Small Pox: Air traffic is evaporating at smallish U.S. airports. Recipe for growth? Call Allegiant or find oil

Back in 2007, by most measures the peak year for U.S. air travel volumes, the town of Lexington, in Kentucky, had flights to Atlanta, Detroit, Memphis and Cincinnati. But then Delta and Northwest merged. Quickly, the new mega-carrier realized that most of the people flying to Memphis and Cincinnati were connecting passengers who could just as easily connect in Atlanta and Detroit. So the Memphis and Cincinnati flights disappeared.

Lexington also had flights to Chicago, Newark and Cleveland. But then Continental, faced like all airlines with spiking fuel prices, downsized its Cleveland hub and decided many of the people flying from Lexington to Cleveland could instead use Newark. So the Cleveland flights disappeared. Then Continental merged with United, and United decided many of the passengers connecting in Newark could instead use Chicago. So the Newark flights disappeared.

Is Lexington an unusual example of hard luck? Hardly. Its story is also the story of dozens of other small and midsized U.S. airports—stories that collectively explain a lot about the reinvented U.S. airline industry. Lexington’s mostly unhappy story, in fact, does inspire some hope—but more on that later.

Forgive someone for being confused after 1) learning that scheduled seats at U.S. airports are down 9% since that peak year 2007 and are now rising by less than 1% annually and 2) looking at the chart on page seven of last week’s issue and seeing rather healthy year-over-year growth at a majority of the 50 busiest U.S. airports.

The last part of that sentence explains the apparent discrepancy. Sure, the top 50 U.S. airports by scheduled seats (according to an analysis using Diio Mi) accounted for 83% of all seats in 2013. But the story is so different at the hundreds of other U.S. airports that their gloomy predicament weighs heavily on the overall figures. At airports not in the top 50 by scheduled seats for 2013, capacity is due to be down another 2% this year after dropping by that much last year. And capacity at these airports since 2007 is down not 9% but fully 20%—the non-top-50 markets are the reason that 9% figure is even as bad as it is; among the top 50, it’s a less drastic drop of 6%. Among the non-top-50 airports, in fact, 2007 wasn’t even the peak year at all: their capacity was already declining a few years earlier.

The least fortunate small-fry airports saw their commercial air service vanish entirely. Back in 2007, the…

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