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For the week of Oct. 13, 1999 through Oct. 19, 1999

Curious economics knocks out Air Ketchum

Commentary by PAT MURPHY


Pull up a chair, students, for a discussion of the curious world of economic subsidies.

The first lesson learned in the decision to cover losses of one daily roundtrip flight by Horizon Air between Boise and Hailey during ski season involves tricks of the lawyering trade.

When the city of Ketchum was asked to kick in $10,000 of a $100,000 subsidy for Horizon Air, the town’s lawyer said—horrors!—funding a private entity is illegal under state law.

But not so fast.

The lawyer for the neighboring city of Sun Valley, presumably schooled in the same state statutes and working from the same code of ethics, said, shucks, there’s a legal subterfuge to get around state law—just launder $20,000 of Sun Valley tax funds through a middle man, the Sun Valley/Ketchum Chamber of Commerce, to Horizon Air to avoid the appearance of a direct, illegal city contribution.

This, students, is known in politics as treating taxpayers like chumps.

So, one lawyer says it’s illegal to provide a subsidy, another lawyer says it’s perfectly legal by playing games with the law.

Now for the next lesson in this gambit—justice and fairness.

Remember aviation entrepreneur Leonard McIntosh, who took it on himself to launch a modest little air service, Air Ketchum, between Hailey and Boise with two roundtrip flights a day with an eight-passenger Beech KingAir turboprop?

Well, he covered losses out of his own pocket, thank you, hoping business for the only Hailey-Boise air service would pick up without help from deep pockets in the Wood River Valley.

But when the notion of a subsidy to cover air service was kicked around, the local entrepreneur was snubbed by the town’s deep pockets in favor of Horizon Air, which has a 37-seat DeHavilland Dash 8 turboprop for Boise-Hailey service, and is a subsidiary of the deep pockets of Alaska Air Group, which includes Alaska Airlines.

So, the $100,000 in guaranteed subsidies for one daily roundtrip between Dec. 18 and April 1 ($50,000 from the Sun Valley Company; $20,000 from the chamber; $20,000 from the Sun Valley City Council and $10,000 from Elkhorn) will go to profitable Horizon Air, instead of the unprofitable and struggling Air Ketchum.

The likelihood is that most of the Horizon Air passengers won’t be new seasonal business, but locals trekking to Boise on business or shopping.

The end of McIntosh’s fledgling air service is inevitable, while profitable Horizon Air is secure with the corporate equivalent of a welfare stipend to cover any losses.

Come April 1, Horizon Air presumably will ditch the Boise-Hailey route. Then, instead of possibly having one small air carrier (Air Ketchum) making runs to Boise, there’ll probably be no service.

So much for the consequences of underwriting a profitable carrier to drive an unprofitable air service out of business.

Pat Murphy is the retired publisher of the Arizona Republic and a former radio commentator.

 

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Copyright 1999 Express Publishing Inc. All Rights reserved. Reproduction in whole or in part in any form or medium without express written permission of Express Publishing Inc. is prohibited.