Winners and Losers at PDX

Today the Port of Portland voted unanimously to enter into an Air Service Development Agreement with Delta Airlines. Under the terms of the agreement, the Port of Portland will pay Delta a service retention fee in the amount of $3.5 million in exchange for Delta’s commitment to continue daily nonstop service between PDX and Tokyo, Japan, from September 1, 2009 through May 31, 2010. This program is also available to any other air carrier willing to commence new daily nonstop service between PDX and Asia, so it creates an open-ended liability for the Port. If 7 other airlines sign up for the same deal, then presumably the Port would have to pay out $24.5 million, regardless of whether it actually has the money and regardless of whether PDX needs the service.

The FAA prohibits the use of airport revenues for such subsidies, so the money will come from the Port’s general fund. Port executive director Bill Wyatt told the Board that FAA considers the practice of taking money paid by other airlines and giving it to one airline as a subsidy to be a bad idea. He did not explain why doing the same thing with taxpayer funds is a good idea.

Coincidentally, the Port this morning also approved a property tax rate applicable to all properties within the Port’s jurisdiction (most of the tri-county region) that will raise more than $8.8 million for the Port’s general fund in the next fiscal year. So I think we know who is paying for this giveaway.

According to the Port, “This agreement has been developed on the premise that maintaining daily nonstop air service between PDX and Asia is critical to the economic vitality of the region and central to the Port’s mission.” Apparently, the concept of “too big to fail” applies to Wall Street investment firms, mismanaged auto companies, and (now) international air carriers servicing Portland.

My comment to the Board was that this was classic Portland behavior, namely, some group of politicians thinks that a pro sports franchise, or suburban commuter train, or aerial tram, or convention center hotel, or free transit service in downtown, or something else would be a wonderful idea that would generate lots of money and prestige for Portland, even though private investors are unwilling to put their own money at risk. So taxpayers are forced to become “silent partners” in these ventures, except that we don’t share in any of the profits, just the losses. I said that propping up money-losing ventures time after time is not the mark of a “sustainable economy.”

No one from the Port responded to any of my comments; and, of course, the motion passed unanimously (it would not have been on the agenda if the votes were not there in the first place).


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research center.

Post to Twitter Post to Facebook Post to LinkedIn Post to Reddit

Posted by at 07:30 | Posted in Measure 37 | 9 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Rupert in Springfield

    I guess we are faced with a dilemma. Are those that find themselves on such a board simply drawn from the lowest levels of mental capacity available in the populous, or is this simply a case of the Michael Jackson stupidity parasite finding an intermediate host until the Lenin tomb for the gloved one can be built?

  • Joe

    Of course he can’t explain it. It makes no sense.
    These people are lucky to find their way to work each day.

  • Matt Evans

    $13,000 per flight. And when the deal runs out in 9 months??

  • Dave POrter

    As an advocate for getting more Oregon students studying abroad, I noted, and wrote Mr Wyatt, that the Port rather than just giving the $3.5 to Delta could buy 3,500 round trip tickets for $1,000 each (Travelocity had them starting at $760) and give the to Oregon students – K-12, community college, and university. That would help Delta sustain the service, but also help many Oregon students study abroad.

  • Bob Tiernan

    It’s not like it’s difficult to from Portland to points east — quick shuttle flights to Seattle take care of that when demand for direct flights from here are low. When non-stop flights between Portland and two Asian cities (Tokyo and Seoul) began some years ago (they were once per week), the Portland elite (like news anchors who want to be part of an “important” city) were tripping over themselves with their gushing about how there was now a “direct link between Asia and the Northwest” (as if Seattle didn’t exist, where non-stop flights to Asia have been routine).

    Also, I heard Sho Dozono speaking in favor of this on the news. He has a travel agency, does he not?
    Gee, what a surprise.

    Bob Tiernan
    Portland

  • Richardb

    Another case of Seattle envy, I do not think Portland is big enough to be international hub. There no problem with shuttles to SEA or SFO.

  • Alyssa Eggebrecht

    Anyone who is willing to point out how indescribably ridiculous it is to give 3.5 million dollars away, especially to the airline industry, has my whole-hearted thanks.

    I used to travel quite a bit internationally. Before 911, international travel was tedious. Today, the proposition of traveling from the West Coast to the East Coast of the United States makes dental surgery or tax preparation look like the better option of how to spend one’s time.

    Currently, direct flights to New York City, Washington D.C., and Philadelphia are in short supply, but suddenly the eccentricity of direct, non-stop flights to Tokyo are a necessity? John, please help me understand the logic of Port of Portland authorities!

    I took the opportunity to look up flights from Portland to Tokyo, and based on consumer cost analysis, it is cheaper to fly with a connecting stop out of Seattle or San Francisco. I mean if there were people clamoring to fly to Tokyo from Portland, wouldn’t a competitive, non-stop flight already exist?

    Don’t get me wrong, I think Portland is a great city, but if its economy was truly benefiting from the cultural and business connections of Tokyo, we wouldn’t have to pay tribute to an airline for such privilege.

    By the way, why Delta airlines? According to cheaptickets.com, if one were to take a flight out of PDX to final destination TYO on the 17th of September and return on the 24th of September, Air Canada would be the cheapest flight at $844.00 total (connection through Vancouver BC) versus Delta non-stop at $1,350 total.

    Wow, 3.5 million dollars spent for 9-month contractual, non-competitive service to Tokyo! This type of savvy business dealing makes me wonder why our Port authorities aren’t Nobel laureates.

    • John A. Charles Jr.

      Alyssa,

      I couldn’t say it much better than you did. The Portland market apparently does not justify non-stop air service to Asia. Subsidies will not create that market, just distort it, while draining $3.5 million from other investments that could generate greater returns.

      John Charles

  • Bob Tiernan

    *Alyssa:*

    Don’t get me wrong, I think Portland is a great city, but if its economy was truly benefiting from the cultural and business connections of Tokyo, we wouldn’t have to pay tribute to an airline for such privilege.

    *Bob T:*

    That’s right. If the demand is there next year then an airline can re-start this. I mentioned the
    initial non-stop flights to Seoul and Tokyo. They were United flights and only one per week. When an increase in demand seemed to materialize, Delta stepped in with daily service to at least one of the above cities, and United dropped its once-per-week flights.

    All this is about now is for bragging rights for the city — like in having a major league soccer team and a convention center that is “bigger and better” than any other on the west coast.

    I’ve always gotten a kick out of the Portland news readers (TV and radio) going along with the
    euphoric reporting of such things because they want to be part of a “major” city, and then they
    blow it only 90 seconds into the top of the hour news by reporting that the “goat at the zoo has died”.

    Bob Tiernan
    Portland

Stay Tuned...

Stay up to date with the latest political news and commentary from Oregon Catalyst through daily email updates:

Prefer another subscription option? Subscribe to our RSS Feed, become a fan on Facebook, or follow us on Twitter.

Twitter Facebook

No Thanks (close this box)