Steven Malanga
This article was adapted from the Autumn 2012 issue of City Journal.

Despite a bleak decade for air travel—the result of the 9/11 terrorist attacks and the post-2008 economic downturn—local governments, aided by Washington, have been pouring billions of dollars into airport development and expansion. They claim that these expensive, debt-laden facilities will spur growth in economically precarious locales by attracting businesses that want more air connections. But from Cincinnati to the Florida Panhandle, this Field of Dreams approach—build it, and they will come—hasn’t worked.

In 1978, Washington transformed America’s airline industry, deregulating fares, routes, and the entry of new competitors, which federal oversight had long restricted. A host of low-cost carriers arrived on the scene, and some of the established airlines, now free to enter new markets, moved toward a hub model, in which passengers fly to a central airport and transfer to connecting flights. Deregulation also sent fares plummeting. Today, the average plane ticket is 30 percent to 40 percent cheaper than it was in the regulated era, adjusted for inflation. Business soared, with passenger volume increasing from about 270 million passengers annually in the late 1970s to about 730 million last year. Employment in the industry exploded—up 35 percent, to about 450,000 people.

Over the troubled 2000s, however, airline employment declined, and passenger traffic rose only slightly—growing just 0.2 percent per year from 2000 through 2010, compared with about 4.6 percent annually in the 1980s and 1990s. The harsh business climate forced many big airlines to shrink, merge, or go bankrupt, and they began abandoning unprofitable routes and airports that didn’t generate sufficient revenue. Because airports rely heavily on the fees that airlines pay them, which vary according to use, the shift hit them hard, especially those that already owed a lot of money to pay off their construction or expansion. And airports that had expanded to accommodate hub traffic saw unprecedented declines in business, since they generated most of it from passengers taking connecting flights, which airlines suddenly eliminated or shifted elsewhere. Airports that relied on local business lost far less traffic.

Steven Malanga

Steven Malanga is the senior editor of City Journal and a senior fellow at the Manhattan Institute.