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March 13, 2010

Delta's PIT - CDG flight draws full $5M subsidy

Excellent post at NullSpace regarding Delta's direct flight, PIT to Paris.

The Pittsburgh Business Journal reports that the Allegheny Conference will have to pay the full $5 million subsidy to compensate for revenue shortfalls.

The agreement between the Allegheny Conference and Delta is a two-year contract stating that if the flight doesn’t reach a revenue threshold, the Conference will pay the airline up to $5 million during year one, and up to $4 million during year two.

  • The average load factor over the first eight months was 68 percent. Delta’s average load factor for transatlantic flights between June and January 2009 was 83.6 percent.

  • What the Conference projected as a $582 average one-way fare for a trip from Pittsburgh to Paris turned out to be an average $412 rate in 3Q 2009.

  • With about 407 daily passengers traveling internationally at PIT during the third quarter of 2009, about 88 of those utilized the Paris-Pittsburgh flight.

  • Two Indian cities — Mumbai and Bangalore — are among the top 10 destinations of the Pittsburgh-Paris flight’s travelers.


My take-away is this reflects a government inability to affect the marketplace. In a way, the Allegheny Conference subsidy contract was a non-government (NGO) stimulus to jump-start international service at the airport. After one year, it doesn't seem to be working. Maybe it's too soon to tell.

Or maybe it's a leading indicator for our other, larger government stimulus programs.

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