Another good thing about Nashville: I find counter-intuitive so much about economics. Perhaps, that’s why I enjoy the work of writers like Virginia Postrel who make me rethink the obvious and realize how wrong the obvious can be. Today, the WSJ features such a piece in a Marketplace section page 1 article (by the way, kudos to the wsj.com’s option of allowing users to access articles by where they appear in the paper) called, “How a city can win by losing its airport hub status.”
Of course, the majority of the five regular readers of the rexblog already know this particular counter-intuitive economics lesson as we benefit from it directly. However, others (who are WSJ.com subscribers) may find it surprising to learn that the best thing to ever happen to Nashville air travelers was the day 12 years ago when American Airlines announced it was shutting its hub here.
Highlights from the article:
…in the current airline economy, losing a hub can actually leave a city better off. As the dominant airline shrinks, others can more readily boost service and increase competition. The airport can also more easily lure new entrants, particularly fast-growing low-cost carriers that can push down prices overall. And many companies now look to locate near airports with lower fares or less congestion for their traveling employees.
When American started phasing out its hub in Nashville 12 years ago, locals feared a dearth of service. But low-fare Southwest Airlines picked up much of the slack domestically, now accounting for 42% of scheduled service compared with American’s 15%, according to airport statistics. What’s more, since 1993, average fares at the airport have dropped 22%, and corporate relocations to the area have climbed in recent years as companies focus more on the bottom line, said the city’s Chamber of Commerce.
In February, low-fare Frontier Airlines signed on to fly to Nashville saying the airport was more appealing because it doesn’t have a mammoth dominant carrier. Frontier also said Southwest paved the way in Nashville to drawing passengers who live farther away from the airport, from such cities as Chattanooga, Tenn., and Louisville, Ky.