The Airport Authority’s economic perversions

The Airport Authority’s economic perversions

So what does a marketplace-meddling bureaucrat do when government-sponsored interventionism predictably fails?

If you’re Christina Cassotis, the CEO of the Allegheny County Airport Authority, you double-down. After all, interventionists have to cover up the lie of each successive interventionist failure.

In a Wednesday Post-Gazette story, mind-boggling for its concomitant hubris and economic ignorance, Cassotis defends millions of dollars in public subsidies to a number of airlines that predictably grabbed the carrot off the stick then, in their incentivized failures, used the stick to bludgeon sound public policy.

“I’m not rattled,” Cassotis told the newspaper. “None of this bothers me.”

Guess that’s the kind of haughtiness that is bred when failure is underwritten by other people’s money. In this case, it’s all public money, whether it be from county and state grants and loans or even gambling money and proceeds from shale gas drilling at Pittsburgh International Airport (PIT).

The latter two categories, by the way, were designed to lowers costs at PIT, not turn public coffers into venture capitalist or corporate wealthfare troughs.

As the P-G’s Mark Belko reports, “Cassotis chalks up the losses to market adjustments more than anything else.”

The more accurate characterizing phrase would be “market perversions” wrought by government believing it can pick winners that, invariably, create losers.

The list of subsidized failures was long in 2018 for Cassotis, whose Airport Authority board has granted her sole power to grant subsidies of any amount. The bill of particulars has been oft-stated but worth repeating:

OneJet, subsidized even though it was a federal tax scofflaw, isn’t flying and was forced into liquidation. Oh, and now there’s word that at least three clearly conflicted authority board members had a financial interest in the airline.

Delta Air Lines, subsidized by the Allegheny Conference, reduced flights to Paris when the subsidy ran out. Then, when the authority announced a $3 million subsidy to international competitor British Airways, Delta said it would pull out.

The authority incentivized Qatar Airways to fail with a contract that paid the cargo carrier $1.48 million to not reach tonnage goals. Incredibly, Cassotis is talking about future “partnership opportunities.”

And WOW Air, heavily subsidized by a number of airports and no longer flying to most of them, is re-evaluating its subsidized Pittsburgh service because of financial woes. As with OneJet, this deal calls into question what kind of due diligence was performed on WOW’s financials.

Part of Cassotis’ ancillary defense of her failures is that, hey, passenger traffic is up at PIT and the Findlay Township facility is on track to host the most travelers since 2007.

But as the number-crunching scholars at the Allegheny Institute have pointed out (in Policy Brief Vol. 18, No. 41), in the least some of that is more due to a national economy improving following the Great Recession than to anything Cassotis has done.

But there’s another aspect to the P-G story that is bothersome. And that’s the continuing oddball pronouncements of aviation consultants observing the mess at Pittsburgh International.

One applauded the authority for suing OneJet to recover the bulk of a $1 million subsidy. As the newspaper reported, the strategist said it sent a message to the industry that if incentives are awarded for a flight, the airline has to deliver. “I think that was bold and right move,” he said.

Odd, considering the first no-brainer, bold and right move would have been to better investigate OneJet’s financials. Perhaps the discovery that the airline was a federal excise tax deadbeat would have raised some red flags? Of course, the better move would be to not subsidize any airline.

Another consultant who, in the past has repeatedly lauded announcements of subsidized “progress” at PIT as nothing less than slam-dunks, was chastened a bit in the P-G story. He used a baseball analogy to defend Cassotis.

When you swing for the fences, “you strike out sometimes,” he said. “But if you don’t swing, you’re not going to hit anything. I look at it as being a positive thing and an airport that isn’t afraid to try anything.”

As if trying the same thing over and over again and failing, and then doubling-down on the failure isn’t bureaucratic insanity?

“There are a lot of opportunities still to be tapped,” Cassotis told the newspaper. “I’m incredibly bullish on the market.”

Whether that refers to the free market or the market perverted and rendered dysfunctional by Cassotis’ subsidies is the question.

Which brings this At Large to a final point: Last March, Cassotis was awarded a bonus of $146,020 for her 2017 “performance,” on top of her annual salary of $325,000. By contract, she’s eligible for an automatic bonus of 15 percent, or nearly $49,000, each year.

But by any reasonable standard, Cassotis’ strikeouts outpaced her hits in 2018. Should the Airport Authority board award her anything above what it, sadly, is contractually obligated to – a string of pearls, you might say, for a string of failures – the perversion will be complete.

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