This September I will be attending my best friend’s wedding in Philadelphia. The only problem is that two round-trip tickets from Denver to Philadelphia cost more than I make in a week. So we set out to see if we could figure out a cheaper way to travel. And we did.
The traditional model of air travel has been travel between major hubs with connecting flights to smaller airports from the hubs. If you wanted to fly from a major city to major city, you could probably do so on a non-stop flight. But if you needed to fly to a smaller city, an additional flight with additional cost would be necessary.
But carriers are increasingly flying to smaller airports direct. Because it is only one flight, it is cheaper than the traditional model of flying into smaller cities. But the surprising fact is that these flights are often cheaper than flying to the larger hubs.
Airport Incentives Make Smaller Airports Cheaper for Airlines
Throughout the business world, when a city or state wants to bring business to its area, they offer tax breaks, help fund building costs, and provide other incentives to companies. When the companies set up shop, they bring jobs, tax revenue, and other benefits.
Recently in the news, a local county was paying for half of the cost of a local business’ expansion of their headquarters. They were doing so because the average salary for this company was more than 50% higher than the average salary in the county. By helping the company build the space to fit more employees, more county residents will be making more money to then spend at other businesses in the county, enabling those businesses to grow or increase wages to be spent at other shops. This is a classic example of what economists call a virtuous circle.
Airports operate the same thing. A major hub may lower costs they charge to an airline if it agrees to make that airport their base. Despite their new fees, Frontier airlines has consistently been the cheapest flight anywhere in the country for me, in large part because Denver is their home and DIA has made it worth their while to stay there. Frontier then passes on that savings to its customers. The airline gets more customers, the airport gets more customers, and the shops get more customers. More money coming into the airport means the airport can expand to capture even more customers and money.
Smaller airports simply can’t compete with major hubs for headquarters. But one thing that major airports don’t need is to create incentives for airlines to fly to them. Smaller airports will often lower its fees to an airline to encourage flights to them. That is how they help grow their airports.
Competition Makes Larger Airports More Expensive for Airlines
While smaller airports need to encourage airlines to create flights to their runways, larger airports have no trouble with that. From decades of flyers having no other choice, to being near the most popular destinations, millions of people fly to and from major hubs every year. Hubs can pretty much charge what they want.
They only have limited space and multiple airlines clamoring over it. The law of supply and demand dictates that prices will increase. Just as airlines are willing to pass on savings to customers to encourage business, they are also forced to pass on higher prices.
When these factors combine, smaller airports can get much cheaper than flying into a nearby hub, especially if your destination isn’t the city of the larger airport itself. Our two tickets into the Wilmington Airport came to a total cost of $150 less than two tickets for the same days to the larger Philadelphia International. Since we are taking the week to visit family in NJ, a rental car was always going to happen for us anyway. And if not, a train connects the two cities at a cost for ~$30 per person, still saving us nearly $100.
Is there extra time involved? Yes. The train to Philly takes about half an hour, plus time spent waiting for the train. Wilmington is also half an hour (although in a different direction) further from my mother’s home than is the City of Brotherly Love. But I’ve never been one to claim that time is money. Even if I were to buy that particular argument, half an our each is works out to one hour. The time is money crowd usually provide a price to their free time of $20/hour. Doing the math, flying into a smaller airport is saving us enough money to pay for that extended warranty I got on my tv.
Do you fly into smaller airports to save money, or stick with larger airports for the convenience factor?