Trend Away from Smaller US Communities, but Hope Remains

The trend may not be news since it has been reported before (2018 and 2017). But a picture is worth 1,000 words. so take a look at this chart. The trend is clear. Both regionals and majors are flying longer legs. That means more of the US market becomes "flyover country". It means disconnecting communities from the national and global economy. Interestingly, the regionals trend is steeper, although there is a lot more variance. Given the pilot shortage and the trend to larger aircraft, small markets don't offer the economics the airlines need. To help offset this issue, the US DoT has something called Essential Air Service (EAS). Then there's also something called Small Community Air Service Development Program (SCASDP). DoT says: "EAS is a direct subsidy to air carriers and serves a limited universe of eligible applicants. SCASDP’s eligibility criteria are broader and provide a grant applicant the opportunity to self-identify its air service deficiencies and propose an appropriate solution". This issue goes back a long way. Regardless of government intervention, the trends do not favor small communities with regard to air service. As the chart illustrates, using 2003 as the base year, traffic has grown robustly. The number of flights (departures) has grown too, but much less robustly. Even if airlines have been adding seats to aircraft (they have) or are flying larger aircraft (that too), the load factor shows that those fewer flights are nearly full. The airlines simply don't need to chase the extra customer in a smaller community. This is even more so as the industry has consolidated. What does this mean for US air travelers? If you need to fly, there's going to be a lot of driving to and from an airport which will be further away every few years. What does it mean for regional airlines? They will continue to fly where the market exists. This will entail moving to the most economically effective aircraft (at the top end of scope clause) to move the most people with the fewest crew and costs. Even if that means a community sees fewer flights per day. And for the majors? They will keep forcing ever tighter margins on their regional partners. Which likely means ever higher barriers to entry for air service. Any goods news? Actually yes. This trend could offer new operators a chance to deploy disruptive strategies like using turboprops. With much lower costs, such aircraft could probably work well in jet-marginal markets. Moreover, the turboprop could be a combi, carrying people and freight. But who will be the entrepreneur ready for this? Further down the road, we could see air taxi services (using yet to be developed aircraft) between these small communities and larger regional airports. We expect to see a lot of innovation in this segment, despite how bleak it looks now. Here is a real aviation transport problem looking for an innovative solution.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

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