October 22, 2012

Columbia: You Can’t Dance At Two Weddings

It looks like Columbia, Mo., officials have never heard that old phrase, “You can’t dance at two weddings.” The city recently offered a substantial incentive package to American Airlines, enticing them to provide service to Columbia Regional Airport. Too bad they forgot about those other airlines already serving the airport. Oopsy daisy.

Incentives often appear to be an easy solution to spur economic development. But this plan is now backfiring for Columbia. Delta has served the Columbia market since 2008 —  without any special government incentives. Now that American has been offered a two-year revenue guarantee of $3 million, Delta is reconsidering its service to Columbia.

In a letter from Delta Senior Vice President Robert Cortelyou to Columbia Mayor Bob McDavid, he states, “While we welcome competition in the marketplace, this revenue guarantee puts Delta at a severe disadvantage by subsidizing American Airlines at Delta’s expense. This is unacceptable.”

Cortelyou emphasizes an important point. If Columbia gives a subsidy to one airline, it creates unfair competition and puts the other companies in that market (Delta and Frontier) at a disadvantage.

Delta officials did state that the airline will exit the Columbia market if they are not offered a similar package. Their threat exemplifies why cities like Columbia should not provide benefits to some companies and exclude others in the first place. If Columbia meets their demands, the city will waste even more scarce public dollars. There is no reason to bribe airlines to serve Columbia.  If there is passenger demand to warrant increased service to the airport, companies will provide it without subsidies, just as Delta has been doing. Doling out subsidies to these companies takes money and resources away from other actions that could be better investments for the city.

However, at this point, Columbia has dug itself a hole and the only option may be to provide similar incentives to Delta, if the deal with American goes through. The good news is that it would only be a two-year commitment. If city officials act prudently, they will prevent it from extending beyond two years.

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