How Essential Is Essential Air Service? The Value of Airport Access for Remote Communities

NITC-1550 69A3551747112 ; Essential Air Service is a federal government program that provides subsidies to airlines that provide commercial service between certain remote communities and larger hubs, which proponents argue are justified because driving to larger airports would be prohibitively expensive for residents of these communities. I estimate the value of Essential Air Service to local communities using a revealed-preferences approach by formulating and estimating a discrete-choice model of domestic air travel purchases that incorporates passengers’ geographical proximity to alternative airports. I estimate the model using proprietary data containing millions of domestic airline passengers’ residential ZIP codes coupled with their choice of airline product. Simple data tabulations reveal that most travelers living in regions receiving subsidized service have several alternative airports to choose from and generally prefer to drive to larger airports. A counterfactual policy simulation using the estimated model finds that, in aggregate, community members value subsidized commercial air service from their local airport at $16 million per year, compared to an annual cost of over $290 million.