Airport Authority’s ‘house of cards’ collapsing

Airport Authority’s ‘house of cards’ collapsing

Spinning. Dodging. Bobbing. Weaving. Rationalizing. Dissembling. They are all apt words to describe Allegheny County officials as they scramble to defend indefensible public subsidies to airlines that have been playing them for suckers.

In one 24-hour span this past week, it was revealed that two government attempts to command the air-service marketplace with large dollops of public dollars – to Qatar Airways and WOW Air – have, by any proper measure, failed.

No one should be surprised. For what a tangled web government and its acolytes weave when first they practice to intercede.

The first self-inflicted slap came when the Allegheny County Airport Authority revealed on its website Monday last that, as the Post-Gazette correctly captured the perverted dichotomy:

“Qatar Airways has been paid $1.48 million in subsidies after its twice-weekly cargo flights from Pittsburgh International Airport (PIT) failed to generate anywhere near the volume needed to avoid them.”

In a nutshell, the authority entered into a contract that obligated it to subsidize each Qatar flight to the tune of $15,500 for the first six months of the deal. And that’s no matter whether Qatar met its “goal” of 60 tons of cargo per flight.

As if that’s not outrageous enough, Qatar was, by contract, incentivized to not meet that goal in the second six months of the deal. To wit, as the P-G further chronicles it:

“During the second half of the year, the support fee would have decreased ‘based on calculations agreed to by the parties’ if the 60-ton-per-flight goal was met.

In other words, it was in Qatar’s best financial interests, at the public’s expense, to not meet any goal. In fact, the P-G notes that Qatar “never came close” to moving the average of 480 tons monthly to decrease those subsidies.

That one-year deal ended in October. The Airport Authority says Qatar continues to fly out of Pittsburgh International, now subsidy-free. But, a spokesman says, talks are underway “about what, if any, contractual relationship would exist moving forward.”

Airport Authority CEO Christina Cassotis pretty much telegraphed that the possibility of a new deal when she called Qatar a “good partner.” As did the headline on the authority’s grossly spun announcement of the success of the Qatar failure on its blog: “PIT cargo: In for the long haul.”

On what planet? The public kitty has been smacked around for $1.48 million and Cassotis is hearing it say “Thank you, ma’am, may I have another?!”

Really?

The rationalization continued on KDKA Radio on Thursday morning with Allegheny County Chief Executive Rich Fitzgerald’s claim that Qatar had invested $20 million into its operations at Pittsburgh International Airport.

Thus, he argued, the public dollars are “a very small part of the cost of doing business” here. But why were they a part of this deal at all?

And what of fellow cargo carriers UPS and FedEx, apparently unsubsidized and who, by the Airport Authority’s own admission, carry about 90 percent of the cargo that moves through PIT? They certainly can’t be happy that such a minor cargo carrier as Qatar has been incentivized by contract to fail and rakes in public cash.

Then there’s this gem from the Airport Authority’s blog:

“Still, an economic impact study commissioned by the authority found that the Qatar flights could produce nearly $43 million of economic output ($23 million direct) through increased trucking revenue from the additional activity in and out of PIT, increased demand for the warehousing/distribution center and reduced transportation costs for businesses using the service, which they can then reinvest.”

“Could” being the operative word in that passage prompts this logical question: “Well, did it?” Not likely, given the public heavily incentivized Qatar to fail.

What, if only we give Qatar more public money? How absurd.

The second self-inflicted slap came mere hours later when it was reported that WOW Air, subsidized at PIT with $800,000 over two years to fly to Iceland (and, supposedly, a gateway to Europe) had halted bookings past mid-January.

Whether it’s OneJet all over again – another publicly subsidized debacle that raises serious questions about the Airport Authority’s due diligence practices – remains to be seen. But the indicators are not good.

As the P-G also reported:

“Wow tied the (bookings moratorium) move to a decision to reduce its jet fleet by two Airbus A320s and two Airbus A330s ‘in cooperation with its lessors.’”

Sounds like a euphemism for not finding enough demand to warrant those jets, even heavily subsidized. And don’t forget that WOW ended also-subsidized service in October after only five months in Cincinnati and Cleveland. Flights to St. Louis will end in January.

Incredibly, Fitzgerald use this fact to set up his defense of PIT’s subsidies. Paraphrasing here, he told KDKA that all three of those cities subsidized WOW and lost service.

Again, really? That’s actually the argument against such subsidies.

PIT is competing with everybody else, Fitzgerald added. In a race to the economic bottom? Which brings to mind that old line about the adolescent doing something stupid because all his peers are doing it and the father asking “Would you jump off a cliff if your friends did?”

Allegheny County and county Airport Authority officials apparently have decided to hold hands and jump off the cliff together.

Further in putrid defense of this airline subsidy racket, Airport Authority spokesman Bob Kerlik reminded that no matter what happens with PIT’s Wow Air flights, British Airways will be starting nonstop service to London in April.

That would be the very same British Airways about to be paid $3 million in public subsidies to begin those flights, a subsidy that likely drove Delta Air Lines out of PIT’s overseas flights equation.

In a stark, but quite apropos, observation, Jake Haulk, president-emeritus of the Allegheny Institute, poses this pertinent question: “How much crapola do they think the public will swallow?”

Simply put, this all is a textbook example of how government interventionism begets more government interventionism. In order to attempt to save face, government intervenes more hoping to cover up the lie that the last interventionism somehow worked.

But in the case of the Allegheny County Airport Authority and Pittsburgh International Airport, the practice has become a wicked caricature in which newly publicly subsidized airlines are driving out prior publicly subsidized airlines.

The irony “is unbelievably rich,” says Haulk, a Ph.D. economist.

And incredibly tragic from a public policy standpoint.

No matter how county and authority officials attempt to spin it, this practice, a house of cards, is collapsing. And there must be serious consequences for the junior engineers who constructed it.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).