The airlines offer an extraordinary example of how the playing field has become increasingly tipped, to favor money, corporations, and the politically connected. In this example, the Washington, DC area is served by three commercial airports: Baltimore-Washington [KBWI], Dulles [KIAD], and Reagan National [KDCA]. As is common at all major U.S. airports, there is little actual price competition at each airport, with each location dominated by one or two major carriers. So, travelers to the DC Metropolitan area via Southwest use KBWI, those flying United use KIAD, and those flying American use KDCA. The data for December 2013 shows Southwest flies 81% of KBWI flights, United flies 91% of KIAD flights, and American flies 56% of KDCA flights.
This airport dominance is problematic for local communities. It puts the non-resident airline corporate officials in a strong bargaining position to compel elected officials to create huge subsidies. The taxation system underlying U.S. commercial airlines and airports is such that, if an airline abandons a hub, the local economic impact can be severe. See for example the dramatic declines in airport operations when major airlines ‘moved on’ from former major hubs: USAir in Pittsburgh [KPIT], by Delta in Northern Kentucky [KCVG], by American in St. Louis [KSTL], and by United in Cleveland [KCLE].
In this case, elected officials are saying they believe United might leave Dulles, so they must give United lots of money. Well, think about that for a moment: if United left Dulles, where would they go? They certainly would not base at KBWI, and compete against Southwest. And trying to relocate to KDCA would be all but impossible, due to capacity limits. So, would United want to leave the entire DC metropolitan market? Would one of the four major U.S. commercial carriers be able to run a real airline without serving the lucrative market that feeds elected officials, lobbyists and aggrieved citizens to the nation’s capitol? Of course not. In other words, United was not going anywhere, and the huge subsidy being trumpeted by McAuliffe, Kaine, and others is nothing but another example of massive corporate welfare.