“Small businesses are normally a major source of jobs but they have been particularly reluctant to hire lately because of weak sales and uncertainty about the pace of the recovery.” says this Reuters article, which is typical of a lot of reports on the U.S.’s anemic labor market. I happen to be involved in a small business, a Massachusetts flight school with about 30 aircraft, including two helicopters.
Let’s start with investment and bank lending. We have not invested in new aircraft or other capital equipment recently. Is it because the bailed-out banks won’t lend us money? I don’t think so. Most of our aircraft are between 2 and 11 years old. Airplanes can be operated safely and economically for at least 30 years. As evidenced by all of the 50- and 75-year-old planes that came to the Oshkosh, Wisconsin fly-in last month, even a 30-year-old plane may have quite a bit of life left. We will buy new engines and overhaul kits for our machines, but pay for those out of revenues. If we could not pay for the overhauls out of revenues it would mean that we were operating at a loss and that it would be smarter simply to close the doors. Our capacity is ample for the current customer demand. In fact, even if every other flight school in the Boston area were to shut down, our school’s existing fleet of aircraft is large enough to satisfy the total regional demand. Not everyone would be flying at 9:00 am on a prime summer weekend, of course, but everyone would be able to fly as many hours per week as desired.
Federal and state governments offer a lot of subsidies and incentives for businesses, or so we’re told, but we never have more than one admin person working the front desk at any given time. We don’t have qualified staff ready to go looking for government programs to tap into. We know how to serve private customers, but not how to get money from the government. This puts us at a disadvantage compared to big companies that can afford to spread the cost of a full-time “getting money from the government” employee.
A government that consumes a larger percentage of the GDP is a government that makes lobbying more fruitful. In a lobbying war, however, the small will inevitably lose out to bigger enterprises. For example, the Boston Red Sox, along with other professional sports teams, lobbied Congress and the FAA for years trying to get them to forbid banner-towing airplanes flying over stadiums during games. They did this in hopes of preventing anyone from advertising to fans other than themselves, thus enhancing their billions of dollars in revenue. The FAA refused to hand over airspace to private owners, but Congress forced them to do so after 9/11, arguing that a 3 nautical mile ban around stadiums was necessary for security. Because this taking of public property was done under the guise of security, it was sufficient to ban only banner towers; all aircraft were banned except for those owned or operated on behalf of the sports team. The security value of the ban is negligible. A terrorist in a jet would fly through the 3 n.m. ring in about 1 minute. There would be no time to evacuate the stadium. It isn’t even clear that there are procedures in place for FAA controllers to inform stadium owners that someone has violated this security zone and therefore there would be notification to fans that it was time to duck.
What’s the result of the government having grown a bit larger to serve the needs of the Boston Red Sox? Some additional air traffic controllers are required because their work has expanded from just separating aircraft from each other to also making sure that aircraft don’t impinge upon the new privately owned airspace. So all taxpayers become slightly poorer. How about the effect on small business? The banner towing guys have suffered a huge loss in business. Our flight school suffers a substantial loss in business because we can’t fly helicopter tours during games. We wouldn’t want to fly over Fenway Park, especially, but the 3 nautical mile zone covers nearly all of downtown Boston. We also need to pay staff to check the Red Sox schedule every time a customer calls wanting to schedule a tour. We’ve had tours where we ended up having to turn back to the airport because the Red Sox schedule had changed due to a rained-out game earlier in the week and games were added that did not appear on a schedule printed earlier.
You might think that we’d be doing well because the government has decided to put more money into education. The new funds, however, generally can only be used at degree-granting institutions. Once enrolled in a “bachelor’s of aviation” program, the spigots open up for the student’s tuition, housing, and food. This is great for established large colleges and universities because, even though they may charge 50% higher prices than our school, it works out to be cheaper for the student. Our prices are lower and our instructors are more experienced, which gives us a competitive advantage when dealing with privately-funded students. In a world where most of the new students are government-funded, however, we are inevitably out-competed by the big schools.
The bigger the government gets, the worse our small business does both in absolute terms and in terms of our competitive position. Anyone else out there running a small company (other than one set up specifically to contract with governments) with a different story to tell?