Plane Conversations

Few people take into account the social value of air transportation.  There are very few studies that can measure the impact on a community when they are immobilized due to lack of a service that had previously been available. There is no true economic category to describe such loss except as a tax on travel.

A regressive tax is taxation that takes a larger percentage from low-income people than from high-income people. A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder. Social Flights can restore this value with a regionalized public jet charter system.

Now we can add “Travel” to the list

Sales taxes that apply to essentials are generally considered to be regressive as well because expenses for food, clothing and shelter tend to make up a higher percentage of a lower income consumer’s overall budget. In this case, even though the tax may be uniform (such as 7% sales tax), lower income consumers are more affected by it because they are less able to afford it.

<via American Eagle to park planes, reduce service – Dallas Business Journal>

The small city gets the regressive travel tax

American Eagle announced that they would reduce frequency in a few select markets, they would discontinued seasonal service from D/FW to Augusta, Ga. Eagle would also discontinued service from Chicago to Tri-Cities, Tenn as well as discontinued service between Miami and Savanna, Ga., and Miami and Fort Myers, Florida.  American Eagle would also hasten the cancellation of Los Angeles-Boise, Chicago-Calgary and D/FW-Fayetteville, N.C., service from Feb. 9 to Jan. 31.

So how many people would these reduction in service decisions impact? If we just add up the populations of the smaller metropolitan area in each city pair, we can estimate economic loss of opportunity under the assumption that the larger city would have alternate options. Fair enough?

Augusta, GA: 556,877

Tri Cities, TN:  500,538

Savanna, GA: 347,611

Ft Meyers, Fl: 618,754

Boise, Id: 616,500

Calgary: 1,230,248

Fayetteville, NC:  366,383

The Creeping Costs

The total is at least 4 million who will lose one more degree of economic freedom.  4 million people will pay a regressive tax denominated in time, money, and dignity in some form or another for the benefit of stockholders in American Eagle. 4 million people will lose the economic benefit of travelers from large cities.

On closer inspection, with the exception of Calgary and Boise, all of these cities are well within 1000 miles of each other.  Each of these cities is well within 1000 miles of cities just as large as those that American Eagle is diminishing service.

While a hub and spoke model may break down economically, a regionalization strategy may work quite well.  It has been proven that people are willing to pay a premium for direct service (otherwise the airlines would not be dropping less profitable indirect service).  It is also obvious that people place a premium on their time and hassle as demonstrated by trends in online shopping, communication, and social organization.

These ingredients simple add up to a regionalization air transportation route structure enabled by online social organization tools such as Social Flights where community airlines can form around community priorities.  Social Flights can restore this value with a regionalized public jet charter system.