[Senate Hearing 109-1140]
[From the U.S. Government Publishing Office]
S. Hrg. 109-1140
RURAL AIR SERVICE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON AVIATION
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 14, 2006
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana Chairman
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
JIM DeMINT, South Carolina FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
Lisa J. Sutherland, Republican Staff Director
Christine Drager Kurth, Republican Deputy Staff Director
Kenneth R. Nahigian, Republican Chief Counsel
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Samuel E. Whitehorn, Democratic Deputy Staff Director and General
Counsel
Lila Harper Helms, Democratic Policy Director
------
SUBCOMMITTEE ON AVIATION
CONRAD BURNS, Montana, Chairman
TED STEVENS, Alaska JOHN D. ROCKEFELLER IV, West
JOHN McCAIN, Arizona Virginia, Ranking
TRENT LOTT, Mississippi DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas BYRON L. DORGAN, North Dakota
OLYMPIA J. SNOWE, Maine BARBARA BOXER, California
GORDON H. SMITH, Oregon MARIA CANTWELL, Washington
JOHN ENSIGN, Nevada FRANK R. LAUTENBERG, New Jersey
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire E. BENJAMIN NELSON, Nebraska
JIM DeMINT, South Carolina MARK PRYOR, Arkansas
C O N T E N T S
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Page
Hearing held on September 14, 2006............................... 1
Statement of Senator Burns....................................... 1
Statement of Senator Dorgan...................................... 4
Statement of Senator Lott........................................ 3
Statement of Senator E. Benjamin Nelson.......................... 6
Letters from Essential Air Service communities in response to
rural air service.......................................... 7
Statement of Senator Pryor....................................... 12
Statement of Senator Rockefeller................................. 2
Witnesses
Dillingham, Gerald L., Director, Physical Infrastructure Issues,
U.S. Government Accountability Office.......................... 19
Prepared statement........................................... 20
Kaercher, Hon. Douglas, County Commissioner, Hill County,
Montana; on Behalf of the President, Montana Association of
Counties (MACo),;National Association of Counties.............. 56
Prepared statement........................................... 58
Malarkey, Faye, Vice President, Legislative Affairs, Regional
Airline Association............................................ 47
Prepared statement........................................... 49
Reynolds, Michael W., Acting Assistant Secretary for Aviation and
International Affairs, Department of Transportation............ 12
Prepared statement........................................... 15
Torgerson, John, Deputy Commissioner of Aviation, Department of
Transportation and Public Facilities, State of Alaska.......... 53
Prepared statement........................................... 55
RURAL AIR SERVICE
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THURSDAY, SEPTEMBER 14, 2006
U.S. Senate,
Subcommittee on Aviation,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:03 a.m. in
room SR-253, Russell Senate Office Building, Hon. Conrad Burns,
Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. The Subcommittee on Aviation will come to
order.
And this morning I want to thank everybody for coming in on
this important topic, especially for the Senator from West
Virginia and to Montana. We'll examine the importance of rural
air service. The hearing will review progress achieved by
Essential Air Service and Small Community Air Service
Development programs. We will look at the obstacles to which--
the accomplishment of the program goals, and we'll consider
suggestions for improvement in upcoming aviation
reauthorization legislation coming up, which we're just a year
away.
This committee, and Congress as a whole, has long been
concerned about the benefits of preserving airline service to
small and rural communities. When we deregulated the airlines,
in the late 1970s, we also created the Essential Air Service
program to ensure that communities receiving service before
deregulation would continue to receive service through the
transition.
In addition, in 2000--year 2000, we authorized the Small
Community Air Service Development Pilot Program to provide
additional tools to help small communities enhance their air
service. This is a topic near and dear to us in rural States
like Montana. Montana has eight EAS communities, and many of
them do not have any other form of public transportation
serving their community. Driving nearly 4 hours from Sidney,
Montana, to Billings, Montana, just isn't an option for those
most in need of medical attention. The service is aptly named,
and it is essential.
My state is not the only state who benefits from this
service, and Congress has recognized the importance of aviation
connectivity over the years. In fact, civil aviation has become
an integral part of rural U.S. economy. It is a key factor in
maintaining economic growth and a high quality of life.
Together with telecommunication advancements, civil aviation
has enabled many Montana communities to enter the mainstream of
the--global commerce.
Rural communities gain tremendous economic benefit from
their ability to attract and retain businesses, attract
visitors, and provide vital medical facility access. These
are--arguments are not lost on me, and the rural air service
will continue to be a focal point of this Committee. We have
our work cut out for us in the upcoming reauthorization debate,
and I think we have the opportunity to provide a solid
foundation and adequate funding stream for rural air service
for many years to come. And I look forward to the ideas and
hearing the testimony today.
I'm joined today, very ably, my good friend from West
Virginia. Senator Rockefeller, if you have an opening
statement, you may make it, sir, and thank you for coming.
STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA
Senator Rockefeller. Thank you, Chairman Burns. And I thank
you for having this--as we always open our statements, right?
Thank you for having this hearing.
As the Chairman indicated, we're approaching the 30th year
of airline deregulation. I remember so vividly that United,
Eastern, and American had large jets that came into Charleston
and other places. And within 3 or 4 weeks of deregulation, they
were gone. Now, there's no question that deregulation helped
large urban communities and ushered in a new era of prosperity,
but it meant a loss of service and convenience and, often,
higher prices, always higher prices, for West Virginia,
Mississippi, and Montana's rural communities.
I recognize that we're not going back to the days of
regulation, so that's--we're too global for that, and I
understand that. And I know that millions of Americans in urban
areas really have benefited, and that it's tremendously
important for them. That's a large part of our economy, and to
say that you represent a rural state and ignore everything else
is not modern. Sometimes we feel that way, but it's not modern.
But I think that Congress does have an obligation to
protect the rural parts of our country, just like when the
interstates were built, that was considered a national system.
They went through rural areas, they went through urban areas;
it was all the same. They had to be treated the same. That's
the future with broadband service. That was the future,
actually, with railroads, back in the latter part of the 19th
century.
I've always been a very strong supporter of making sure
that the Federal Government is a partner with local
communities--and help them address their air service needs. I
think that's part of our responsibility.
I helped author the Small Community Air Service Development
Program in 2000--the Chairman made reference to that--with a
few of my colleagues on this committee. I worked with Senator
Lott to make changes in the Essential Air Service program in
the last FAA reauthorization effort. Unfortunately, these two
programs have not received support from the Administration, or
adequate funding from the Congress itself.
This has to change. I believe that Congress must provide a
more stable funding source for small community air service
programs. As this committee begins consideration of an FAA
reauthorization bill next year, I will work to make sure that
the Essential Air Service program and the Small Community Air
Service program have a dedicated source and a robust source of
funding that is not reliant on the annual whims of the
appropriating process. If Congress moves to adopt a user-fee
system, for example, to fund the aviation system, I will
propose a Small Community Air Service fee to fund the Essential
Air Service brand and the Small Community Air Service
Development Program. If Congress retains the existing financing
structure, I will seek other options to fund these critical
programs.
I know this will be an uphill fight. I don't care.
Everything's an uphill fight when it comes to aviation and
transportation in rural states. We're all accustomed to it, and
we never give up, whether it's captive shippers or anything
else.
I know that no one in the industry wants to pay more in
fees, but this is a question of fundamental fairness and the
Nation's safety. We cannot continue to have a two-tiered system
in aviation. The benefits of airline deregulation were not
evenly distributed. We understood that. And it's come to be
even more true than we thought. And so, finding ways to fund
programs to mitigate this--these differences are very
important.
In my judgment, over the last 30 years since airline
deregulation, Congress has really done--slowly just walked away
from its commitment to making sure that small and rural
communities remain connected to the national aviation system;
hub and spokes, whatever you want to call it. Next year in the
FAA bill, Congress has a chance to recognize, and to correct,
that problem, and I am going to fight for that.
Senator Burns. Senator Lott?
STATEMENT OF HON. TRENT LOTT,
U.S. SENATOR FROM MISSISSIPPI
Senator Lott. Well, thank you, Mr. Chairman, for having
this very important hearing. It should be noted the Senators
who are attending are bipartisan and are from Mississippi,
Montana, North Dakota, Nebraska, Arkansas, and West Virginia,
all small rural states, and this is a very important issue for
all----
Senator Burns. Turn your microphone on, there, if you
would, please.
Senator Lott. Well----
Senator Burns. There you go.
Senator Lott.--I was--well, I was going to praise you.
That's why you wanted it on at this point.
I want to thank you, Mr. Chairman, for having the hearing.
This is a very important hearing for the Senators here, and, I
think, for the country.
I want to urge the witnesses here today to provide
leadership in this area, but in the aviation area, in
particular, and in general. Transportation is a key component
of the future economic development of this country. Americans
are mobile. We're going to move around. And we're going to get
air service, and it has to include the rural areas or--under
the current system, or we'll get it some other way.
I have worked on AIR-21, Vision 2000, worked on the
reauthorization bills, have been very aggressive in pushing the
programs that are important to our rural communities, including
the Essential Air Service program, which I have one airport in
my state that participates in, and the Small Community Air
Service Development Program, which has turned out to be a real
plus.
I'm not going to get too critical today of the
Administration, but I do want to say I don't think the
Administration has paid enough attention to aviation. I've
enjoyed working with Marion Blakey at FAA, but, frankly, you're
not forward-leaning, we're pulling you. We have to--we have to
come up with these programs, we have to authorize the funding,
and then we have to do the funding, because the Administration,
year after year, doesn't ask for the funding. And I'm tired of
that, and I'm embarrassed about it. You know, unless you can
get from Montana to these major hubs, unless you get from
Mississippi to Atlanta, you know, you're going to cut the
number of people and the opportunities for half the country
out. And so, I think we should support these programs. I think
we should fund them completely. And I think the Administration
needs to get off its royal--and start really aggressively
pushing transportation--lanes, trains, planes, ports, and
harbors, the whole package, because if we don't, we're going to
fall--we're going to fall behind in this world competition.
So, I appreciate what you're trying to do. I know a little
bit about the witnesses here today. And I hope you'll take that
message back. I just spoke to the nominee for the Department of
Transportation, and urged her to make it clear that we're going
to have an aggressive transportation plan. And the plans don't
begin in New York and L.A.; they begin in Charleston, West
Virginia, and, you know, Montana, and Jackson, Mississippi. So,
just keep that in mind.
Thank you very much, Mr. Chairman.
Senator Burns. Thank you, Senator Lott. And that's a nice
message to send.
Mr. Reynolds, thank you. We'd like to welcome you back. We
can remember when you served on--oh, Senator Dorgan is here. My
goodness. North Dakota. Yes, you can turn your refrigerated
truck off when you go--when you cross North Dakota.
Senator Dorgan. Mr. Chairman, I will forego any Montana
humor.
[Laughter.]
Senator Dorgan. We have all those Montana jokes in North
Dakota that all of us have heard. And, Mr. Chairman, you've
heard them all, as well, so I won't do that today. But thank
you for recognizing me.
Senator Burns. Sorry--I'm sorry about that. I apologize.
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. I appreciate your holding this hearing. And
I want to just make a couple of opening comments.
I appreciate the comments made by my two colleagues,
Senator Lott and Senator Rockefeller. And I did not hear your
opening statement, Mr. Chairman, but I assume that it follows
in the same vein. I know that you have worked with me and many
others for a long while on these issues.
But let me just--let me make this comment. The airlines in
this country--notwithstanding the issue of rural service, the
airlines are struggling, for a lot of reasons. There's a spike
in the price of jet fuel and terrorist threat and security and
so on. Airlines are struggling. But whether in good times or
bad times, whether airlines are struggling or doing well, there
is an overriding issue of service to rural areas, and that's
what I believe this hearing is attempting to get at. And let me
describe it. We went through, in this town, a deregulation
fever. And, you know, people walked around here with sweat on
their brow and shortness of breath talking about how quickly we
could deregulate everything. So, we deregulated the airlines
and the railroads. And the result is, the rural areas of this
country got the short end of the stick. And I think
deregulation has provided powerful benefits if you live in one
of America's biggest cities. You have multiple opportunities to
find different carriers at different and competitive prices to
fly almost anywhere. And God bless you, good for you. But part
of this country was left behind, and that is not what should
happen on services that are essential. And I believe
transportation services are essential.
Now, let me describe who was left behind. Mississippi would
have its stories. West Virginia, Montana would have their
stories. And North Dakota would have its stories. I have
previously brought to this committee room a picture of the
world's largest cow. Now, probably no one in this room has seen
the world's largest cow except me. It actually has a name; it's
called Salem Sue. Salem Sue sits on a very large hill. Salem
Sue is a Holstein cow sitting on a hill overlooking New Salem,
North Dakota. So, I said, with a picture of this cow, the
largest cow in the world--that's--metal cow, I should say--the
world's largest cow and Mickey Mouse. I had two large posters.
I said, ``Now, depending on which one you wanted to see, here's
the cost of getting there. You could travel half as far from
Washington, D.C., to North Dakota to see the world's largest
cow, or you could travel twice as far from Washington, D.C., to
go see Mickey Mouse in Disneyland. Now, here are your choices.
You can travel half as far to see the world's largest cow, and
pay twice as much, or you can pay twice as far--twice as much,
rather--excuse me, you can travel twice as far and pay half as
much to go to Disneyland.''
Now, if someone just looked at that, they say, ``Well, what
on Earth is going on here? That's just stupid.'' Yes, it is
stupid. We say, in this country, ``Oh, but depending on where
you live, you can travel twice as far and pay half as much, or,
if you live somewhere else, particularly in a rural area, then
you're going to get stuck paying twice as much for traveling
half the distance.''
I'm just telling you, by definition that leaves a part of
this country behind. It says to someone who wants to do
business in Montana, West Virginia, Mississippi, or North
Dakota, ``By the way, when you move your plant here, make sure
you understand, your transportation costs are going to be a lot
higher, because it costs a lot more to fly from our area to the
major metropolitan areas.'' That's what deregulation has given
us.
Now, I don't know that I know all the answers on how to
address this. I know some of them. But I think the need to hold
this hearing, and to do it routinely and repeatedly until we
find a way to adjust deregulation, is urgent. We deregulated,
and now what we have are large carriers retreating into large
metropolitan areas, where they dominate service in those areas.
So, we now have deregulated monopolies in regional areas. I'm
telling you, I don't think--that might work for some parts of
the country, and God bless them, but it sure on Earth doesn't
work for rural areas of this country. I think it systematically
cheats rural travelers. And so--rural State travelers, I should
say.
I want the airlines to do well, but I also want all
Americans to have reasonable access, at decent, competitive
prices, to good airline service. And that is not now the case.
Let me just finish with one final point with a chart.
Senator Rockefeller. What about the cow?
Senator Dorgan. The--well, the cow's still there, and I'd
invite all my colleagues----
[Laughter.]
Senator Dorgan.--to pay twice as much to travel half as far
to see Salem Sue.
In the meantime, I've put up here an airline ticket that
shows I can get on an airline here in Washington and fly to Los
Angeles, California, and it's going to cost me $224.50, but I
can fly half as far and go to Fargo, North Dakota, and pay
three times as much. That's my choice today. A heck of a
choice. And, you know, if you went to your constituents, any of
us, and said, ``You know, we've got a new pricing scheme that
we've agreed to with respect to deregulation, travel half as
far and pay three times as much, and we'd like you to just chew
on that and see what you think,'' I think I know what the
crescendo of voices would say, coming from rural areas in this
country. They'd say, ``Hell, no, that doesn't make sense for
this country. That's not fair to a major portion of this
country.''
So, Mr. Chairman, having said all that, I'm pleased that
you've called this hearing. I'm pleased to be here with my
colleagues from rural states--Arkansas, Nebraska, Mississippi,
West Virginia. We need to work together to find ways to address
these issues. More competition, lower prices. That'll be a
fairer situation for people who live in rural parts of this
country.
Senator Burns. Well, in the competition area--and, as you
well know, most of our--we don't--they don't even have to
compete with bus or train service; there's little or no public
transportation at all.
Senator Nelson?
STATEMENT OF HON. E. BENJAMIN NELSON,
U.S. SENATOR FROM NEBRASKA
Senator Ben Nelson. Thank you, Mr. Chairman. Appreciate
very much your holding this hearing.
And I, like Senator Dorgan, am very concerned about rural
air service for Nebraska, in particular, but for our rural
parts of our country. Rural air service is obviously a very
important issue in states like ours, and certainly like
Nebraska. Our largest airport in Nebraska is only 20 gates, and
most of our airport runways are surrounded by cornfields. So,
as you can imagine, this is a big issue for my constituents.
And I'd like to quickly give you a picture of aviation in
Nebraska. We have 83 public-use airports in the state, and, of
those, only two in the eastern part of the state, Omaha and
Lincoln, have scheduled air-carrier jet service. That leaves 81
communities that must rely on general aviation support or
Essential Air Service subsidies. Charter operations are
concentrated in the east, so general aviation support is very
limited in communities in central and western Nebraska. As you
can see, our seven EAS communities are critical for the people
living in rural Nebraska to have access to the Nation's
aviation system.
And in anticipation of this hearing, I contacted a number
of our Essential Air Service communities to get their thoughts
on rural air service; specifically, the Essential Air Service
and Small Community Air Service Development Program. And I'd
like to highlight for the Committee portions of the responses
I've received. And, Mr. Chairman, I would ask unanimous consent
to submit these letters from these communities for the record.
Senator Burns. Without objection.
[The information referred to follows:]
Alliance Municipal Airport
Alliance, NE, September 12, 2006
Hon. E. Benjamin Nelson,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Dear Senator Nelson:
On behalf of the City of Alliance I would like to express our
support for continuation of the Essential Air Service and the Small
Community Air Service Development Grant Programs. The benefit to the
Alliance Municipal Airport provided through these programs supports the
economic vitality of the region.
We are currently developing our Instrument Landing System (ILS) in
order to better serve our traveling public, air carriers, and general
aviation customers. Continued development of air services is vital to
the growth of our community. The availability of commercial flights
provides much needed access to the area for both business and leisure
activities. The presence of the Alliance Municipal Airport, and the
funding that supports it, is a vital part of our community development
and way of life.
We thank you for your support of Essential Air Service and the
Small Community Air Service Development Grant Programs.
Sincerely,
Richard C. Cayer, P.E.,
Airport Manager.
______
Central Nebraska Regional Airport
Hon. E. Benjamin Nelson,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Re: Comments on Essential Air Service
Dear Senator Nelson:
Thank you for the opportunity for me to comment on my views of
rural air service. As an Executive Director for the Central Nebraska
Regional Airport, a rural airport, I am deeply concerned about this
very issue.
Senator Nelson, as I have expressed to you on several occasions,
rural America is the true essence of what has made this country a
strong and prosperous country. Rural America represents the true
backbone of this country with its agriculture production such as corn,
soybeans, wheat, beef, and more recently in the State of Nebraska,
ethanol production. We are now seeing in Nebraska, a diversification to
not only agriculture, but we are seeing a tremendous growth in
industry, goods, and services.
In order to continue this diversification, communities like Grand
Island, rely on air service to fly in and out the business travelers
from all parts of the world. Essential Air Service has provided that
very bridge to the outside world in order for rural communities to
continue to grow and prosper. It is vitally important to keep this
program in place!
I would like to take a moment to commend the staff at the
Department of Transportation that administers the Essential Air Service
program. I do not envy the tough job they have ``juggling'' $110
million dollars between 120 plus communities. The DOT takes a
``beating'' from Airport Directors like myself when the community is
given air service that is viewed as ``not viable.''
In further reviewing the Essential Air Service program, it is
important to keep in mind the viability of the air service proposals.
We all could spend hours debating what ``viable'' air service is. This
is why community input is so valuable and should be given more
consideration by the DOT. As an Airport Director, I feel it is
important to solicit public input. Public input helped my board members
and I make our recommendation to the DOT as to the air service that is
desired and more importantly, supported by the local population. My
goal as an airport is to wean off of the Essential Air Service program.
I believe this should be the goal for all airports that are on EAS
subsidies. I would caution the Senate Commerce Committee the lowest
cost proposals submitted by the airlines are not always the best for
sustaining long-term viable air service. The DOT needs to consider the
public input more and what proposal is going to benefit the community
in the long run!
I feel the Small Community Air Service Development Grant Program is
a great program for small communities. I do have some concerns about
the size of some ``small communities'' that have received this grant in
the past. I definitely support this program as long as it is for small
communities!
In closing, I would be honored to testify as a representative of
small airports. I feel the decisionmakers in Washington, D.C., need to
face Airport Directors of rural airports to hear our concerns. The
direct dialogue is crucial for all of us so decisions are made on
factual testimonies from those of us working in ``Heartland U.S.A.''
Sincerely submitted,
Michael J. Olson, A.A.E,
Executive Airport Director.
______
Nebraska Department of Aeronautics--Airport Advisory Board
McCook, NE, September 12, 2006
Hon. E. Benjamin Nelson,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Dear Senator Nelson:
As a Commissioner for the Nebraska Department of Aeronautics and
Chairman of the McCook, Nebraska Airport Advisory Board, I am annually
concerned about the continued funding for the Essential Air Service and
the Small Community Air Service Development Grant Programs. Without the
funding provided by these programs to communities in Nebraska, reliable
air service and the means to promote it would no longer exist. Not only
is it a problem for our state, but for all of the other ``Fly Over''
states in the country. Public transportation would continue to be
threatened with permanent loss of commercial air service. Demographics
and rural economies' conditions restrict the profitable operations of
the airlines serving these communities. Over the years we have seen
several airlines fail in their attempt to achieve profitability.
Not only does this service provide our cities public
transportation, it also benefits rural economic development and
visiting medical personnel from our state's major hospitals. Without
commercial air service available, many of these patients would be
required to commute long distances to major medical facilities. I fully
understand the pressure to eliminate both programs. However, living in
one of these isolated communities, I fully understand that these
programs are all that allows us to commute to the rest of the world.
Thank you for your time and consideration of these important
issues.
Sincerely,
Douglas F. Vap,
Commissioner.
______
City of McCook
McCook, NE, September 13, 2006
Hon. E. Benjamin Nelson,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Dear Senator Nelson:
The citizens of Southwest Nebraska would like to thank you for your
continued hard work to try and secure appropriate funding for Essential
Air Service and the Small Community Air Service Development Grant
Program. As you well know, funding for Essential Air Service is vital
to the continuation of passenger air service at McCook Regional
Airport. Having access to commercial air service is crucial to the
economic stability to communities like McCook and without this service
it would make recruiting new businesses very difficult. A statement
that I have recently heard is that economic development does not come
by bus or train, it comes by air. This statement could not be more
true. As we have seen, without the assistance of EAS, it would not be
profitable for an airline to operate in rural communities; thus
eliminating this essential need.
Again, thank you for your continued support of Southwest Nebraska
and especially your current effort to secure appropriate funding for
Essential Air Service and the Small Community Air Service Development
Grant Program for rural America.
Cordially,
Kyle Potthoff,
Public Works Director.
______
Western Nebraska Regional Airport
Scottsbluff, NE, September 28, 2006
Hon. E. Benjamin Nelson,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Dear Senator Nelson:
We apologize for the late arrival of this support letter to you for
the Essential Air Service Program as well as the Small Community
Development Grant Program.
As you are well aware. whether it is in Nebraska or any other
state, these programs are vital for the survival of small communities
across the United States. Small airports provide an important service
to individuals living outside of big cities. Continued funding of the
Essential Air Service Program is the only way airlines could possibly
continue to provide air service from smaller airports to the large
multi-airline airports.
The Small Community Development Block Grant Program is another
program that is very necessary to continue to provide for the
possibility of the start-up of new airlines and for the ability for
small communities to advertise and promote economic development for
their community or better yet their region that they are providing air
service for.
Western Nebraska genuinely thanks you for your continued support of
these very important programs for small communities and the flying
public to continue to receive these valuable services.
Very truly yours,
Donald E. Overman,
Airport Authority Board Chairman.
______
Nebraska Department of Aeronautics
Lincoln, NE, September 12, 2006
Mr. Doug Vap,
109 East N Street,
McCook, NE.
Re: EAS
Doug:
In response to your request for our thoughts on EAS, please
consider the financial impact--not just to the traveler; but the
communities at large. Some critical figures come to mind.
We have 83 public use airports in the state. Of those, only two
(Omaha & Lincoln) have scheduled, air-carrier jet service. That leaves
81 communities that must rely on general aviation support or EAS
subsidies. Charter operations, too, are concentrated in the east; so
general aviation support is severely limited in those communities in
the central and western regions of the state.
In order to effectively recruit new industry, we absolutely must
maintain a strong network of airports and access to those airports
(scheduled service). I'm sure you are well aware of the old adage,
``New industry does not come to town in a Greyhound Bus.'' In recent
years we have upgraded our Nebraska airports at the rate of
approximately $30 million a year. That's considerable investment to
ignore. Our communities have been strong supporters on air travel. In
many cases, it represents their lifeline to government, industry and,
of course, medical care. Communities like Chadron, Alliance, and McCook
come to mind immediately.
Aviation's Impact on Nebraska can, in fact, be quantified. A recent
NDA-commissioned study cited a direct impact of 29,400 jobs and $681.3
million in payroll (including tenants, construction and visitors). And,
these figures do not include the ``multiplier,'' which inflates the
numbers considerably. So, before we cut back on this program, we must
consider both the immediate impact on our people and the potentially
drastic impact on the future vitality of our communities. The media
recently claimed that Nebraska was the seventh best state to welcome
new industry. That's assuming we have reasonable access, and right now,
the best we have relies on EAS subsidy. Don't forget the ``Greyhound
bus''!
Respectfully,
Stuart E. MacTaggart,
Director.
Senator Ben Nelson. Now, McCook, Nebraska, my hometown,
only 70 miles south of the Chairman's wife's hometown of North
Platte, says, ``Having access to commercial air service is
crucial to the economic stability to communities like McCook,
and, without this service, it would make recruiting new
businesses very difficult.'' Economic development does not come
by bus or train, it comes by air.
And from Grand Island, Nebraska, ``Communities like Grand
Island rely on air service to fly in business travelers from
all parts of the world. Essential Air Service has provided that
very bridge to the outside world in order for rural communities
to grow and prosper.''
From Scottsbluff, Nebraska, Essential Air Service and the
Small Community Air Service Development Program are, ``vital
for the survival of small communities across the United States.
Small airports provide an important service to individuals
living outside of big cities. Continued funding of Essential
Air Service is the only way airlines could possibly continue to
provide air service from smaller airports to largest--to large
multi-airline airports.''
So, from Alliance, Essential Air Service, ``supports the
economic vitality of the region. Continued development of air
services is vital to the growth of our community.''
And from the Nebraska Department of Aeronautics, air
service in rural communities, ``represents their lifeline to
government, industry, and medical care.''
I highlight these comments in an effort to make the point
that air service is an economic development issue for rural
America. Supporting rural air service means supporting economic
growth. And this is why I have opposed the administration's
efforts each budget cycle to cut funding for EAS and the Small
Community Air Service Development Program. It means cutting
access and opportunity for rural areas.
I'll end this statement by telling you about yet another
Essential Air Service community in Nebraska, Chadron, Nebraska.
Earlier this year, after the President released his budget that
cut EAS funding, I received a letter from the City Manager of
Chadron urging me to continue to support the Essential Air
Service program. He explained that the City of Chadron was in
negotiations to secure a call-center operation that would
ultimately employ over 100 full-time employees in Chadron, the
population of which is about 5,000. A hundred full-time
employees in Chadron is a major economic development boost. One
of the vital factors in the company's decision to expand its
operations in Chadron is the presence of commercial air
service. So, I share this story with the Committee as a
tangible example of what commercial air service means to our
small rural communities. Cutting air service equates to
eliminating economic development opportunities and jobs to the
communities. And that's why I'll continue to fight for funding
for Essential Air Service and the Small Community Air Service
Development Program.
I hope, as we consider the FAA authorization bill in the
coming months, the administration will work with this Committee
to find constructive, workable ways to ensure these communities
do not lose this critical service.
Thank you, Mr. Chairman.
Senator Burns. Senator Nelson, other than Scottsbluff,
North Platte, probably Kearney, and Grand Island----
Senator Ben Nelson. And McCook.
Senator Burns.--and McCook--does Alliance and Chadron
also--do they fall----
Senator Ben Nelson. Chadron does. Alliance doesn't.
Senator Burns. Alliance does not?
Senator Ben Nelson. Oh, Alliance--excuse me--Alliance still
does, yes, right.
Senator Burns. OK.
Senator Ben Nelson. Exactly. It's Norfolk that no longer--
--
Senator Burns. OK.
Senator Ben Nelson. Yes. Yes.
Senator Burns. I say that, just in--so I'm--to alert
everybody that I'm, sort of, familiar----
Senator Ben Nelson. You're----
Senator Burns.--with what you speak.
Senator Ben Nelson. You are very impressive.
Senator Burns. Yes, sir.
Senator Pryor?
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you, Mr. Chairman. Thank you for doing
this. I don't have an opening statement. I'd rather get on to
the witnesses. Thank you.
Senator Burns. Thank you. And thank you for your--for your
great statement.
[Laughter.]
Senator Burns. Mr. Reynolds, welcome back. I can remember
the days you were on this very Subcommittee. And the Chairman
found out that you were going to come back, and so he spruced
the place up. I thought he'd done a fairly nice job of that.
And we look forward to your comments this morning, and thank
you for coming.
STATEMENT OF MICHAEL W. REYNOLDS, ACTING ASSISTANT SECRETARY
FOR AVIATION AND INTERNATIONAL AFFAIRS, DEPARTMENT OF
TRANSPORTATION
Mr. Reynolds. Thank you very much, Mr. Chairman. Thank you
for inviting me to this hearing.
With your permission, I will summarize my prepared
statement, which I ask be made part of the record.
Senator Burns. Without objection. And all witnesses can do
that this morning.
Mr. Reynolds. Thank you, sir.
I appreciate the opportunity to discuss with you air
service to small communities and the two programs administered
by the Department of Transportation that deal specifically with
such service; namely, the Essential Air Service program and the
Small Community Air Service Development Program.
It is clear that air service in this country has changed
dramatically over the past several years. Many of the changes
have been positive. The growth of low-fare carriers, for
example, has made affordable air transportation available to
millions of people across the country. While this is a good
development for consumers overall, we recognize that it can
create challenges for some small communities, because many
consumers are willing to drive to places with a broader array
of air service options, making it more difficult for some
individual airports to sustain their own traffic levels. This
leakage can result in a struggling community airport, but not
necessarily consumers who lack access to the national air
transportation system.
The challenge that we face is one of adjusting the programs
in an efficient and effective manner to account for such
changes. All of us, including the Federal Government, as well
as the states and the communities themselves, need to re-
examine the way we approach small community air service.
Recognizing that Federal Government involvement in smaller
community air service has not kept pace with changes in the
industry, we have initiated some important reevaluations of the
programs that we manage.
Let me first address the EAS program. The laws governing
this program have not changed significantly since its inception
28 years ago, notwithstanding the dramatic changes that have
taken place in the airline industry. As currently structured,
the EAS program acts only as a safety net for small communities
receiving subsidized air service by providing threshold levels.
Unfortunately, this approach does not help communities attract
self-sustaining, unsubsidized air service. With this in mind,
the Administration proposed very fundamental and substantial
changes of the program in the last FAA reauthorization
proposal, as well as in the last several budget requests. Those
changes were based on our extensive experience dealing with the
communities and the carriers involved with the program,
recommendations from both of these constituencies, as well as
studies by the GAO that were geared toward finding the answer
to successful service at small communities.
Two major themes came through repeatedly: the need for
greater participation in addressing--the need for greater
participation by communities in addressing their air service
issues, and the desire for greater flexibility in doing so.
Currently, a community's eligibility for inclusion in the
EAS program is based only on whether it had scheduled air
service at the time of deregulation. Once subsidized air
service was established, there was little incentive for active
community involvement to help ensure that the air service being
subsidized would ultimately be successful. As a result of these
and many other factors, EAS-subsidized flights are frequently
not well-patronized, and our funds are not being used as
efficiently or effectively as possible.
Under the Administration's proposal, communities are being
asked to become partners in the financing of their air
services, but, in exchange, are given a much bigger role in
determining the nature of those air services.
In addition to the traditional EAS schedule of two or three
roundtrips a day to a hub, the communities would have
alternatives, including charter flights, air taxi services,
ground transportation links, or perhaps regionalized air
services. Community financial participation of 10 percent, 25
percent, or 50 percent in the costs of the services would be
determined by the degree of isolation from access to the
national air transportation system.
We believe that this approach would allow the Department to
provide the most isolated communities with air service that is
tailored to their individual needs. Importantly, it provides
communities in the program greater participation, control, and
flexibility over how they meet their air service needs, and a
far greater incentive to promote the success of those services.
It is important to note the continued growth in the size
and cost of the EAS program to taxpayers over time. Before the
terrorist attacks of September 11, the Department was paying
subsidies for 108 communities, and the budget had been a flat
$50 million a year. We are now subsidizing service at 149
communities, and our budget is $110 million for the current
fiscal year. For these and other reasons, an approach along the
lines proposed by the administration is needed to more directly
address small community air service issues, and the Department
is fully prepared to work with this Committee in that effort.
On our other program, the Department is now in its fifth
year of administering the Small Community Air Service
Development Program, which provides grants to smaller
communities to address air service and fare issues. For Fiscal
Year 2006, the funding for the program is $10 million, and just
last month we announced this year's 25 grant recipients. In
previous years, the funding level had been at about $20
million.
Following statutorily-mandated selection criteria, we have
made many awards to communities throughout the country and
authorized a wide variety of projects, seeking both to address
diverse types of problems presented and to test communities'
different ideas about how to solve them.
Over the past 4 years, the Department has made 150 grant
awards. Our experience, to date, with this program demonstrates
the great interest and desire of communities to tackle their
air service challenges head-on, and to contribute substantially
to meet those challenges.
Communities have been very successful in implementing their
authorized grant projects, and we have been monitoring the
progress of all of them. However, because the majority of
projects involve activities over 2- to 4-year periods, only
some of them are now at the point of completion.
Beyond implementation, the true test of success will be if
improvements are sustained when the grant projects have
concluded. As more grant awards are completed, we will review
the results to determine if they can offer insight into helping
smaller communities with their air service challenges.
The Federal Government, however, is only one piece of the
equation. States and communities will need to review their air
service in the context of the changed industry structure and
service patterns to seek fresh, new solutions to maximize their
air service potential, including regional and intermodal
approaches and expansion of public-private partnerships to meet
these challenges.
In closing, Mr. Chairman, I can assure you that the
Department is committed to implementing its small community air
service programs in the best and most efficient manner, thereby
helping smaller communities meet some of the challenges they
face in obtaining and retaining air service. We look forward to
working with you, and the members of this subcommittee, and the
Full Committee, as we continue to work toward these objectives.
Thank you, and I will be happy to answer any of your
questions.
[The prepared statement of Mr. Reynolds follows:]
Prepared Statement of Michael W. Reynolds, Acting Assistant Secretary
for Aviation and International Affairs, Department of Transportation
Mr. Chairman, thank you for inviting me to this hearing. I
appreciate the opportunity to discuss with you air service to small
communities, and the two programs administered by the Department of
Transportation that deal specifically with such service, namely the
Essential Air Service (EAS) program and the Small Community Air Service
Development Program. I can assure you that the Department is committed
to implementing its small community air service programs in the best
and most efficient manner and thereby helping smaller communities meet
the challenges that they face in obtaining and retaining air service.
It is clear that air service in this country has changed
dramatically over the past several years. Many of these changes have
been very positive. The growth of low-fare carriers, for example, has
made affordable air transportation available to millions of people
across the country. The number of air travelers has expanded
dramatically, as hundreds of passengers have taken advantage of the low
fares that have become more widely available. While this is a good
development overall for consumers, we recognize that it can create new
challenges for some small communities. With a greater number of service
choices available, particularly those involving lower fares, many
consumers are willing to drive to places with a broader array of air
service options, making it more difficult for some individual airports
to sustain their own traffic levels. There are, for example, some
communities receiving EAS assistance within ready driving distance of
two or three major airports. This ``leakage'' can result in a
struggling community airport, but not necessarily consumers who lack
access to the national air transportation system.
Another challenge is the change in aircraft used by carriers that
serve small communities. Many commuter carriers have been replacing
their 19-seat aircraft with 30-seat aircraft, due to the increased
costs of operating the smaller planes and larger carriers' reluctance
to offer code-sharing on 19-seaters. This trend began at least 10 years
ago and has continued. There are now fewer and fewer 19-seat aircraft
in operation as many carriers have up-gauged to 30-seat aircraft, and,
in some cases, even regional jets. As a result, many small communities
that cannot support this larger size of aircraft are being left without
air service. Additionally, the rise in the cost of jet fuel has made
all carriers more cost-conscious and more selective in initiating new
service and maintaining service where yields are low. Finally, some
changes have occurred in response to the terrorist attacks of September
11, 2001. Many consumers, leisure and business, have changed their
travel patterns and carriers have altered the structure of their
airline services. Generally, this has meant carriers abandoning the
smaller markets, as evidenced by the fact that we have received notices
to suspend service at more than 100 communities since September 11. In
addition, the financial condition of the network carriers has added
further uncertainty for their regional code-share partner service.
The challenge that we face is one of adjusting the programs to
account for these changes in an efficient and effective manner, giving
appropriate and balanced recognition to the reasonable needs of the
communities, the carriers, the consumers, and the taxpaying public at
large. Mr. Chairman, I do not use the word ``challenge'' lightly. All
of us--the Federal Government that manages programs affecting service
at small communities, as well as the states and the communities
themselves--need to reexamine the way we approach small community air
service.
We at the Department of Transportation have recognized for a while
now that the way the Federal Government helps small communities address
air service concerns has not kept pace with the changes in the industry
and the way service is now provided in this country. For that reason,
we have initiated some important reevaluations of the programs that we
manage. I want to share with you today what we have done and are doing
to address this issue.
As you know, the Department administers two programs dealing with
air service at small communities. The EAS program provides compensation
to air carriers to provide air service at certain statutorily-mandated
communities. The Small Community Air Service Development Program, which
was established by Congress in 2000 under the AIR-21 legislation,
provides Federal grants-in-aid to help small communities address their
air service and airfare issues. While initially established as a pilot
program, it was reauthorized through FY 2008 in Vision 100.
Essential Air Service Program
Let me first address the EAS program. The laws governing our
administration of the EAS program have not changed significantly since
its inception 28 years ago, notwithstanding the dramatic changes that
have taken place in the airline industry. As currently structured, the
EAS program acts only as a safety net for small communities receiving
subsidized air service by providing threshold levels of air service.
While ensuring some service, this approach does little to help
communities attract self-sustaining unsubsidized air service, as
evidenced by the fact that once a community receives subsidized air
service it is rare for an air carrier to come in offering to provide
unsubsidized air service. The goal of our proposed changes to the EAS
program is to end this dependency and to give communities the ability
to obtain transportation services more tailored to the communities'
needs.
With this in mind, the Administration proposed very fundamental and
substantial changes to the program in its last FAA reauthorization
proposal, as well as in the last several budget requests. Those changes
were based on our extensive experience dealing with the communities and
the carriers involved with the program, recommendations from both of
these constituencies, as well as studies by the Government
Accountability Office (GAO) that were geared toward finding ``the
answer'' to successful service at small communities. Two major themes
came through repeatedly--the need for greater participation by
communities in addressing their air service issues, and the desire for
greater flexibility in doing so.
The Administration's proposed revisions to the EAS program would,
for the first time since the program was established in 1978, require
communities to be stakeholders in the air service they receive and thus
have a vested interest in its success. With the proposed reforms, the
Administration would also ensure that the small communities most in
need would be able to maintain access to the national air
transportation system.
Currently, a community's eligibility for inclusion in the EAS
program is based only on whether it was listed on a carrier's
certificate on the date the program was enacted--October 24, 1978. Once
subsidized service was established, there was little incentive for
active community involvement to help ensure that the service being
subsidized would ultimately be successful. I can tell you anecdotally
that a number of EAS communities do not even display their subsidized
EAS flights on their Internet homepages, but some in the past have
shown the availability of air service at nearby hubs, especially if it
is low-fare service. As a result of these and other factors, EAS-
subsidized flights are frequently not well patronized and our funds are
not being used as efficiently or effectively as possible.
Under the Administration's proposal, communities are asked to
become partners in the financing of their air services, but in exchange
are given a much bigger role in determining the nature of that service.
As a result, currently-eligible communities would remain eligible, but
would have an array of new transportation options available to them for
access to the national air transportation system. In addition to the
traditional EAS schedule of two or three round trips a day to a hub,
the communities would have the alternatives of charter flights, air
taxi service, or ground transportation links. Regionalized air service
might also be possible, where several communities could be served
through one airport, but with larger aircraft or more frequent flights.
Under the Administration's proposals, community participation would
be determined by the degree of its isolation from access to the
national air transportation system. The most remote communities (those
greater than 210 miles from the nearest large or medium hub airport)
would be required to provide only 10 percent of the total EAS subsidy
costs. Communities that are within a close drive of major airports
would not qualify for subsidized air service, but could receive
subsidies constituting 50 percent of the total costs for providing
surface transportation links to that service. Specifically, communities
within: (a) 100 driving miles of a large or medium hub airport, (b) 75
miles of a small hub, or (c) 50 miles of a non-hub with jet service
would not qualify for subsidy for air service. All other EAS
communities would have to cover 25 percent of the subsidy costs
attributable to the provision of air service.
The proposed small-hub and non-hub criteria are important. Under
current law, communities located within 70 miles of a large or medium
hub are not eligible for subsidized air service because they have
nearby, attractive alternatives. Given the growth of air services in
this country since deregulation, our proposal simply recognizes that
the same principle should apply for communities located near small hubs
and non-hubs offering jet service.
We believe that this approach would allow the Department to provide
the most isolated communities with air service that is tailored to
their individual needs. Importantly, it provides communities in the
program greater participation, control, and flexibility over how to
meet their air service needs, and a far greater incentive to promote
the success of those services.
Congress has also recognized the need for reform and made some
changes in the reauthorization bill, Vision 100. One program is the
Community Flexibility Pilot Program. It allows up to ten communities to
receive a grant equal to 2 years' worth of subsidy in exchange for
their forgoing their EAS for 10 years. The funds would have to be used
for a project on the airport property or to improve the facilities for
general aviation, but no communities have volunteered for that program.
Another program is the Alternate Essential Air Service Program. The
thrust of this program is that, instead of paying an air carrier to
serve a community as we typically do under EAS, communities could apply
to receive the funds directly--provided that they have a plan as to
exactly how they would use the funds to the benefit of the communities'
access to air service. The law gives great flexibility in that regard.
For example, funds could be used for smaller aircraft but more frequent
service, for on-demand air taxi service, for on-demand surface
transportation, for regionalized service, or to purchase an aircraft to
be used to serve the community. The Department issued an order
establishing that program in the Summer of 2004, but to date no
communities have applied. I cannot tell you for sure why, but my guess
is that part of it is that it is just human nature to resist change.
More importantly, while there have been criticisms that the EAS program
does not provide optimum service, I do think that the communities have
gotten very comfortable in knowing that they are guaranteed their two
or three round trips a day no matter what, i.e., EAS is viewed as an
absolute entitlement whether the communities invest any time and effort
in supporting the service or not.
With respect to the EAS program, it is important to note the
continued growth in both the size and cost of the program to taxpayers
over time. As a point of reference, before the terrorist attacks of
September 11, the Department was paying subsidies for 75 communities
(plus 32 in Alaska) and the budget had been flat at $50 million a year.
We are now subsidizing service at 110 communities (plus 39 in Alaska)
and our budget is $110 million for Fiscal Year 2006. Currently, there
are approximately 70 communities that are eligible for EAS subsidy
under the parameters of the existing statute that are served by one
carrier without subsidy support. As most of these communities would be
eligible for subsidy if the last carrier requested to stop service,
this represents a significant potential liability. Moreover, should
more eligible communities now served by multiple carriers get down to
service by a single carrier, the number of communities on the verge of
requiring subsidy support could increase further. That is why an
approach along the lines proposed by the Administration is needed to
more directly address small community air service issues and the
Department is fully prepared to work with this committee in that
effort.
Small Community Air Service Development Program
The Department is now in its fifth year of administering the Small
Community Air Service Development Program. Under current law, the
Department can make a maximum of 40 grants in each fiscal year to
address air service and airfare issues, although no more than four
grants each year can be in any one state. Until 2006, Congress provided
$20 million in each year for this program. In 2006, the funding for the
program is $10 million.
On January 20, the Department issued an order requesting that
communities interested in receiving a grant under the Small Community
Air Service Development Program for Fiscal Year 2006 file their
applications by April 7. The Department received 75 applications
seeking nearly $33 million. On August 10, the Department selected 25
communities for grant awards and we are currently working to complete
the individual grant agreements with the selected communities.
Our experience to date with this program demonstrates the great
interest and desire of communities to tackle their air service
challenges head on and to contribute substantially to meeting those
challenges. The Department has received as many as 180 applications for
the opportunities available, although that level has dropped to
approximately 100 applications per year as the number of grant
recipients has increased. In each year, between 2002 and 2005, the
Department has made at least 35 grant awards, and in Fiscal Year 2004,
the Department made an additional six grant awards using unspent funds
from prior years' completed or terminated grants. This year the
Department issued 25 grant awards.
Following statutorily mandated selection criteria, we have made
many awards to communities throughout the country and authorized a wide
variety of projects, seeking both to address the diverse types of
problems presented and test communities' different ideas about how to
solve them. Some of these projects include a new business model to
provide ground handling for carriers at the airport to reduce station
costs, financial assistance for a new airline to provide regional
service, expansion of low-fare services, a ground service
transportation alternative for access to the Nation's air
transportation system, aggressive marketing and promotional campaigns
to increase ridership at airports, and revenue guarantees, subsidies,
and other financial incentives to reduce the risk to airlines for
initiating or expanding service at a community. For the most part,
these projects extend over a period of two to 4 years.
This program differs from the traditional EAS program in a number
of respects. First, the funds go to the communities rather than
directly to an airline serving the community. Second, the financial
assistance is not limited to air carrier subsidy, but can be used for a
number of other efforts to enhance a community's service, including
advertising and promotional activities, studies, and ground service
initiatives. Third, communities design their own solutions to their air
service and airfare problems and seek financial assistance under the
program to help them implement their plans. Fourth, while not a
requirement for participation, most communities provide a portion of
the cost of the activity receiving financial assistance.
Over the past 4 years, the Department has made 150 grant awards.
Communities have been very successful in implementing their authorized
grant projects. Overall, more than 90 percent of the grant recipients
have implemented their authorized projects and we expect that pattern
to continue.
For example, new services have been inaugurated at many
communities; others have received increased frequencies or services
with larger aircraft. Several communities have begun targeted and
comprehensive marketing campaigns to increase use of the services at
the local airport and to attract additional air carrier services. We
have been monitoring the progress of all of the communities as they
proceed with the implementation of their projects. However, because the
majority of the projects involve activities over a two-to-four-year
period, only now are some of them at the point of completion.
One test of success will be if the improvements achieved are
sustained when the grant projects have concluded. As more grant awards
are completed, we will review the results of those grants to determine
if they can offer greater insight into helping smaller communities with
their air service challenges. An important goal of the Small Community
Program is to find solutions to air service and airfare problems that
could serve as models for other small communities.
As you know, the GAO recently concluded a review of the Small
Community Program. They too have recognized that it is difficult to
draw any firm conclusions as to the effectiveness of the Small
Community Program in helping communities address their service issues
because many grant projects are still in process. Of the grant projects
that had been completed, the GAO concluded that the results were mixed
because not all of the grants resulted in improvements that were
achieved and sustained after the grant funding was exhausted.
The GAO noted that nearly 80 grants were scheduled to be completed
by the end of this year and they recommended that the Department review
the results of these grants before the program is considered for
reauthorization beyond 2008. The Department concurred with GAO's
recommendation and indicated that it would conduct such a review before
the reauthorization process. In conjunction with that analysis, we hope
to learn not only from the projects that succeeded, but also from those
that did not. Both will inform our review of the program and the
guidance that we may be able to develop for the benefit of small
communities overall from a larger group of completed grants under this
relatively new program.
The Federal Government, however, is only one piece of the equation.
States and communities will also need to review their air service in
the context of the changed industry structure and service patterns to
seek fresh, new solutions to maximize their air service potential,
including regional and intermodal approaches and expansion of public-
private partnerships to meet these challenges.
In closing, Mr. Chairman, let me reaffirm the Department's
commitment to implementing the DOT's small community air service
programs in the best and most efficient manner. We look forward to
working with you and the members of this Subcommittee and the full
Committee as we continue to work toward these objectives. Thank you
again. This concludes my prepared statement. I will be happy to answer
any of your questions.
Senator Burns. Thank you very much, Mr. Reynolds.
Mr. Dillingham, welcome back. We appreciate your coming
this morning, and we look forward to your testimony. Thank you.
STATEMENT OF GERALD L. DILLINGHAM,
DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES,
U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Dillingham. Thank you, Chairman Burns, Senator
Rockefeller, and Senator Lott.
My testimony today will discuss three issues: first, the
development and impact of the Essential Air Service program;
second, our review of the Small Community Air Service
Development Program; and, third, I will offer some options that
could possibly lead to more effective use of scarce Federal
resources for both programs.
With regard to the development and impact of the EAS
program, our studies have shown that over the last decade a
growing number of communities have received subsidies under the
EAS program. In Fiscal Year 1997, there were 95 communities
receiving subsidies. There are 159 communities receiving
subsidies this fiscal year. During this time, the Federal
funding for the program has also risen by more than four-fold,
nearly $26 million in Fiscal Year 1997, to just over $109
million this fiscal year. In addition, we found that over time
the average subsidy per community and per passenger has
increased substantially. The average subsidy for an EAS
community was about $834,000 in Fiscal Year 2006, and the
subsidy per passenger ranged from a low of about $12 to a high
of over $600.
The principal impact of the EAS program has been consistent
with its legislative objective of providing Federal subsidies
to eligible communities to ensure that they continue to have
access to air services. However, based on passenger traffic, it
could be argued that the program is not providing the quality
of services or fares to attract local passenger traffic. Our
work further suggests that if the subsidies were removed, air
services would end at many of these communities.
With regard to the status of the Small Community Program,
as Mr. Reynolds has pointed out, during the time the program
has been operating, there have been over 150 grants awarded. To
date, 56 grants, or about 31 percent of the grants, have been
completed. Our review of the program, which was completed late
last year, was based on 23 grants that were completed at that
time. Therefore, our review does not provide a comprehensive
evaluation of the program, but a snapshot in time.
For those 23 completed grants, we found that the majority
of those communities--that is, 19 of the 23--have reported
service or fare improvements, as well as an increase in the
number of enplanements. Charleston, West Virginia, provides an
example of a successful project, where their grant enabled
Charleston to add a new carrier and a new nonstop service to
Houston. Some of the other community initiatives included
offering revenue guarantees to airlines, marketing activities,
and taking over ground station operations.
Mr. Chairman, another important consideration in evaluating
a grants program is what happens after the grant money goes
away. For the grants we reviewed, we found that after the grant
was completed, the majority of communities reported that the
improvement was still in place. And those improvements that
remained after the completion of the grant, the majority of
them were self-sustaining.
Mr. Chairman, although the results that we are reporting
for the Small Community Program are generally positive, let me
reiterate that these results are not necessarily representative
of the total program.
Now I want to turn to a discussion of actions and options
to address the more cost-effective use of scarce Federal
resources for these programs.
Our written testimony provides some details on legislative
options that could make the EAS program more cost effective.
These options include targeting subsidized service to the more
remote communities; two, better matching capacity with
community use; three, consolidating service to multiple
communities and to regional airports; and, finally, changing
the form of Federal assistance from carrier subsidies to local
grants.
Mr. Chairman, Senator Rockefeller, I want to point out that
although these options may make EAS more cost-effective, they
could also result in reduced services to some areas.
In looking at the Small Community Program, we've said that
when enough grants have been completed and DOT has evaluated
them, Congress will be in a better position to determine if the
air service gains that are made are worth the overall cost of
the program. This kind of information can be very useful when
Congress considers the reauthorization of this program in 2008,
and could also result in identifying lessons learned from
successful projects.
In the final analysis, the Congress is faced with many
difficult choices as it tries to help maintain and improve air
services to small communities, especially given the very large
fiscal challenges the Nation faces as a whole. I think it is
important to recognize that for many small communities, air
service is not, and might never be, commercially viable.
Furthermore, in many cases, such as in the State of Montana,
there are limited alternative means for small-community
residents to connect to the national air transportation system.
And in States like Alaska and Hawaii, where other modes of
transportation are somewhat limited, continued subsidies will
likely be needed to maintain that connection.
It will be the Congress's weighing of priorities that will
ultimately decide whether or not these air-service programs
will continue in their current form or some type of modified
form, or whether other less costly options will be pursued.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Dillingham follows:]
Prepared Statement of Gerald L. Dillingham, Director, Physical
Infrastructure Issues, U.S. Government Accountability Office
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to testify today on issues related to
the Federal approach to providing air service to small and under-served
communities. Over the last decade, significant changes have occurred in
the airline industry that have affected service to small communities.
Service to small communities decreased as a result of the weak
financial condition of the airline industry that was exacerbated by the
events of September 11, 2001. Some network carriers are still facing
challenging financial conditions which can negatively affect small
community air service.\1\ For example, small communities may become
cost-cutting targets because they are often the carrier's least
profitable operation. This, as well as other changes, have challenged
small communities to obtain adequate commercial air service at
reasonable prices.\2\
Two key Federal programs help support air service to small
communities--the Essential Air Service (EAS) program and the Small
Community Air Service Development Program (SCASDP).\3\ EAS, established
after airline deregulation in 1978, is designed to ensure that small
communities that received scheduled passenger air service before
deregulation continue to have access to the Nation's air transportation
system. In Fiscal Year 2006, Congress appropriated about $109 million
to the Department of Transportation (DOT) for EAS. For Fiscal Year
2007, the administration requested that $50 million be allocated for
the program and paid for by overflight fees,\4\ while both the House
and Senate Appropriations Committees are proposing $117 million for the
program. Congress established SCASDP in 2000 and has appropriated $20
million annually from 2002 through 2005 for DOT to award up to 40
grants each year to communities that have demonstrated air-service
deficiencies or higher-than-average fares. However, in Fiscal Year
2005, DOT transferred $5 million of these funds from SCASDP to EAS.\5\
For Fiscal Year 2006, Congress authorized $10 million. For Fiscal Year
2007, the administration proposed no funding for SCASDP while the House
and Senate Appropriations Committees are proposing $20 million and $10
million, respectively. In addition, we have reported that it was too
early to assess the effectiveness of SCASDP and have raised questions
about the current structure of EAS.
While the airline industry has been facing fiscal challenges, the
Federal Government's financial condition and long-term fiscal outlook
also deteriorated. We have reported on the Nation's long-term fiscal
imbalances and the need for a fundamental and periodic reexamination of
the base of government, ultimately covering discretionary and mandatory
programs as well as the revenue side of the budget.\6\ In light of
these challenges, we have identified some options for reforming EAS and
recommended that DOT evaluate SCASDP.
My testimony today will discuss: (1) the development and impact of
EAS, (2) the status of SCASDP, and (3) options for reforming EAS and
evaluating SCASDP. My statement is based primarily on the body of
research that we have conducted related to these programs, program
updates, and recent interviews with (and data from) key stakeholders.
We obtained information on the status of projects from the Office of
the Secretary (OST). Based on assessments conducted during previous
reviews, we concluded that the data are reliable for the purposes of
this report. Appendix V contains a list of our related testimonies and
reports. We conducted our work on EAS from March through December 2002,
and our work on SCASDP from September 2004 through October 2005, in
accordance with generally accepted government auditing standards.
In summary:
In recent years, a growing number of communities have
received subsidies under EAS--expanding from 95 communities in
Fiscal Year 1997 to 152 in Fiscal Year 2006. Similarly, funding
for EAS has risen more than four-fold over this 10-year
period--from $25.9 million in Fiscal Year 1997 to $109.4
million in Fiscal Year 2006. In addition, EAS funds were used
to subsidize about 1 million passenger enplanements in 2004--
about 0.15 percent of the Nation's 706 million annual passenger
enplanements.\7\ It is possible that air service might end at
many of these communities, if these subsidies were removed.
Our recent review of SCASDP found that the number of grant
applications was declining, grantees were pursuing a variety of
goals and strategies for supporting air service, and completed
grants had mixed results. Specifically, we found that the
number of applications for SCASDP has declined--from 179 in
2002 to 75 in 2006. We also found that the goals grantees are
pursuing include trying to add flights and destinations, or
trying to obtain lower fares. The different strategies grantees
are employing to improve air service in their communities
include offering subsidies or revenue guarantees to airlines,
marketing, hiring personnel, and conducting studies. Finally,
although we could not assess the effectiveness of the program,
since few projects--23 of 157--had been completed at the time
of our review, we found the results of the completed projects
were mixed. Of the 23 projects, 11 had implemented a self-
sustaining improvement to air service, while the remaining 12
had not.
To ensure the effective use of scarce resources, these
programs need to be examined and options for program
improvement need to be addressed. We have previously reported
on some options for changing EAS to potentially make it more
cost-effective. These options include: (1) targeting subsidized
service to more remote communities, (2) better matching
capacity with community use, (3) consolidating service to
multiple communities into regional airports, and (4) changing
the form of the Federal assistance from carrier subsidies to
local grants. These changes require legislative action.
Although these options might make EAS more cost-effective, they
could also reduce service to some areas. In 2003, the Vision
100--Century of Aviation Reauthorization Act, (Vision 100)
provided for several alternative programs for EAS communities.
However, these programs have not progressed due, in part, to a
lack of response from EAS communities.
Regarding SCASDP, as we recommended, DOT plans to conduct a
comprehensive evaluation of completed projects after Fiscal Year 2006.
The results of such an evaluation will be useful when Congress
considers the reauthorization of this program in 2008 and could result
in identifying ``lessons learned'' from successful projects. These
lessons could be shared with other small communities that are trying to
improve air service, and, if needed, to reform and refocus the program.
Background
Before I discuss these issues in detail, let me sketch the
background of air service to small communities and these programs. Air
service to many small communities has declined in recent years,
particularly after the September 11, 2001 attacks. As of 2005,
scheduled departures at small-, medium-, and large-hub airports had
largely returned to 2000 levels. However, departures from nonhub
airports continued to decline--the number of departures declined 17
percent at nonhub airports between July 2000 and July 2005. Small-hub
airports actually had more scheduled departures in July 2005 than in
July 2000, a fact that clearly distinguishes them from nonhub airports.
Several factors may help explain why some small communities,
especially nonhubs, face relatively limited air service. First, small
communities can become cost-cutting targets of air carriers because
they are often a carrier's least profitable operation. Consequently,
many network carriers have cut service to small communities and
regional carriers now operate at many small communities where the
network carriers have withdrawn.\8\ Second, the ``Commuter Rule'' that
FAA enacted in 1995 brought small commuter aircraft under the same
safety standards as larger aircraft--a change that made it more
difficult to economically operate smaller aircraft, such as 19-seat
turboprops.\9\ For example, the Commuter Rule required commuter air
carriers who flew aircraft equipped with 10 or more seats to improve
ground deicing programs and carry additional passenger safety
equipment. Additionally, the 2001 Aviation and Transportation Security
Act instituted the same security requirements for screening passengers
at smaller airports as it did for larger airports, sometimes making
travel from small airports less convenient than it had been.\10\ Third,
regional carriers had reduced the use of turboprops in favor of
regional jets, which had a negative effect on small communities that
have not generated the passenger levels needed to support regional jet
service. Finally, many small communities experience passenger
``leakage''--that is, passengers choosing to drive longer distances to
larger airports instead of using closer small airports. Low-cost
carriers have generally avoided flying to small communities but have
offered low fares that encourage passengers to drive longer distances
to take advantage of them.\11\
Mr. Chairman, as you know, Congress established EAS as part of the
Airline Deregulation Act of 1978 to help areas that face limited
service. The Act guaranteed that communities served by air carriers
before deregulation would continue to receive a certain level of
scheduled air service.\12\ In general, the act guaranteed continued
service by authorizing DOT to require carriers to continue providing
service at these communities. If an air carrier could not continue that
service without incurring a loss, DOT could then use EAS funds to award
that carrier a subsidy.\13\ Under the Airline Deregulation Act, EAS was
scheduled to sunset, or end, after 10 years. In 1987, Congress extended
the program for another 10 years, and in 1998, it eliminated the sunset
provision, thereby permanently authorizing EAS.
Funding for EAS comes from a combination of permanent and annual
appropriations. The Federal Aviation Reauthorization Act of 1996 (P.L.
104-264) permanently appropriated the first $50 million of such
funding--for EAS and safety projects at rural airports--from the
collection of overflight fees. Congress can appropriate additional
funds from the general fund on an annual basis.
To be eligible for this subsidized service, communities must meet
three general requirements. They: (1) must have received scheduled
commercial passenger service as of October 1978, (2) may be no closer
than 70 highway miles to a medium- or large-hub airport, and (3) must
require a subsidy of less than $200 per person (unless the community is
more than 210 highway miles from the nearest medium-or large-hub
airport, in which case no average per-passenger dollar limit
applies).\14\ Federal law also defines the service that subsidized
communities are to receive under EAS.\15\ For example, carriers
providing EAS flights are required to use aircraft with at least 15
seats unless the community seeks a waiver. In addition, flights are to
occur at ``reasonable times'' and at prices that are ``not excessive.''
EAS operations to communities in Alaska are subject to different
requirements (e.g., carriers may use smaller aircraft).
Air carriers apply directly to DOT for EAS subsidies. Air carriers
set the subsidy application process in motion when they file a 90-day
notice of intent to suspend or terminate service. If no air carrier is
willing to or able to profitably provide replacement air service
without a subsidy, DOT solicits proposals from carriers who are willing
to provide service with a subsidy. DOT requires that air carriers
submit historical and projected financial data, such as projected
operating expenses and revenues, sufficient to support a subsidy
calculation. DOT then reviews these data in light of the aviation
industry's pricing structure, the size of aircraft required, the amount
of service required, and the number of projected passengers who would
use this service in the community.\16\ Finally, DOT selects a carrier
and sets a subsidy amount to cover the difference between the carrier's
projected cost of operation and its expected passenger revenues, while
providing the carrier with a profit element equal to 5 percent of total
operating expenses, according to statute.\17\
Turning now to SCASDP, Congress authorized SCASDP as a pilot
program in the Wendell H. Ford Aviation Investment and Reform Act for
the 21st Century (AIR-21),\18\ to help small communities enhance their
air service. AIR-21 authorized the program for Fiscal Years 2002 and
2003, and subsequent legislation \19\ reauthorized the program through
Fiscal Year 2008 and eliminated the ``pilot'' status of the program.
The Office of Aviation Analysis in DOT's Office of the Secretary is
responsible for administering the program. The law establishing SCASDP
allows DOT considerable flexibility in implementing the program and
selecting projects to be funded. The law defines basic eligibility
criteria and statutory priority factors, but meeting a given number of
priority factors does not automatically mean DOT will select a project.
DOT also considers many other relevant factors in making decisions on
projects, and the final selection of projects is at the discretion of
the Secretary of Transportation.\20\ (See App. I for a list of the
factors used in DOT selections.)
SCASDP grants may be made to single communities or a consortium of
communities, although no more than four grants each year may be in the
same state. Consortiums are considered one project for the purpose of
this program. Inclusion of small hubs for eligibility means that some
relatively large airports qualify for this program. For example,
Buffalo Niagara International Airport in Buffalo, New York; and Norfolk
International Airport in Norfolk, Virginia, are eligible for the
program; these airports enplaned over 2.4 million and over 1.9 million
passengers in 2005, respectively. In contrast, small nonhub airports,
such as those in Moab, Utah (with about 2,600 enplanements) or
Owensboro, Kentucky (with about 3,600 enplanements) are also eligible.
SCASDP grants are also available in the 50 states, the District of
Columbia, Puerto Rico, and U.S. territories and possessions. As shown
in Appendix II, DOT's awards have been geographically spread out--
covering all states except Delaware, Hawaii, Maryland, New Jersey, and
Rhode Island. To date, no communities in Delaware or Rhode Island have
applied for a grant. Appendix III includes information on all SCASDP
grants awarded as of August 31, 2006.
Number of Airports and Amount of EAS Subsidies Has Been Growing
Mr. Chairman, demand for EAS subsidies has been growing over the
past 10 years, as has the amount of funds appropriated for the program.
As shown in Table 1, for Fiscal Year 2006, EAS is providing subsidies
to air carriers to serve 154 communities--an increase of 57 communities
over the 1997 low point.\21\ The funding for EAS has also grown from
$25.9 million in 1997 to $109.4 million in 2006. This amounts to an
average of about $720,000 per EAS community in Fiscal Year 2006.
Appendix II includes a map showing the locations of current EAS
communities and Appendix IV lists EAS communities and their current
subsidy amounts.
Table 1: EAS Program Appropriations and Communities Served, Fiscal Years 1992-2006
----------------------------------------------------------------------------------------------------------------
Total EAS appropriations (in
Fiscal year Number of communities millions)
----------------------------------------------------------------------------------------------------------------
1992 130 $38.6
1993 126 38.6
1994 112 33.4
1995 107 33.4
1996 97 22.6
1997 95 25.9
1998 101 50.0
1999 100 50.0
2000 106 50.0
2001 115 50.0
2002 123 113.0
2003 126 101.8
2004 140 101.7
2005 146 101.6
2006 154 109.4
----------------------------------------------------------------------------------------------------------------
Source: DOT
In addition, in recent years, the number of communities and states
receiving EAS funding has increased. Since 1998, when a $50 million
funding level was established, eight additional states now have EAS
communities. These states include Alabama, Georgia, Kentucky, Maryland,
Mississippi, Oregon, Tennessee, and Virginia. Excluding Alaska, where
different program rules apply, four states now have had significant
increases in the total number of communities served by EAS, compared to
1998. The number of EAS communities in Pennsylvania increased by five,
West Virginia and Wyoming increased by four, and New York increased by
three. These states are now among the largest participants in the
program, in terms of the number of communities served.
In 2004, slightly more than 1 million passengers enplaned at
airports that received EAS-subsidized service--about 0.15 percent of
the more than 706 million passenger enplanements in the United States
that year.\22\ As of May 1, 2006, 13 regional air carriers served the
subsidized communities in the continental United States, and 15 served
those in Alaska, Hawaii, and Puerto Rico. The carriers serving the
communities in the continental United States typically used turboprop
aircraft seating 19 passengers, whereas in Alaska, Hawaii, and Puerto
Rico, the most commonly used aircraft seated 4 to 9 passengers.
If EAS subsidies were removed, air service may end at many small
communities. EAS subsidies have helped communities that were served by
air carriers before deregulation continue to receive scheduled air
service. Since air carriers have to show financial data to support a
subsidy calculation, it is likely that if the subsidy is no longer
available commercial air service would also end. Furthermore, according
to a DOT official, once a community receives subsidized air service it
is rare for an air carrier to offer to provide unsubsidized air
service. Finally, in previous work, we reported that subsidies paid
directly to air carriers have not provided an effective transportation
solution for passengers in many small communities.\23\
The Small Community Grant Program Has Had Mixed Results
Mr. Chairman, our previous work was not able to evaluate the
overall effectiveness of SCASDP; however, we found that SCASDP grantees
pursued several goals and strategies to improve air service, and that
the projects have obtained mixed results. In addition, the number of
applications for SCASDP has declined each year.
As shown in Figure 1, in 2002 (the first year SCASDP was funded)
DOT received 179 applications for grants; and by 2006 the number of
applications had declined to 75. DOT officials said that this decline
was, in part, a consequence of several factors, including: (1) many
eligible airport communities had received a grant and were still
implementing projects at the time; (2) the airport community as a whole
was coming to understand the importance DOT places on a fulfilling the
local contribution commitment part of the grant proposal; and (3)
legislative changes in 2003 that prohibited communities or consortiums
from receiving more than one grant for the same project, and that
established the timely use of funds as a priority factor in awarding
grants.\24\ There have been 182 grant awards made in the 5 years of the
program. Of these, 56 grants are now completed--34 from 2002, 15 from
2003, and seven from 2004.\25\ Finally, as of August 31, 2006, DOT had
terminated seven grants it initially awarded.\26\
Although at the time of our review it was too soon to determine the
overall effectiveness of the program, our review of the 23 projects
completed by September 30, 2005, found mixed results. The kinds of
improvements in service that resulted from the grants included adding
an additional air carrier, destination, or flights; or changing the
type of aircraft serving the community. In terms of numbers, airport
officials reported that 19 of the 23 grants resulted in service or fare
improvements during the life of the grant. In addition, during the
course of the grant, enplanements rose at 19 of the 23 airports.
However, after the 23 SCASDP grants were completed, 11 grants resulted
in improvements that were self-sustaining. Three additional
improvements were still in place, although not self-sustaining; thus 14
improvements were in place after the grants were completed. (See Fig.
2.)
Charleston, West Virginia provides an example of a successful
project. With the aid of a SCASDP grant, Charleston was able to add a
new carrier and new nonstop service to a major market, Houston. At the
time of our review, and after the grant was completed, this service was
continuing at the level the grant provided.
Finally, for SCASDP grants awarded from 2002 though 2004, we
surveyed airport officials to identify the types of project goals they
had for their grants. We found that grantees had identified a variety
of project goals to improve air service to their community. These goals
included adding flights, airlines, and destinations; lowering fares;
upgrading the aircraft serving the community; obtaining better data for
planning and marketing air service; increasing enplanements; and
curbing the loss of passengers to other airports. (See Fig. 3 for the
number and types of project goals identified by airport directors.)
To achieve these goals, grantees have used many strategies,
including subsidies and revenue guarantees to the airlines, marketing,
hiring personnel and consultants, and establishing travel banks in
which a community guarantees to buy a certain number of tickets. (See
Fig. 4.) In addition, grantees have subsidized the start-up of an
airline, taken over ground station operations for an airline, and
subsidized a bus to transport passengers from their airport to a hub
airport. Incorporating marketing as part of the project was the most
common strategy used by airports. Some airline officials said that
marketing efforts are important for the success of the projects.
Airline officials also told us that projects that provide direct
benefits to an airline, such as revenue guarantees and financial
subsidies, have the greatest chance of success. According to these
officials, such projects allow the airline to test the real market for
air service in a community without enduring the typical financial
losses that occur when new air service is introduced. They further
noted that, in the current aviation economic environment, carriers
cannot afford to sustain losses while they build-up passenger demand in
a market. The outcomes of the grants may be affected by broader
industry factors that are independent of the grant itself, such as a
decision on the part of an airline to reduce the number of flights at a
hub.
Options Exist for Reforming EAS and Evaluating SCASDP
Mr. Chairman, let me now turn to a discussion of options both for
the reform of EAS and the evaluation of SCASDP. I raise these options,
in part, because they link to our previous report on the challenges
facing the Federal Government in the 21st century, which notes that the
Federal Government's long-term fiscal imbalance presents enormous
challenges to the Nation's ability to respond to emerging forces
reshaping American society, the United States' place in the world, and
the future role of the Federal Government.\27\ In our previous report,
we call for a more fundamental and periodic reexamination of the base
of government, ultimately covering discretionary and mandatory programs
as well as the revenue side of the budget. In light of these
challenges, Congress may wish to weigh options for reforming EAS and
obtaining additional information about SCASDP's effectiveness--
information that could be obtained if DOT follows our recommendation to
evaluate the program's effectiveness once more grant projects have been
completed.
Examine Options for Enhancing EAS
In previous work, we have identified options for enhancing the
effectiveness of EAS and controlling cost increases. These options
include targeting subsidized service on more remote communities than is
currently the case, improving the matching of capacity with community
use, consolidating service to multiple communities into regional
airports, and changing the form of Federal assistance from carrier
subsidies to local grants; all of these options would require
legislative changes. Several of these options formed the basis for
reforms passed as part of Vision 100. For various reasons these pilot
programs have not progressed, so it is premature to assess their
impact. Let me now briefly discuss each option, stressing at the outset
that each presents potential negative, as well as positive, effects.
The positive effects might include lowered Federal costs, increased
passenger traffic at subsidized communities, and enhanced community
choice of transportation options. Potential negative effects might
include increased passenger inconvenience and an adverse effect on
local economies that may lose scheduled airline service.
Targeting Subsidized Service to More Remote Communities
The first option would be to target subsidized service to more
remote communities. This would mean increasing the highway distance
criteria between EAS-eligible communities and the nearest qualifying
airport, and expanding the definition of qualifying nearby airports to
include small hubs. Currently, to be eligible for EAS-subsidized
service, a community must be more than 70 highway miles from the
nearest medium- or large-hub airport. We found that, if the distance
criterion was increased to 125 highway miles and the qualifying
airports were expanded to include small-hub airport with jet service,
55 EAS-subsidized communities would no longer qualify for subsidies--
and travelers at those communities would need to drive to the nearby
larger airport to access air service.\28\
Limiting subsidized service to more remote communities could
potentially save Federal subsidies. For example, we found that about
$24 million annually could be saved if service were terminated at 30
EAS airports that were within 125 miles of medium- or large-hub
airports. This estimate assumed that the total subsidies in effect in
2006 at the communities that might lose their eligibility would not be
obligated to other communities and that those amounts would not change
over time. On the other hand, the passengers who now use subsidized
service at such terminated airports would be inconvenienced because of
the increased driving required to access air service at the nearest hub
airport. In addition, implementing this option could potentially
negatively impact the economy of the affected communities. For
instance, officials from some communities, such as Brookings, South
Dakota, told us that they are able to attract and retain local
businesses because of several factors relating to the quality-of-life
there--with one important factor being its scheduled air service.
Better Matching Capacity With Community Use
Another option is to better match capacity with community use. Our
past analysis of passenger enplanement data indicated that relatively
few passengers fly in many EAS markets, and that, on average, most EAS
flights operate with aircraft that are largely empty. To better match
capacity with community use, air carriers could reduce unused
capacity--either by using smaller aircraft or by reducing the number of
flights. Carriers could use smaller aircraft. For example, we reported
that from 1995 to 2002, total passenger traffic dropped at 9 of 24 EAS
communities where carriers added flight frequencies.
Better matching capacity with community use could save Federal
subsidies. For instance, reducing the number of required daily
subsidized departures could save Federal subsidies by reducing carrier
costs in some locations. Federal subsidies could also be lowered at
communities where carriers used smaller--and hence less costly--
aircraft. On the other hand, there are a number of potential
disadvantages. For example, passenger acceptance is uncertain.
Representatives from some communities, like Beckley and Bluefield, West
Virginia, told us that passengers who are already somewhat reluctant to
fly on 19-seat turboprops would be even less willing to fly on smaller
aircraft. Such negative passenger reaction may cause more people to
drive to larger airports--or simply drive to their destinations.
Additionally, the loss of some daily departures at certain communities
would likely further inconvenience some passengers. Last, reduced
capacity may have a negative impact on the economy of the affected
community.\29\
Consolidating Subsidized Service Provided to Multiple Communities Into
Service at Regional Airports
Another option is to consolidate subsidized service at multiple
communities into service at regional airports. As of July 1, 2002, 21
EAS subsidized communities were located within 70 highway miles of at
least one other subsidized community. We reported that if subsidized
service to each of these communities were regionalized, 10 regional
airports could serve those 21 communities.
Regionalizing service to some communities could generate Federal
savings. However, those savings may be marginal, because the total
costs to serve a single regional airport may be only slightly less than
the cost to serve two or three neighboring airports. For example, in
2002, DOT provided $1.9 million in annual subsidies to Air Midwest,
Inc., to serve Ogdensburg and Massena, New York, with stops at another
EAS-subsidized community (Watertown, New York) before arriving at its
final destination of Pittsburgh, Pennsylvania. According to an official
with Air Midwest, the marginal cost of operating the flight segments to
Massena and Ogdensburg are small in relation to the cost of operating
the flight from Pittsburgh to Watertown. Another potential positive
effect is that passenger levels at the proposed regional airports could
grow because the airline(s) would be drawing from a larger geographic
area, which could prompt the airline(s) to provide better service
(i.e., larger aircraft or more frequent departures).
There are also a number of disadvantages to implementing this
option. First, local passengers would be inconvenienced, since they
would likely have to drive longer distances to obtain local air
service. Moreover, the passenger response to regionalizing local air
service is unknown. Passengers faced with driving longer distances may
decide that driving to an altogether different airport is worthwhile,
if it offers better service and air fares. Additionally, as with other
options, the potential impact on the economy of the affected
communities is unknown. Regionalizing air service has sometimes proven
controversial at the local level, in part because regionalizing air
service would require some communities to give up their own local
service for the hypothetical benefits of a less convenient regional
facility. Even in situations where one airport is larger and better
equipped than others (e.g., where one airport has longer runways, a
superior terminal facility, and better safety equipment onsite), it is
likely to be difficult for the other communities to recognize and
accept surrendering their local control and benefits.
Changing Carrier Subsidies to Local Grants
Another option is to change carrier subsidies into local grants. We
have noted that local grants could enable communities to match their
transportation needs with individually tailored transportation options
to connect them to the national air service system. As we previously
discussed, DOT provides grants to help small communities to enhance
their air service via SCASDP.
Our work on SCASDP identified some positive aspects of the program
that could be beneficial for EAS communities. First, in order for
communities to receive a Small Community grant, they had to develop a
proposal that was directed at improving air service locally. In our
discussion with some of these communities, it was noted that this
required them to take a closer look at their air service and better
understand the market they serve--a benefit that they did not foresee.
In addition, in one case developing the proposal caused the airport to
build a stronger relationship with the community. SCASDP also allows
for flexibility in the strategy a local community can choose to improve
air service, recognizing that local facts and circumstances affect the
chance of a successful outcome. In contrast, EAS has one approach--a
subsidy to an air carrier.
However, there are also differences between the two programs that
make the grant approach problematic for some EAS communities; these
differences should be considered. First, because the grants are
provided on a one-time basis, their purpose is to create self-
sustaining air service improvements. The grant approach is therefore
best applicable where a viable air service market can be developed.
This could be difficult for EAS communities to achieve because,
currently, the service they receive is not profitable unless there is a
subsidy. While some EAS communities might be able to transition to
self-sustaining air service through use of one of the grants, for some
communities this would not be the case. In addition, the grant program
normally includes a local cash match, which may be difficult for some
EAS communities to provide. This could systematically eliminate the
poorest communities, unless other sources of funds--such as state
support or local industry support--could be found.
Vision 100 Small Community Programs Have Not Progressed
In Vision 100, Congress authorized several programs relevant to
small communities. These programs have not progressed for various
reasons. The Alternate Essential Air Service Pilot Program allows the
Secretary of Transportation to provide assistance directly to a
community, rather than paying compensation to an air carrier. Under the
pilot program, communities could provide assistance to air carriers
using smaller aircraft, fund on-demand air taxi service, provide
transportation services to and from several EAS communities to a single
regional airport or other transportation center, and purchase aircraft.
Vision 100 also authorized the Community Flexibility Pilot Program,
which requires the Secretary of Transportation to establish a program
for up to 10 communities that agree to forgo their EAS subsidy for 10
years in exchange for a grant twice the amount of the EAS subsidy. The
funds may be used to improve airport facilities. (The grants can be
used for things other than general aviation.) DOT has solicited
proposals for projects in both of these programs. However, according to
a DOT official, no communities expressed any interest in participating
in these programs. Finally, the EAS Local Participation Program allows
the Secretary of Transportation to select no more than 10 designated
EAS communities within 100 miles, by road, of a small hub (and within
the contiguous states) to assume 10 percent of their EAS subsidy costs
for a 4-year period. However, Congress has prohibited DOT from
obligating or expending any funds to implement this program since
Vision 100 was enacted.
Evaluate the Effectiveness of SCASDP Before Reauthorization
We recently recommended that DOT examine the effectiveness of this
program when more projects are complete. \30\ Such an evaluation would
provide DOT and Congress with information about whether additional or
improved air service was not only obtained, but whether it continues
after the grant support has ended. This may be particularly important
since our work on the limited number of completed projects found that,
11 of 23 grantees reported that the improvements were self-sustaining
after the grant was complete. In addition, our prior work on the air
service to small communities found that once financial incentives are
removed, additional air service may be difficult to maintain. Since our
report, an additional 33 grants have been completed and DOT's plans to
examine the results from these completed grants should provide a
clearer and more complete picture of the value of this program. Any
improved service achieved from this program could then be weighed
against the cost to achieve those gains. This information will be
important as Congress considers the reauthorization of this program in
2008.
In addition to the benefit of providing Congress with information
upon which to evaluate the merits of SCASDP, the evaluation would
likely have additional benefits. In conducting this evaluation, DOT
could potentially find that certain strategies the communities used
were more effective than others. For example, during our work, we found
some opposing views on the usefulness of travel banks \31\ and some
marketing strategies as incentives for attracting improved service. As
DOT officials identify strategies that have been effective in starting
self-sustaining improvements in air service, they could share this
information with other small community airports and, perhaps, consider
such factors in its grant award process. In addition, DOT might find
some best practices and could develop some lessons learned from which
all small community airports could benefit. For example, one airport
used the approach of assuming airline ground operations such as baggage
handling and staffing ticket counters. This approach served to maintain
airline service of one airline and to attract additional service from
another airline. Sharing information on approaches like this that
worked (and approaches that did not) may help other small communities
improve their air service, perhaps even without Federal assistance.
In conclusion, Mr. Chairman, Congress is faced with many difficult
choices as it tries to help improve air service to small communities,
especially given the fiscal challenges the Nation faces. Regarding EAS,
I think it is important to recognize that for many of the communities,
air service is not--and might never be--commercially-viable and there
are limited alternative transportation means for nearby residents to
connect to the national air system. In these cases, continued subsidies
will be needed to maintain that capability. In some other cases,
current EAS communities are within reasonable driving distances to
alternative airports that can provide that connection to the air
system. It will be Congress' weighing of priorities that will
ultimately decide whether this service will continue or whether other,
less costly options will be pursued. In looking at SCASDP, I would
emphasize that we have seen some instances in which the grant funds
provided additional service, and some in which the funds did not work.
When enough experience has been gained with this program, the Congress
will be in a position to determine if the air service gains that are
made are worth the overall cost of the program. I would be pleased to
answer any questions that you or other Members of the Subcommittee may
have at this time.
Appendix I: Additional Department of Transportation Selection Factors
for SCASDP Grants
service-related factors
1. How many carriers are serving the community?
2. How many destinations are served?
3. What is the frequency of flights?
4. What size aircraft service the community?
5. Has the level of service been increasing or decreasing over the
past 3 years?
6. Have enplanements been increasing or decreasing over the past 3
years?
7. Is the Metropolitan Statistical Area population increasing or
decreasing?
8. Is the per-capita income increasing or decreasing?
9. Are the number of businesses in the area increasing or
decreasing?
10. What is the proximity to larger air service centers?
11. What is the quality of road access to other air service
centers?
12. Does the community lack service in identified top origin and
destination markets?
13. Is the proposal designed to provide:
First air service;
Second carrier service;
New destinations;
Larger aircraft; or
More frequent flights?
14. If this is an air service project, has the community selected a
carrier that is willing and committed to serve?
15. If this is an air service project, does the community have a
targeted carrier that would serve?
Source: GAO table based on DOT information.
project-related factors
1. Do demographic indicators and the business environment support
the project?
2. Does the community have a demonstrated track-record of
implementing air service development projects?
3. Does the project address the stated problem?
4. Does the community have a firm plan for promoting the service?
5. Does the community have a definitive plan for monitoring,
modifying, and terminating the project, if necessary?
6. Does the community have a plan for continued support of the
project if self-sufficiency or completion is not attained after the
grant expires?
7. If it is mainly a marketing proposal, does the community have a
firm implementation plan in place?
8. Is the applicant a participating consortium?
9. Is the project innovative?
10. Does the project have unique geographical traits or other
considerations?
11. Is the amount of funding requested reasonable compared with the
total amount of funding available?
12. Is the local contribution reasonable compared with the amount
requested?
13. Can the project be completed during the funding period
requested?
14. Is the applicant a small hub now?
15. Is the applicant a large nonhub now?
16. Is the applicant a small nonhub now?
17. Is the applicant currently subsidized through Essential Air
Service?
18. Is the project for marketing only?
19. Is the project a study only?
20. Does the project involve intermodal services?
21. Is the project primarily a carrier incentive?
22. Is the project primarily air fare focused?
23. Does the project involve a low-fare service provider?
24. Does the proposal shift costs from the local or state level to
the Federal level?
25. Does the proposal show that proximity to other service would
detract from it?
26. Is the applicant geographically close to a past grant
recipient?
Source: GAO table based on DOT information.
Appendix II: Essential Air Service Airports and Small Community Air
Service Development Program Grantees
Appendix III: Status of SCASDP Grants Awarded, 2002-2006
2002 Grant Year
----------------------------------------------------------------------------------------------------------------
Status as of August 31,
Location Grant amount 2006
----------------------------------------------------------------------------------------------------------------
1. Abilene, TX $85,010 Completed
2. Akron/Canton, OH 950,000 Completed
3. Aleutians East Borough, AK 240,000 Completed
4. Asheville, NC 500,000 Completed
5. Augusta, GA 759,004 Terminated
6. Baker City, OR 300,000 Terminated
7. Beaumont/Port Arthur, TX 500,000 Completed
8. Bellingham, WA 301,500 Ongoing
9. Binghamton, NY 500,000 Completed
10. Bismarck, ND 1,557,500 Ongoing
11. Brainerd, St Cloud, MN 1,000,000 Completed
12. Bristol/Kingsport/Johnson City, TN 615,000 Completed
13. Cape Girardeau, MO 500,000 Completed
14. Casper, Gillette, WY 500,000 Terminated
15. Charleston, WV 500,000 Completed
16. Chico, CA 44,000 Completed
17. Daytona Beach, FL 743,333 Completed
18. Fort Smith, AR 108,520 Completed
19. Fort Wayne, IN 398,000 Completed
20. Hailey, ID 600,000 Completed
21. Lake Charles, LA 500,000 Completed
22. Lake Havasu City, AZ 403,478 Completed
23. Lamar, CO 250,000 Completed
24. Lynchburg, VA 500,000 Completed
25. Manhattan, KS 388,350 Completed
26. Marion, IL 212,694 Completed
27. Mason City, IA 600,000 Terminated
28. Meridian, MS 500,000 Completed
29. Moab, UT 250,000 Completed
30. Mobile, AL 456,137 Completed
31. Paducah, KY 304,000 Completed
32. Presque Isle, ME 500,000 Completed
33. Rapid City, SD 1,400,000 Completed
34. Reading, PA 470,000 Completed
35. Rhinelander, WI 500,000 Completed
36. Santa Maria, CA 217,530 Completed
37. Scottsbluff, NE 950,000 Completed
38. Somerset, KY 95,000 Completed
39. Taos/Ruidoso, NM 500,000 Completed
40. Telluride, CO 300,000 Completed
----------------------------------------
Total..... $19,999,056
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of DOT data.
2003 Grant Year
----------------------------------------------------------------------------------------------------------------
Status as of August 31,
Location Grant amount 2006
----------------------------------------------------------------------------------------------------------------
1. Aguadilla, PR $626,700 Ongoing
2. Aleutians East Borough, AK 70,000 Ongoing
3. AZ Consortium, AZ 1,500,000 Ongoing
4. Bakersfield, CA 982,513 Ongoing
5. Bangor, ME 310,000 Ongoing
6. Charleston, SC 1,000,000 Terminated
7. Cut Bank, MT 90,000 Completed
8. Dickinson, ND 750,000 Completed
9. Dothan, AL 200,000 Completed
10. Dubuque, IA 610,000 Ongoing
11. Duluth, MN 1,000,000 Ongoing
12. Elmira, NY 200,000 Ongoing
13. Erie, PA 500,000 Completed
14. Fresno, CA 1,000,000 Ongoing
15. Friday Harbor, WA 350,000 Completed
16. Gainesville, FL 660,000 Completed
17. Grand Island, NE 380,000 Ongoing
18. Greenville, MS 400,000 Terminated
19. Gunnison, CO 200,000 Completed
20. Joplin, MO 500,000 Ongoing
21. Knoxville, TN 500,000 Terminated
22. Laredo, TX 400,000 Ongoing
23. Lewiston-Nez Perce, ID 675,000 Ongoing
24. Mountain Home (Baxter), AR 574,875 Ongoing
25. Muskegon, MI 500,000 Completed
26. NC Consortium, NC 1,200,000 Ongoing
27. Owensboro, KY 500,000 Ongoing
28. Parkersburg-Marietta, WV/OH 500,000 Ongoing
29. Pierre, SD 150,000 Completed
30. Redmond, OR 515,000 Completed
31. Savannah, GA 523,495 Completed
32. Shreveport, LA 500,000 Completed
33. Staunton, VA 100,000 Ongoing
34. Taos Consortium, NM 1,400,000 Completed
35. Tupelo, MS 475,000 Completed
36. Victoria, TX 20,000 Completed
----------------------------------------
Total..... $19,862,583
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of DOT data
2004 Grant Year
----------------------------------------------------------------------------------------------------------------
Status as of August 31,
Location Grant amount 2006
----------------------------------------------------------------------------------------------------------------
1. Albany, GA $500,000 Ongoing
2. Alpena, MI 583,046 Ongoing
3. Beckley/Lewisburg, WV 300,000 Ongoing
4. Bloomington, IL 850,000 Ongoing
5. Butte, MT 360,000 Ongoing
6. Champaign-Urbana, IL 200,000 Completed
7. Charlottesville, VA 270,000 Ongoing
8. Chattanooga, TN 750,000 Ongoing
9. Clarksburg/Morgantown (reallocation), WV 372,286 Ongoing
10. Columbus, MS 260,000 Ongoing
11. Del Rio, TX 318,750 Ongoing
12. Dubois, PA 400,000 Ongoing
13. Eau Claire, WI 500,000 Ongoing
14. Elko, NV 222,000 Completed
15. Evansville/South Bend, IN 1,000,000 Ongoing
16. Farmington, NM 650,000 Ongoing
17. Hot Springs (reallocation), AR 195,000 Completed
18. Huntsville, AL 479,950 Completed
19. Kalamazoo, MI 500,000 Ongoing
20. Lafayette, LA 240,000 Ongoing
21. Latrobe, PA 600,000 Ongoing
22. Lebanon, NH 500,000 Ongoing
23. Lincoln, NE 1,200,000 Ongoing
24. Logan City, UT 530,000 Ongoing
25. Marquette, MI 700,000 Ongoing
26. McCook/North Platte, NE 275,000 Ongoing
27. New Haven, CT 250,000 Ongoing
28. Pocatello, ID 75,000 Completed
29. Redding/Arcata, CA 500,000 Ongoing
30. Richmond, VA 950,000 Ongoing
31. Rutland (reallocation), VT 240,000 Ongoing
32. Salem, OR 500,000 Ongoing
33. Santa Rosa, CA 635,000 Ongoing
34. Sarasota, FL 1,500,000 Ongoing
35. Sioux City, IA 609,800 Ongoing
36. Sioux Falls, SD 350,000 Ongoing
37. Steamboat Springs, CO 500,000 Ongoing
38. Sumter, SC 50,000 Completed
39. Syracuse (reallocation), NY 480,000 Ongoing
40. Tyler, TX 90,000 Ongoing
41. Visalia (reallocation), CA 200,000 Ongoing
42. Walla Walla, WA 250,000 Ongoing
43. Waterloo, IA 550,000 Ongoing
44. Wilkes-Barre/Scranton, PA 625,000 Completed
45. Worcester (reallocation), MA 442,615 Ongoing
46. Youngstown, OH 250,000 Ongoing
----------------------------------------
Total..... $21,803,447
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of DOT data.
Note: Program funds from 2002 and 2003 were reallocated to six cities in 2004.
2005 Grant Year
----------------------------------------------------------------------------------------------------------------
Status as of August 31,
Location Grant amount 2006
----------------------------------------------------------------------------------------------------------------
1. Aberdeen, SD $450,000 Ongoing
2. Alexandria, LA 500,000 Ongoing
3. Bradford, PA 220,000 Ongoing
4. CA Consortium, CA 245,020 Ongoing
5. Cedar City, UT 155,000 Ongoing
6. Durango, CO 750,000 Ongoing
7. Fargo, ND 675,000 Ongoing
8. Florence, SC 500,000 Ongoing
9. Great Falls, MT 220,000 Ongoing
10. Greenville, NC 450,000 Ongoing
11. Gulfport/Biloxi, MS 750,000 Ongoing
12. Hancock/Houghton, MI 516,000 Ongoing
13. Hibbing, MN 485,000 Ongoing
14. Huntington, WV 500,000 Ongoing
15. Idaho Falls, ID 500,000 Ongoing
16. Ithaca, NY 500,000 Ongoing
17. Jacksonville, NC 500,000 Ongoing
18. Killeen, TX 280,000 Ongoing
19. Knox County, ME 555,000 Ongoing
20. Lawton/Ft. Sill, OK 570,000 Ongoing
21. Macon, GA 507,691 Ongoing
22. Marathon, FL 750,000 Ongoing
23. Marshall, MN 480,000 Ongoing
24. Massena, NY 400,000 Ongoing
25. Modesto, CA 550,000 Ongoing
26. Monterey, CA 500,000 Ongoing
27. Montgomery, AL 600,000 Ongoing
28. Oregon/Washington Consortium, OR/WA 180,570 Ongoing
29. Rockford, IL 1,000,000 Ongoing
30. Ruidoso, NM 600,000 Ongoing
31. Somerset, KY 950,000 Ongoing
32. Stewart (Newburgh), NY 250,000 Ongoing
33. Vernal, UT 40,000 Ongoing
34. Williamsport, PA 500,000 Ongoing
35. Wyoming Consortium, WY 800,000 Ongoing
----------------------------------------
Total..... $17,429,281
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of DOT data.
2006 Grant Year
------------------------------------------------------------------------
Location Grant amount
------------------------------------------------------------------------
1. Abilene, TX $465,100
2. Big Sandy Region, KY 90,000
3. Brunswick, GA 500,000
4. Cedar Rapids, IA 200,000
5. Chico, CA 472,500
6. Fairbanks, AK 500,000
7. Gallup, NM 600,000
8. Garden City/Dodge City/Liberal, KS 150,000
9. Gary, IN 600,000
10. Grand Forks, ND 350,000
11. Harrisburg, PA 400,000
12. Jackson, MS 400,000
13. Jamestown, NY 150,000
14. Jamestown/Devil's Lake, ND 100,000
15. Kalispell, MT 450,000
16. Longview, TX 225,000
17. Lynchburg, VA 250,000
18. Melbourne, FL 800,000
19. Monroe, LA 50,000
20. Montrose, CO 450,000
21. North Bend, OR 400,000
22. Palmdale, CA 900,000
23. Springfield, IL 390,000
24. Toledo, OH 400,000
25. Tuscaloosa, AL 400,000
---------------
Total........ $9,692,600
------------------------------------------------------------------------
Source: DOT data.
Appendix IV: Essential Air Service Communities and Subsidies
as of May 1, 2006
Table 2: Essential Air Service (EAS) Communities in the Contiguous
United States, Hawaii, and Puerto Rico
------------------------------------------------------------------------
States and communities May 1, 2006 annual subsidy amounts
------------------------------------------------------------------------
ALABAMA
Muscle Shoals $1,364,697
------------------------------------------------------------------------
ARIZONA
Kingman 1,001,989
Page 1,057,655
Prescott 1,001,989
Show Low 779,325
------------------------------------------------------------------------
ARKANSAS
El Dorado/Camden 923,456
Harrison 923,456
Hot Springs 1,385,183
Jonesboro 923,456
------------------------------------------------------------------------
CALIFORNIA
Crescent City 816,025
Merced 696,788
Visalia 450,000
------------------------------------------------------------------------
COLORADO
Alamosa 1,083,538
Cortez 853,587
Pueblo 780,997
------------------------------------------------------------------------
GEORGIA
Athens 392,108
------------------------------------------------------------------------
HAWAII
Hana 774,718
Kamuela 395,053
Kalaupapa 331,981
------------------------------------------------------------------------
ILLINOIS
Decatur 954,404
Marion/Herrin 1,251,069
Quincy 1,097,406
------------------------------------------------------------------------
IOWA
Burlington 1,077,847
Fort Dodge 1,080,386
Mason City 1,080,386
------------------------------------------------------------------------
KANSAS
Dodge City 1,379,419
Garden City 1,733,997
Great Bend 621,945
Hays 1,540,392
Liberal 1,008,582
Manhattan/Ft. Riley 487,004
Salina 487,004
------------------------------------------------------------------------
KENTUCKY
Owensboro 1,127,453
------------------------------------------------------------------------
MAINE
Augusta/Waterville 1,065,475
Bar Harbor 1,065,475
Presque Isle 1,116,423
Rockland 1,065,475
------------------------------------------------------------------------
MARYLAND
Hagerstown 649,929
------------------------------------------------------------------------
MICHIGAN
Escanaba 290,952
Ironwood/Ashland, WI 409,242
Iron Mountain/Kingsford 602,761
Manistee/Ludington 776,051
------------------------------------------------------------------------
MINNESOTA
Chisholm/Hibbing 1,279,329
Thief River Falls 777,709
------------------------------------------------------------------------
MISSISSIPPI
Laurel/Hattiesburg 1,100,253
------------------------------------------------------------------------
MISSOURI
Cape Girardeau 1,147,453
Columbia/Jefferson City Order 2006-4-6 requested proposals for
Columbia/Jefferson City
Fort Leonard Wood 683,201
Joplin 755,762
Kirksville 840,200
------------------------------------------------------------------------
MONTANA
Glasgow 922,103
Glendive 922,103
Havre 922,103
Lewistown 922,103
Miles City 922,103
Sidney 1,306,313
West Yellowstone 247,122
Wolf Point 922,103
------------------------------------------------------------------------
NEBRASKA
Alliance 655,898
Chadron 655,898
Grand Island 1,198,396
Kearney 1,166,849
McCook 1,502,651
North Platte 870,504
Scottsbluff 494,887
------------------------------------------------------------------------
NEVADA
Ely 784,463
------------------------------------------------------------------------
NEW HAMPSHIRE
Lebanon 998,752
------------------------------------------------------------------------
NEW MEXICO
Alamogordo/Holloman Order 2006-3-26 requested proposals on
an emergency basis
Carlsbad 599,671
Clovis 859,057
Hobbs 519,614
Silver City/Hurley/Deming 859,057
------------------------------------------------------------------------
NEW YORK
Jamestown 1,217,414
Massena 585,945
Ogdensburg 585,945
Plattsburgh 753,964
Saranac Lake 753,964
Watertown 585,945
------------------------------------------------------------------------
NORTH DAKOTA
Devils Lake 1,329,858
Dickinson 1,697,248
Jamestown 1,351,677
------------------------------------------------------------------------
OKLAHOMA
Enid 636,279
Ponca City 636,279
------------------------------------------------------------------------
OREGON
Pendleton 649,974
------------------------------------------------------------------------
PENNSYLVANIA
Altoona 893,774
Bradford 1,217,414
DuBois 643,818
Johnstown 464,777
Lancaster 1,611,707
Oil City/Franklin 683,636
------------------------------------------------------------------------
PUERTO RICO
Mayaguez 688,551
Ponce 622,056
------------------------------------------------------------------------
SOUTH DAKOTA
Brookings 1,039,364
Huron 1,039,364
Pierre 449,912
Watertown 1,211,589
------------------------------------------------------------------------
TENNESSEE
Jackson 1,179,026
------------------------------------------------------------------------
TEXAS
Victoria 510,185
------------------------------------------------------------------------
UTAH
Cedar City 1,068,608
Moab 783,608
Vernal 555,771
------------------------------------------------------------------------
VERMONT
Rutland 849,705
------------------------------------------------------------------------
VIRGINIA
Staunton 650,123
------------------------------------------------------------------------
WASHINGTON
Ephrata/Moses Lake 1,698,922
------------------------------------------------------------------------
WEST VIRGINIA
Beckley 977,858
Clarksburg/Fairmont 306,109
Greenbrier/Lewisburg/White 540,579
Sulphur Springs
Morgantown 306,109
Parkersburg 439,115
Princeton/Bluefield 977,858
------------------------------------------------------------------------
WYOMING
Laramie 397,400
Riverton 394,046
Rock Springs 390,488
Sheridan 336,701
Worland 797,844
------------------------------------------------------------------------
Source: DOT.
Table 3: Alaskan EAS Communities
------------------------------------------------------------------------
Community May 1, 2006 annual subsidy
------------------------------------------------------------------------
Adak $1,617,923
Akutan 350,381
Alitak 106,054
Amook Bay 16,622
Atka 336,303
Cape Yakataga 30,920
Central 61,421
Chatham 6,433
Chisana Order 2006-4-13 held in 40-Mile Air and
Requested Proposals
Circle 61,421
Cordova 1,763,179
Elfin Cove 108,297
Excursion Inlet 9,212
Funter Bay 6,433
Gulkana 199,839
Gustavus 732,217
Healy Lake 51,781
Hydaburg 54,733
Icy Bay 30,920
Karluk 38,880
Kitoi Bay 16,622
Manley 24,768
May Creek 69,759
McCarthy 69,759
Minto 24,768
Moser Bay 16,622
Nikolski 173,603
Olga Bay 16,622
Pelican 108,297
Petersburg 732,217
Port Alexander 48,746
Port Bailey 16,622
Port William 16,622
Seal Bay 16,622
Uganik 15,715
West Point 16,622
Wrangell 732,217
Yakutat 1,763,179
Zachar Bay 16,622
------------------------------------------------------------------------
Source: DOT.
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Commercial Aviation: Initial Small Community Air Service Development
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D.C.: November 30, 2005.
Commercial Aviation: Survey of Small Community Air Service Grantees and
Applicants. GAO-06-101SP Washington, D.C.: November 30,
2005.
Commercial Aviation: Bankruptcy and Pension Problems Are Symptoms of
Underlying Structural Issues. GAO-05-945 Washington, D.C.:
September 30, 2005.
Commercial Aviation: Legacy Airlines Must Further Reduce Costs to
Restore Profitability. GAO-04-836 Washington, D.C.: August
11, 2004.
Commercial Aviation: Issues Regarding Federal Assistance for Enhancing
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D.C.: March 11, 2003.
Federal Aviation Administration: Reauthorization Provides Opportunities
to Address Key Agency Challenges. GAO-03-653T Washington,
D.C.: April l0, 2003.
Commercial Aviation: Factors Affecting Efforts to Improve Air Service
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Commercial Aviation: Financial Condition and Industry Responses Affect
Competition. GAO-03-171T Washington, D.C.: October 2, 2002.
Options to Enhance the Long-term Viability of the Essential Air Service
Program. GAO-02-997R Washington, D.C.: August 30, 2002.
Commercial Aviation: Air Service Trends at Small Communities Since
October 2000. GAO-02-432 Washington, D.C.: March 29, 2002.
Proposed Alliance Between American Airlines and British Airways Raises
Competition Concerns and Public Interest Issues. GAO-02-
293R Washington, D.C.: December 21, 2001.
``State of the U.S. Commercial Airlines Industry and Possible Issues
for Congressional Consideration,'' Speech by Comptroller
General of the United States David Walker. The
International Aviation Club of Washington: November 28,
2001.
Financial Management: Assessment of the Airline Industry's Estimated
Losses Arising From the Events of September 11. GAO-02-133R
Washington, D.C.: October 5, 2001.
Commercial Aviation: A Framework for Considering Federal Financial
Assistance. GAO-01-1163T Washington, D.C.: September 20,
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Aviation Competition: Restricting Airline Ticketing Rules Unlikely to
Help Consumers. GAO-01-832 Washington, D.C.: July 31, 2001.
Aviation Competition: Challenges in Enhancing Competition in Dominated
Markets. GAO-01-518T Washington, D.C.: March 13, 2001.
Aviation Competition: Regional Jet Service Yet to Reach Many Small
Communities. GAO-01-344 Washington, D.C.: February 14,
2001.
Airline Competition: Issues Raised by Consolidation Proposals. GAO-01-
402T Washington, D.C.: February 7, 2001.
Aviation Competition: Issues Related to the Proposed United Airlines-US
Airways Merger. GAO-01-212 Washington, D.C.: December 15,
2000.
Essential Air Service: Changes in Subsidy Levels, Air Carrier Costs,
and Passenger Traffic. RCED-00-34 Washington, D.C.: April
14, 2000.
ENDNOTES
\1\ The U.S. network carriers are Alaska Airlines, American
Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines,
United Airlines, and US Airways.
\2\ The Nation's commercial airports are categorized into four main
groups based on annual passenger enplanements--large hubs, medium hubs,
small hubs, and nonhubs. The 30 large hubs and 37 medium-hub airports
together enplaned about 89 percent of the almost 703 million U.S.
passengers in 2004. In contrast, the 69 small hubs enplaned about 8
percent, and the 374 nonhub airports enplaned about 3 percent of U.S.
passengers.
\3\ Small community airports also receive other financial support
from the Federal Government. For example, under the Airport Improvement
Program small airports receive certain funds for addressing capital
improvement needs--such as for runway or taxiway improvements.
\4\ Overflight fees are user fees for air traffic control services
provided by the Federal Aviation Administration (FAA) to aircraft that
fly over, but do not land in the United States, as authorized by the
Federal Aviation Reauthorization Act of 1996 (Pub. L. 104-264).
\5\ The Emergency Supplemental Appropriations Act for Defense, the
Global War on Terror, and Tsunami Relief, 2005, Pub. L. No. 109-13,
recognized that the funds appropriated for EAS may not be sufficient to
meet the service needs of communities encompassed by that program. The
Emergency Supplemental Appropriations Act provided that the Secretary
of Transportation could transfer ``such sums as may be necessary to
carry out the Essential Air Service program from any available amounts
appropriated to or directly administered by the Office of the
Secretary.''
\6\ GAO, 21st Century Challenges: Reexamining the Base of Federal
Government. GAO-05-325SP. (Washington, D.C.: 2005). February 2005.
\7\ The analysis is based on 2004 national enplanement data--the
most recent data available.
\8\ A network carrier operates a significant portion of its flights
using at least one hub where connections are made for flights on a
spoke system. Regional carriers provide service from small communities
primarily using regional jets to connect the network carriers' hub-and-
spoke system.
\9\ Code of Federal Regulations Title 14 Part 121 (14 CFR Part 121)
provides details on aircraft certification requirements for aircraft
that operate scheduled service with 10 or more seats. The Commuter Rule
was instituted with 60 Fed. Reg. 65832, December 20, 1995.
\10\ Aviation and Transportation Security Act, Section 110 of Pub.
L. 107-71, 115 Stat. 597 (2001).
\11\ Low-cost carriers follow a business model that may include
point- to-point service between high-density city pairs, a standardized
fleet with high aircraft utilization, low fares, and minimal onboard
service.
\12\ Special provisions guaranteed service to Alaskan communities.
\13\ Subsidies are used to cover the difference between a carrier's
projected revenues and expenses and to provide a minimum amount of
profit.
\14\ The average subsidy per passenger does not equate to a
specific portion of a passenger's ticket price paid for by EAS funds.
Ticket pricing involves a complex variety of factors relating to the
demand for travel between two points, the supply of available seats
along that route, competition in the market, and how air carriers
choose to manage and price their available seating capacity.
\15\ 49 U.S.C. 41732.
\16\ DOT officials said that they check the reasonableness of the
cost and revenue information received from the air carriers against
other data reported to DOT and in documents filed with the Securities
and Exchange Commission.
\17\ At any time throughout the year, an air carrier providing
unsubsidized service to an EAS-eligible community can file a notice to
suspend service if the carrier determines that it can no longer provide
profitable service, thus triggering a carrier selection case. In
addition, after DOT selects an air carrier to provide subsidized
service, that agreement is subject to renewal, generally every 2 years,
at which time other air carriers are permitted to submit proposals to
serve that community with or without a subsidy.
\18\ Pub. L. 106-181.
\19\ Vision 100, Pub. L. 108-176
\20\ DOT must give priority consideration to communities that: (1)
have air fares higher than average for all communities, (2) provide a
portion of the cost of the project from local sources other than
airport revenues, (3) have--or plan to establish--a public-private
partnership to facilitate air carrier service to the public, (4) will
provide material benefits to a broad segment of the public that has
limited access to the national air transportation system, and (5) will
use the assistance in a timely manner.
\21\ The highest number of communities served during the program's
history was 405 in 1980.
\22\ DOT did not have ridership data available for all EAS
communities.
\23\ GAO, Commercial Aviation: Factors Affecting Efforts to Improve
Air Service at Small Community Airports, GAO-03-330 (Washington, D.C.:
2003). January 17, 2003.
\24\ The authorizing legislation provides one limitation on the
timing of expenditures. If funds are used to subsidize air service, the
subsidy cannot last more than 3 years. However, the time needed to
obtain the service is not included in the subsidy time limit. The
legislation does not limit the timing of expenditures for other
purposes. In Fiscal Year 2005, DOT issued an order specifying that in
general, grant funds should be expended within 3 years.
\25\ We considered a grant to be complete when the activities
associated with the grant were finished and FAA had made final
reimbursements of allowable costs.
\26\ According to DOT officials, the agency only initiated the
termination for the grant awarded to Casper/Gillette, Wyoming. The
communities awarded the other six grants requested the termination of
the grants.
\27\ GAO-05-325SP.
\28\ This information was current as of January 2006.
\29\ As we reported in our 2002 report, although scheduled
commercial air service is positively correlated with local economic
activity, we were unable to locate reliable studies that describe the
extent to which scheduled commercial air service is directly
responsible for economic development in small communities in the United
States (i.e., whether air service precedes, follows, or develops
simultaneously with local economic activity).
\30\ GAO, Initial Small Community Air Service Development Projects
Have Achieved Mixed Results, GAO-06-21 (Washington, D.C.: Nov. 2005).
\31\ Businesses or individuals deposit or promise future travel
funds to a carrier providing new or expanded service. Contributing
businesses and individuals can then draw down from this account.
Senator Burns. Thank you, Mr. Dillingham. We appreciate
that.
Senator Rockefeller has a pressing appointment coming up,
and I would forego my time and yield to the Senator from West
Virginia.
Senator Rockefeller. Mr. Chairman, you're, typically, very,
very kind.
Let me ask two questions at once. The first one will be to
you, Mr. Dillingham, and the second one will be to both of you.
The GAO has reviewed the Essential Air Service program--
you've discussed that at length--in a series of reports, and
your testimony reiterates policy options. All of these options
are predicated on reducing the Federal Government's obligation
to the program, it seems to me. I know that inadequate and
unreliable service, and the use of small turboprop aircraft,
are two reasons why a lot of people don't want to fly from EAS
communities. Has the GAO ever examined the impact of providing
substantially more resources in the program--I don't care about
OMB, I care about what you think--so that air service would be
provided for larger aircraft--not big jets, but, you know,
regional or simply just larger turboprop--and with more
frequent service? That's the one to you.
To both of you, so I get them both out, GAO notes in its
testimony that the EAS programs that Senator Lott and I
included in the last FAA bill have been largely unused. GAO
only vaguely notes that this is for a variety of reasons. It
happens to be totally untrue, incidentally, in West Virginia,
where it's turned a number of our airports completely around.
Could you please explain why these initiatives were not acted
upon by the Department of Transportation, why communities did
not take advantage of them, to the extent that that's correct?
Mr. Dillingham. I'll take a shot at my question, Senator
Rockefeller.
We, at GAO, have not examined the potential for what would
happen with larger aircraft, but what we can say is that based
on what Mr. Reynolds referred to as ``leakage,'' the fact that
people have a tendency to drive some distance so that they
could connect with low-fare carriers and larger aircraft, one
could hypothesize that you would perhaps draw more people if
the people were there to take advantage of the service.
Another thing that we have found, in looking----
Senator Rockefeller.--point out that Huntington, West
Virginia, and Charleston, have proved that--your statement is
flat-out wrong? People used to drive--16 percent of our
passenger traffic used to drive to Cincinnati to get out on
Southwest, cheaper. What we started doing was--and using AIDP
and others for this--using--advertising airports as if they
were products. You've got to advertise. People stopped driving
to Cincinnati and started getting on those airplanes, which
then increased our service.
Mr. Dillingham. Yes, sir. I would not disagree with you
because in our study of the Small Community Program and EAS, we
found that marketing was a major factor in bringing passengers
to the airport.
There's no one size that fits all. There have been some
success cases, based on a number of factors, but it's also the
case that people generally are not as happy, I would say, to
ride the smaller aircraft. So, I would assume that the opposite
would hold true, as well, that a larger aircraft would, in
fact, attract more passengers. It's up to the airline whether
they can make that choice to have a larger aircraft, and the
cost associated with it.
Senator Rockefeller. OK.
Mr. Reynolds. Senator Rockefeller, we--there were several
programs that were in Vision 100--the Alternate Program, and
the Community Flexibility Program. The Department did establish
both programs. In this case, no communities ever sought to
participate. I think our view is that communities feel
comfortable with the service they have, and they weren't
necessarily willing to take risks to try something different,
in terms of the EAS communities, if it meant leaving what they
have and trying something new. Of course, some EAS communities
have applied for Small Community grants, and have received
those, and we've had some results there that are positive.
Senator Rockefeller. But doesn't that make the point?
Doesn't that discount what you've said in your first sentence?
Mr. Reynolds. No. I mean, I----
Senator Rockefeller. I mean, people have been used to
getting EAS-level funding for so many years that you might
speculate that, well, OK, we're stuck with that. I'm suggesting
another option: more money.
Mr. Reynolds. Well, with respect to more money, I think
that--I mean, I was just saying that the programs--we have
implemented the programs, but no none has come. In those cases,
it was--take, for example, 2 years in a lump--2 years of EAS
subsidies in a lump sum, and make some improvements at your
airport, for example. That was one of the other--that was one
of the programs. And the other was trying to take advantage of
maybe doing air taxis or alternate services. None of them
involved, necessarily, doing marketing along the lines of the
Small Community Air Service Development Program, which is a--
pretty much a part of every single grant that we give. The
marketing does----
Senator Rockefeller. My time is out----
Mr. Reynolds.--yield benefits.
Senator Rockefeller.--but I would simply point out what I
think was the thrust, maybe, of where you're coming from, and I
hope I'm wrong, that--you said if people don't see an
improvement, because there isn't any more funding, they will
start making more and more negative decisions. The--obviously,
the option I'm suggesting is more funding for EAS and more
funding for AIDP, because, let me tell you, where AIDP is
applied, it makes an enormous difference, not just in
marketing, but in airport improvement--facilities, gateways,
things of that sort.
Thank you, Mr. Chairman.
Senator Burns. Thank you, Senator Rockefeller.
Along that same line, Mr. Reynolds, it's come to the
attention of this committee, and--that the EAS program has
incurred accounts with substantial unliquidated obligations.
Could you please explain to this committee what is the
situation right now, and has the Department--what they've done
to correct this accounting--and give us some idea on some of
those unliquidated obligations.
Mr. Reynolds. Certainly, Mr. Chairman.
After the terrorist attacks of September 11, the EAS
carriers were in especially bad financial situations, as were
most airlines. Without some form of across-the-board relief,
many EAS carriers probably would have shut down, leaving many
communities, of course, without any kind of service. To prevent
that, the Department issued an order granting all subsidized
EAS carriers an across-the-board rate increase. The increase
was based on a formula that was subject to retroactive
adjustment and finalization, based on actual financial results.
To protect the program, the full liability was obligated. So,
as we ended up settling the open rates over time, we were able
to negotiate lower rates--and sometimes significantly lower. As
a result, there were many accounts with substantial
unliquidated obligations, because we assumed sort of a worst-
case scenario as to what the carriers might need, but were able
to resolve rates that were much less than that, in the end.
Also, we've had an internal effort to improve our financial
management of the program, and that revealed additional
unliquidated obligations.
Normally, when an order for a subsidized air service is
created, the maximum amount that could ever be claimed is
obligated for the given fiscal year. Frequently, carriers don't
claim all of that money, for a variety of reasons. Because we
pay air carriers based on completed flights, they don't
necessarily complete every single flight--sometimes for
weather, mechanical reasons, or a variety of other reasons--
thus, over time, funds remain unliquidated obligations for
periods of prior performance.
Recently, we sent close-out letters going back several
years to close-out these old contracts and ensure that we can
now start de-obligating funds. To ensure this doesn't happen
again, we're including language in EAS contracts going forward,
so that the de-obligations can happen as a matter of course. Of
course, 9/11 is--we certainly hope--a one-off situation, but we
are in the process of de-obligating these monies right now, and
hopefully they will be back in the account very soon.
Senator Burns. Mr. Dillingham, are you aware of this
accounting situation? And have you fully reviewed the
situation?
Mr. Dillingham. Mr. Chairman, we were not aware of that
accounting situation. It recently came to our attention.
Senator Burns. Do you plan to do--do you plan to look at
it?
Mr. Dillingham. Yes, sir, we do.
Senator Burns. I think the Committee needs a full report on
that. And we may have to formally, probably, request it from
you before you take action, but I would suggest that that be
done.
In the last FAA reauthorization bill, there were some
additional--some Small Community Programs, including the
Alternate Essential Air Service Pilot program and the Community
Flexibility Pilot program. Mr. Reynolds, why have these
programs not been successful? And have you--and have you filled
out a full report on that, and give some information to the
Committee why they have not succeeded, as planned?
Mr. Reynolds. Certainly, Mr. Chairman. I think I touched
upon this in answer to Senator Rockefeller's----
Senator Burns. Yes.
Mr. Reynolds.--Senator Rockefeller's question. We
established the programs. We solicited community input or
applications, and no one came calling, essentially. Again, I
think it's a matter of carriers--I mean, communities being very
comfortable with what they have. The Essential Air Service is
an entitlement. I don't think they wanted to take a risk in
trying something new and potentially have a different form of
service, or that, if it didn't work out, that they would be
without their air service, which, of course, a great many of
them feel is very critical.
So, that's--you know, it's difficult to determine exactly
what's in everyone's minds as to why they chose not to try to
pursue these--I mean, one of the--one of the programs was
authorized, but has been blocked in legislation at other times.
But the two to which you were referring, we--again, we
solicited applications, and no one ever came calling. So----
Senator Burns. Would you like to comment on that, Mr.
Dillingham?
Mr. Dillingham. I'd like to underline something that Mr.
Reynolds said. The new programs aren't incentivized enough to
make the communities take advantage of it. And I think if you
look at these programs and see if there's some way to better
incentivize them, in spite of the risk-adverse nature of some
of the communities, it might have a better chance of success.
I would also suggest trying to find out specifically from
the communities why they have not expressed interest in these
programs, so you have more information with which to assess the
programs.
Senator Burns. Well, I think, you know, when we go into the
reauthorization next year, we should have full accountability
of that, and, if some changes are made, to make it, you know,
more flexible or whatever it takes, we should take a look at
that.
At the end of the month, this subcommittee will have a
hearing on new aircraft that are coming in to be used around
the country. We'll look at very light jets, air taxis, and
other aviation modes. Do you anticipate, either one of you,
any--anticipate new evolutions in aviation and what effect they
might have on our small communities and their air service?
Mr. Reynolds. I think that it's very difficult to predict
the future in terms of what new aircraft or technologies might
produce. I certainly think that if there are more options
available to consumers everywhere, whether that's smaller rural
communities or others, that that can be a good thing. Of
course, if people are using smaller jets as air taxis, and they
would be, normally, business passengers that might fly
scheduled service, that might have another effect. But I think
until we see these types of aircraft or these things in the
marketplace, we just really won't know.
Senator Burns. It's my opinion that we're taking a look at
that--Congress is--and I think I would probably ask you to be
pretty agile, looking on that.
Mr. Dillingham, would you like to comment on that? Because
we're seeing some effects on it over in the FAA part of our
responsibility.
Mr. Dillingham. Chairman Burns, we are just getting
underway with a study looking at the impact of very light jets
and unmanned aircraft on the system, both from a safety
perspective, as well as from a capacity perspective. So, we
won't be ready to testify at your hearing at the end of the
month, but we'd certainly be willing to work with your staff to
have you as a part of the study that we're undertaking.
Senator Burns. Well, we're sure looking at that, because
there are big changes happening out there, and I think there
are a lot of things that neither we know--this committee--or
Congress knows. And you're dealing with some unknowns, also.
Mr. Reynolds, we added an additional $15 million a year to
the FY 2007-2008 for EAS programs. I'm sure that you're using
the money.
Mr. Reynolds. If we need the money, sir, we will take
advantage of it. We have--internally, we are taking steps to
ensure that if it's needed, we will be able to have access to
it in a timely fashion.
Senator Burns. You mentioned some new approaches, in your
opening statement. And with the upcoming year and the FAA
reauthorization, regarding EAS, I would hope that you'd be a
participant in those ideas as we move forward with the--with
reauthorization. And we'd look for your cooperation.
Also, we believe that these communities adequately market
the service. And what can we do to improve the relationship? I
think you brought up one thing, where people are starting to
advertise their airports rather than the service. And I would
subscribe to that.
And so, that's all the questions I have for this panel. I
would just like to thank you, and--both of you, for your
cooperation. And as we move into next year and reauthorization,
I'm sure we'll be calling on you with some more technical
information. Any information that we might not think we need,
and you can collect, why, it would certainly be appreciated.
And I thank you for coming this morning.
And we'll go to our--we'll go to our next--we'll go to our
next panel.
Mr. Dillingham. Thank you, Mr. Chairman.
Senator Burns. And you're excused. Thank you very much.
Mr. Reynolds. Thank you.
Senator Burns. Chairman Stevens wanted to make this
hearing, this morning. He is managing the port security bill
now on the floor of the Senate. And he may have some record--he
may have some questions for you in--to be submitted for the
record, so I thank you--if either one of you could respond to
those questions, it would certainly be appreciated.
Mr. Reynolds. Absolutely, Mr. Chairman.
Senator Burns. Thank you.
Now, on our second panel, we'll hear from Ms. Faye
Malarkey, Vice President of Legislative Affairs of Regional
Airline Association, here in Washington; John Torgerson, Deputy
Commissioner of Aviation, Department of Transportation, from
Anchorage, Alaska; and Doug Kaercher, Hill County Commissioner,
and--the National Association of Counties--and he comes from
Havre, Montana.
Hill County, you're getting a new--you're getting a new
store up there. I was through there the other day, and----
Mr. Kaercher. I would say it's about----
Senator Burns. Yes?
Mr. Kaercher.--about 70 percent completed.
[Laughter.]
Senator Burns. You're--Havre is on the move.
We look forward now to Ms. Malarkey and Regional Airline
Association. We look forward to your testimony. Thank you for
coming this morning, by the way.
STATEMENT OF FAYE MALARKEY, VICE PRESIDENT, LEGISLATIVE
AFFAIRS, REGIONAL AIRLINE ASSOCIATION
Ms. Malarkey. Thank you, Mr. Chairman, Members of the
Subcommittee.
Senator Burns. You might want to pull that microphone up to
you and turn it on. We want to hear your----
Ms. Malarkey. Thank you.
Senator Burns. You bet.
Ms. Malarkey. Thank you, Mr. Chairman.
My name is Faye Malarkey, and I'm Vice President of
Legislative Affairs with the Regional Airline Association, or
RAA. RAA represents regional airlines providing short- and
medium-haul scheduled airline service connecting smaller
communities with hub airports.
Of the 664 commercial airports in the Nation, fully 479 are
served exclusively by regional airlines. In other words, at 72
percent of our Nation's commercial airports, passengers rely on
regional airlines for their only source of scheduled air
transportation.
As we have heard, the Department of Transportation
currently subsidizes service to more than 150 rural communities
that would not otherwise receive scheduled air service, through
the EAS program. With your permission, it is on this program
that I would like to focus my spoken remarks today.
In the 5 years since the attacks of September 11, 2001, a
comparison of nonstop flights to and from airports in the lower
48 United States illustrates that the most dramatic service
losses have occurred in rural communities. Airports with
between one and three daily enplanements, for instance, have
seen a 21-percent decline in daily departures since September
2001. Thirteen of these airports have lost service altogether.
Likewise, airports with between three and six daily flights
since September 2001 have experienced a 33-percent decline in
departures, with eight such airports losing service altogether.
Since 9/11, approximately 40 additional communities have
been forced into the EAS programs, and, in the past several
months alone, four EAS communities have lost air service
altogether.
One of the single greatest factors accounting for these
losses, as you know, has been the staggering increase in fuel
prices. Carriers negotiate in good faith with the DOT to
determine EAS subsidy rates that remain in effect for 2 years.
EAS carriers must, therefore, project revenues and costs over
this entire 2-year time-frame--no easy task, considering
today's volatile cost environment.
In cases of unexpected cost increases, EAS carriers
currently lack a mechanism to renegotiate rates and must
instead enter into the unpalatable process of filing
termination notices in order to seek compensation rates that
cover their increased costs.
One of the fundamental tenets of the EAS program holds that
no carrier should be expected to serve any market unprofitably.
Yet, in these cases carriers are forced to continue service for
180 days at a financial loss, while DOT reopens the competitive
bidding process.
Given this scenario, fuel cost increases remain the single
most dramatic factor behind service reductions. Take the case
of Merced, California, one of DOT's noted success stories of
2005. While the carrier involved with the market engaged in
rigorous cost savings, was able, initially, to double the
traffic forecast in its original EAS proposal, escalating fuel
costs ultimately caused the carrier to file 90-day notices at
Merced, as well as Visalia, California, and Ely, Nevada. And,
in doing so, it noted, ``Scenic's need to terminate service at
these airports stems primarily from fuel-cost escalations that
have undermined the economic viability of the carrier's EAS
operations. As a consequence Scenic has decided to refocus its
resources on its historical aerial sightseeing operations, and
discontinue scheduled service operations.''
Under the leadership of this Committee, Congress addressed
this issue in Section 402 of Vision 100 by affording DOT a
rate-indexing mechanism by which it could make real-time rate
adjustments during periods of significantly increased costs.
There is little doubt that situations like the one with Scenic
Airlines in Merced, Visalia, and Ely could have been prevented,
had Section 402 actually been implemented. Unfortunately, DOT
has been unwilling to implement this program, to date. RAA,
therefore, respectfully asks that Congress include language in
the expected FAA bill to mandate DOT's cooperation in making
real-time rate adjustments for extraordinary cost increases.
Further, RAA requests an audit on unspent annual EAS funds, and
requests that any leftover funds are redirected to the EAS
program in order to make real-time retrospective rate
adjustments.
RAA stands ready to help Congress enact further EAS program
reforms as the next FAA reauthorization approaches. We
understand that a rewrite of the eligibility criteria may
become necessary. These decisions, however, should be based on
rational factors and not due to a funding crisis at the DOT.
The most important thing, therefore, Congress could do
right now to help EAS communities is to ensure the $117 million
funding level included in both House and Senate DOT spending
bills this year remains intact as the appropriation bills near
completion. We also ask that Congress ensure whatever criteria
are applied toward eligibility reform, they be applied
consistently, with an eye toward enhancing the program and
protecting rural air service.
The proposal detailed by my colleague this morning would
severely cut the EAS program, effectively forcing out a third
of the communities that now use the program. Their
recommendation sets up a complicated reform that takes the
``air'' out of Essential Air Service, telling residents of
smaller communities that convenient, reliable air service is a
luxury they can't have.
We share with this committee an understanding of the
critical role air service plays in driving the economies of
smaller communities, and request the Committee's assistance in
helping us reject such draconian program cuts.
Part of the nature of the EAS program, as you know, is that
carriers compete rigorously for contracts. Even in cases where
an incumbent carrier desires to continue serving a given
market, DOT has the right to select another carrier. The
current practice, where DOT holds carriers in a market for 30-
day increments of time, is untenable. This practice means a
carrier cannot sell tickets in the EAS market beyond 30 days,
yet it also cannot make plans to utilize its aircraft
elsewhere. We urge Congress to end this unfair practice by
mandating that DOT adopt a date-certain component for allowing
incumbent carriers to exit markets where service is awarded to
a new carrier.
We are eager to work together with this committee and with
Congress as it takes up the issue of the EAS program reform,
and we urge Congress to enact measures aimed at enhancing
service to the smallest communities, rather than espousing
proposed funding cuts that, however well intentioned, can only
serve to undermine small community air service.
Mr. Chairman, thank you very much for the opportunity to
testify today and for your continued support of this program.
[The prepared statement of Ms. Malarkey follows:]
Prepared Statement of Faye Malarkey, Vice President, Legislative
Affairs, Regional Airline Association
Introduction and Background
Good morning. Mr. Chairman and members of the Subcommittee, on
behalf of the 42 airline members of the Regional Airline Association,
thank you for inviting me to appear before you today to discuss issues
related to rural air service in general and the Essential Air Service
program in particular. We see this as a timely opportunity to lay the
groundwork for our common objectives for the Essential Air Service
program in advance of next year's Federal Aviation Administration
Reauthorization and we thank the Committee for holding the hearing at
this time.
My name is Faye Malarkey and I am Vice President of Legislative
Affairs with the Regional Airline Association, or RAA. RAA represents
regional airlines providing short and medium-haul scheduled airline
service, connecting smaller communities with larger cities and hub
airports operating 9 to 68 seat turboprop aircraft and 30 to 108 seat
regional jets. RAA's member airlines transport 97 percent of total
regional airline industry passengers. Of the 664 commercial airports in
the Nation, fully 479 are served exclusively by regional airlines. In
other words, at 72 percent of our Nation's commercial airports,
passengers rely on regional airlines for their only source of scheduled
air transportation.
The Department of Transportation currently subsidizes service to
approximately 140 rural communities across the country, which would not
otherwise receive scheduled air service, through the Essential Air
Service Program, or EAS, which was enacted as part of the Airline
Deregulation Act of 1978. The EAS program was crafted to guarantee that
small communities served by certificated air carriers before
deregulation would maintain a minimum level of scheduled air service
after deregulation.
The program has been in effect each year since 1978 at various
funding levels and has undergone several eligibility criteria
adjustments, taking into account distance from nearby hub airports and
other factors. Most recently, in Fiscal Year 2006, the EAS program was
funded at $110 million. Current versions of both House and Senate DOT
spending bills have funded EAS at $117 million. RAA applauds this
committee in particular for actively working with appropriators to
secure these funding levels. We remain committed to working with
Congress to ensure that the EAS program continues to receive
appropriate funding.
Before returning to this subject, I would like to provide some
background information on regional airline service. As you know, most
regional airlines operate in partnership with the major airlines under
code-sharing agreements. In fact, in 2005, 99 percent of the 151
million passengers transported by regional carriers traveled on code-
sharing airlines. Code-sharing agreements, which provide benefits for
passengers, regional and major airlines, have two broad methods of
revenue sharing. The first, prevalent among larger regional carriers
operating regional jets, occurs when a major and regional airline enter
into a ``fee-for-departure'' or ``capacity buy'' agreement where the
major compensates the regional airline at a predetermined rate for
flying a specific schedule. Within this arrangement are operational
standards for customer service, on-time performance and baggage
handling requirements as well as incentives rewarding excellent
performance.
A second arrangement, common to smaller, turboprop operators,
occurs when major airlines pay regional airlines a portion of passenger
ticket revenue. This is referred to as ``pro-rate'' or ``shared
revenue'' flying. While regional airlines with pro-rate agreements are
most vulnerable to cost increases and the recent fuel cost crisis, it
is important to note that fee-for-departure carriers also suffer when
fuel costs increase this dramatically. Even if the regional airline is
compensated by the major airline for fuel costs, the majors must take
those increased costs and the market's profitability into consideration
when route and capacity decisions are made. Major carriers have no
choice but to eliminate regional routes that lose money for long
periods, even if those routes contribute some connecting revenues to
the mainline system. In some cases, this means the fee-for-departure
carriers finds itself forced to park aircraft.
Regional airlines are providing critical service to smaller
communities with airplanes that use much less fuel than larger
aircraft. Turboprop aircraft are among the most fuel efficient aircraft
for short-haul routes and RJs have some of the most modern, fuel
efficient engines in the airline industry. Like our major airline
counterparts, regional carriers have sought to minimize fuel burn by
tankering fuel, lowering cruise speeds, safely altering approach
procedures and reducing onboard weight, making every effort to manage
escalating fuel costs with an eye toward conservation. Nonetheless,
fuel remains the second highest cost for airlines, ranking just behind
labor.
As you know, most of the major airlines are experiencing some of
the most daunting challenges in the history of the industry. They
cannot afford to continue unprofitable routes and when this service is
discontinued, regional airlines and passengers in small communities
suffer as well.
Small Community Air Service
With the anniversary of the 9/11 attacks just days behind us, a
look at the implications of these events 5 years later shows the most
deleterious air service reductions have occurred among rural
communities. According to data compiled by Back Aviation solutions, a
comparison of the total number of nonstop flights to and from the
contiguous 48 United States illustrates the most dramatic service
losses in rural communities. Among the smallest airports, such as those
with between one and three departures per day, there has been a 21
percent decline in daily departures between September 2001 and
September 2006. Thirteen of these airports have lost service
altogether. Airports with between three and six daily flights in
September 2001 have experienced a 33 percent decline in departures with
eight such airports losing service altogether.
It is within the context of this decrease in rural air service that
we begin to take up the issue of reforming the Essential Air Service
program during the upcoming FAA Reauthorization process.
Essential Air Service
Because of increasing costs and continuing financial pressures in
the aviation industry, at least 40 additional communities have been
forced into the EAS program since September 11, 2001. In the past
several months alone, four EAS communities have lost air service. One
of the single greatest factors accounting for these losses is the
staggering and continuous increase in fuel prices.
As you know, the Essential Air Service program is administered by
the Department of Transportation, where ``best and final'' competitive
proposals are submitted by regional carriers. The Department selects
carriers and establishes EAS subsidy rates based on that bidding
process. If a carrier is the only airline serving an EAS-eligible
community and wishes to exit the market, DOT regulations require that
carrier to file a 90-day service termination notice. DOT holds that
carrier in the market during this period, while a subsidy eligibility
review or competitive bidding process is undertaken. Likewise, carriers
operating EAS-subsidized routes must also file a 90-day service
termination--subject to even more onerous hold-in policies--in order to
trigger a rate renegotiation if costs increase significantly during the
lifetime of the rate agreement.
As part of the EAS application process, carriers negotiate in good
faith with DOT on subsidy rates that remain in effect for 2 years. EAS
carriers must project revenues and costs over this two-year time-
frame--no easy task in today's volatile cost environment. In cases of
unexpected cost increases, EAS carriers lack a mechanism to renegotiate
rates and must instead enter into the unpalatable process of filing
notice to terminate service in 90 days in order to begin the process
for seeking compensation rates that cover increased costs. This
inevitably causes ill-will between an airline and the community, in
some cases fostering a sense of unreliability that ultimately
undermines the use of the air service and further drives up subsidy
rates as fewer passengers traveling causes air fares to climb.
One of the fundamental tenets of the Essential Air Service program
held that no carrier should be expected to serve any market at a loss.
Yet, in cases of unexpected cost increases, carriers are unable to
provoke rate changes without filing such service termination notices,
after which each carrier must continue to provide the service, at a
loss, for 180 days while DOT opens the competitive bidding process.
Fuel cost increases remain the single-most dramatic factor behind
service reductions. Take the case of Merced, California, one of the
DOT's noted success stories of 2005. While the carrier involved with
the market engaged in rigorous cost savings and was able to initially
double the traffic forecast in its original EAS proposal, escalating
fuel costs ultimately caused the carrier to file 90 day notices at
Merced as well as Visalia, California, and Ely, Nevada, noting:
``Scenic's need to terminate service at [Merced/Visalia/Ely]
stems primarily from fuel cost escalations that have undermined
the economic viability of the carriers' EAS operations. As a
consequence, Scenic has decided to refocus its resources on its
historical aerial sightseeing operations and discontinue
scheduled-service operations.''
Congress addressed this issue in Section 402 of Vision 100, the
Century of Aviation Reauthorization Act, by affording DOT a rate
indexing mechanism by which it could make real-time subsidy rate
adjustments during periods of significantly increased costs. With an
eye to preventing deliberate cost underestimation, Congress included an
index where ``significant increase'' is defined as a 10 percent
increase in unit costs that persists for two or more consecutive
months. There is little doubt that situations like the one with Scenic
Airlines and Merced/Visalia/Ely could have been prevented had Section
402 been implemented to curb the grave financial consequences that EAS
carriers are experiencing as a result of serving markets at a loss due
to climbing fuel prices.
Unfortunately, DOT has been unwilling to implement the program to
date, citing a lack of specific appropriations for the activity. RAA
therefore respectfully asks that Congress include language in the
expected FAA bill to mandate DOT's cooperation in making real-time rate
adjustments for cost increases. Further, RAA requests that Congress
request an audit on unspent, obligated funds and that any leftover
funds be redirected to the EAS program in order to make real-time,
retrospective rate adjustments to carriers facing cost increases
relative to section 402 of Vision-100.
Eligibility Criteria
RAA stands ready to help Congress enact further EAS program reforms
as the next FAA reauthorization takes place. We understand that a
rewrite of the eligibility criteria may become necessary as some of the
rules set nearly three decades ago may no longer apply. These
decisions, however, should be based on rational factors and not a
funding crisis at DOT. The most important thing Congress could do right
now to help passengers in EAS communities and the airlines serving them
is to ensure the $117 million funding level included in both House and
Senate DOT spending bills remains intact as the FY07 appropriations
bills near completion.
Next, as we consider a potential eligibility criteria rewrite, we
ask that Congress ensure whatever criteria is applied to these
decisions be applied consistently and with an eye toward enhancing the
program and protecting rural air service. We also ask that any
community reductions be revenue-neutral. In other words, subsidies
recovered from any communities losing eligibility should not be
diverted from the EAS program but, instead, should be reinvested in the
program to help increase frequency along other viable routes. Given the
correlation between increased frequency and increased enplanements,
such a reinvestment could actually serve to help some communities
reduce or eliminate their subsidy reliance altogether.
Cost Sharing Recommendations
As you know, the past several Presidential budget requests have
proposed severe cuts to the EAS program and would establish a $50
million cap on program expenditures as well as strip the program of its
entitlement status. The Administration would create three community
categories based on hub airport distance and would establish cost-
sharing criteria that would likely dismantle the program. EAS
communities within 100 miles to large hub airports, 75 miles to small-
hub airports, or 50 miles to airports with jet service would lose
commercial air service and receive only 50 percent of previous funding
for surface transportation use only. Communities less than 210 miles to
a large or medium hub would receive a 25 percent funding cut.
Communities more than 210 miles would experience a 10 percent funding
cut.
This proposal would severely cut and potentially dismantle the EAS
program as funding would fall by $59 million, effectively forcing out a
third of the communities that now use the program. The recommendation
sets up a complicated reform that takes the ``air'' out of Essential
Air Service, telling residents of smaller communities that convenient,
reliable air service is a luxury they can't have; instead suggesting
surface alternatives.
We share with this committee an understanding of the critical role
air service plays in driving the economies of smaller communities and
request the Committee's assistance in helping us protect rural
communities against EAS program cuts that would undermine the program.
Date Certain for Market Exit
Part of the nature of the Essential Air Service program, as you
know, is that carriers compete rigorously for contracts. Even in cases
where an incumbent carrier desires to continue serving a given market,
DOT has the right to select another carrier to serve that market. In
these cases, where DOT awards the service to a new carrier, DOT must
give the incumbent carrier a date certain when it may exit the market,
without exception. The current practice, where DOT holds the carrier in
markets in 30 day increments, is untenable. This practice means a
carrier cannot sell tickets in the EAS market beyond 30 days, nor can
it make plans to utilize its aircraft elsewhere. We urge Congress to
end this unfair situation by mandating that DOT adopt a date-certain
component for incumbent carrier market exits when it selects an
alternate carrier to serve the market.
Per Passenger Subsidy Cap Adjustments
Within the past 2 months, four communities, including Enid and
Ponca City, OK, Moses Lake, WA, and Bluefield/Princeton, WV, have lost
service because of the per-passenger subsidy cap in place for EAS
markets. This subsidy cap was set at $200 per passenger in 1990 and has
not been indexed for inflation since that time. Even without factoring
in increasing fuel costs, some carriers are concerned that the subsidy
cap is outdated and does not account for the true cost of providing air
service to rural communities. While the Association has not yet taken a
position on this issue, we request that any discussion of EAS reform
also examine the benefits and alternatives to adjusting the subsidy cap
to account for inflation as well as to consider a mechanism for
indexing the cap for inflation on an annual basis.
We are eager work together with Congress in order to enact
meaningful reforms to the EAS program and urge the Congress to enact
measures aimed at enhancing service to the smallest communities rather
than espousing proposed funding cuts that, however well intentioned,
can only serve to undermine small community air service.
Other Rural Air Service Impacts
Aviation Security Fee Increases
As you know, the aviation security fee would increase by 120
percent to $5.50 under recent Administration proposals, capped at $8
for one-way travel and at $16 for round-trips under the budget
proposal. We applaud this Committee for its actions in opposing such
increases and its understanding that this tax increase jeopardizes
airline jobs and flights to small and medium-size communities.
Passengers traveling to rural communities would be disproportionately
impacted because regional flights mean multiple flight segments and
more tax occurrences.
The new tax would raise the cost of air travel rise by an estimated
$1.5 billion a year and would bring the total Federal security tax on
airlines to $4.7 billion. Such tax increases would only serve to
further divert resources away from airlines, already struggling to
provide service to small and rural communities. This tax increase will
raise fares for travel to rural communities and makes this service even
more expensive for carriers, putting air service to rural communities
at risk.
We therefore urge Congress to continue to reject security fee
increases that would jeopardize rural air service.
Demand Management
At LaGuardia, service to small communities and other regional
airline service will be jeopardized if FAA adopts its proposal to
discourage the use of smaller aircraft at La Guardia. Although Congress
decreed that La Guardia should be open to all flights serving small and
non-hub airports in 2000, FAA cut back the number of these LaGuardia
flights to reduce congestion caused by the popularity of service
between La Guardia and these small communities. Rather than encouraging
service to smaller communities with smaller aircraft at La Guardia as
Congress directed, however, FAA is now proposing to create average
aircraft size requirements that would limit small aircraft and the
small cities they serve at La Guardia.
Although the proposed rules contain options for protecting small
community air service, one of the proposals would expand overall small
community service at La Guardia, and one of the options would protect
service only for smaller communities within 300 miles of La Guardia.
The more small community service protected under the proposals, the
greater the average aircraft size required for other flights at La
Guardia, thereby encouraging the reduction of competition on routes
served with small aircraft. This is likely to create monopoly routes
along routes where competition exists today and could serve to
eliminate service altogether on other routes.
We therefore ask Congress to exercise its oversight as FAA
continues through the rulemaking process to ensure that carriers are
not be penalized, in terms of fees or slots at La Guardia, for using
smaller airplanes to serve smaller communities. Such actions at La
Guardia, which will likely set the precedent for other airport demand
management models, limit service and fare choices of passengers in
small or medium-sized cities. Regional passengers pay the same aviation
taxes and fees as other travelers and should not face higher ticket
prices or limited travel options because we failed to modernize and
expand the airport and airway system.
Conclusion
Mr. Chairman, thank you for the opportunity to testify on this
important issue today and thank you and the Committee for continuing to
afford us this opportunity to shape and protect a program that is
important to both our constituencies. I look forward to responding to
your questions at the conclusion of the panel.
Senator Burns. Thank you. And thank you for your time and
your testimony. We look forward to working with you, too, as we
move into the FAA reauthorization.
Mr. Torgerson, the man sitting next to you, I would imagine
you might have some roots in Hill County, Montana, because we
have some Torgersons down there in that part of the world.
Mr. Torgerson. I'm not sure, Mr. Chairman.
Senator Burns. You're from Alaska? You're the Deputy
Commissioner of Aviation, Department of Transportation, and we
look forward to your testimony. Thank you for coming today and
making the long trip.
STATEMENT OF JOHN TORGERSON, DEPUTY COMMISSIONER OF AVIATION,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, STATE OF
ALASKA
Mr. Torgerson. Thank you, Mr. Chairman.
My name is John Torgerson. I've resided in Alaska since
1950, so aviation in the rural part of Alaska and America are
part of my line.
To Alaska, aviation is a critical transportation mode that
provides the basic necessities of life. In rural Alaska, air
transportation is the sole method of transportation to get to
the doctor, the dentist, and, in some communities, even the
grocery store. Some Alaskans even rely on daily air service to
attend school. Every morning and evening, the kids in South
Naknek load into a Piper Cherokee Six aircraft to fly to
school. School programs around the state routinely fly students
to school events, because there are no road connections.
The State of Alaska owns and operates 260 airports. We have
two large international airports located in Anchorage and
Fairbanks. We have 258 community-class airports located across
the state, from as far north as Barrow, to Ketchikan in the
south, and Adak, in the east. To put that in perspective to the
United States, it would be like flying from Michigan to
Florida, and then from Florida to California.
The small communities of rural Alaska, which most depend on
the Essential Air Service, are the very communities that are
not connected by roads to the rest of our state. Thirty-nine
Alaska communities are currently receiving the Essential Air
Service program, with 14 separate air carriers providing that
service. One carrier provides jet service to six communities,
and the other 39 communities are serviced by smaller propeller
aircraft. The aircraft used includes Cessna 185s, Beavers on
floats, and even a Grumman Goose.
Over the last 3 years, the amount of funds administered
under the Essential Air Service program to Alaska air carriers
has increased less than the general rate of inflation, despite
higher inflation and fuel costs. During this same period of
time, the total number of passengers using Essential Air
Service has increased from 69,770 to 73,133.
In 2002, the GAO indicated that further fiscal discipline
may be necessary, and identified four options to control costs
and improve the program's stability.
First, targeted subsidized service to more remote
communities. That is exactly what happens in Alaska. Most of
our Alaskan rural communities are completely dependent on air
service, because the state has only 4,732 miles of paved road.
In comparison, the State of Virginia has over 70,000 miles of
paved road.
Second, much better capacity--or better match capacity with
community use by increasing the use of smaller aircraft. Again,
this is exactly what happens in Alaska. As I've already stated,
only six of our Essential Air Service communities receive jet
service. The others are serviced by some of the smallest
aircraft in commercial use. Alaska air carriers regularly use
planes that only hold three passengers. The citizens of Akutan
rely on the Grumman Goose, last built in 1947, for their
Essential Air Service.
The third recommendation from the GAO was to consolidate
service into regional airports. Again, this is exactly what
happens in Alaska. Essential Air Service programs subsidize the
movement of passengers and freight from 39 small communities to
one of nine primary regional airports.
Fourth, change the form of Federal assistance from carrier
subsidies to local grants. Alaskans believe the program is
working well and request no changes in this funding method be
made. Basically, most of these smaller communities don't have
the staff to administer a program, if one was made available to
them.
Mr. Chairman, Alaska and her rural communities rely every
day on Essential Air Service. We know that it is well-
administered, and are happy with the program, as it is
regulated today.
Just some comments on the Small Community Air Development
Grant. Mr. Chairman, we applied for a grant in April of 2006
and was awarded $500,000 to foster the diversified air service
to Fairbanks. Having just completed this process, I'll provide
a few of my impressions of the program.
First, the program creates public-private partnerships. It
fosters interagency and community partnerships by encouraging
the local match and involvement in the marketing and strategy
plan to attract new and diversified air service.
It creates competition, provides funding to a new air
service in challenging markets that either do not have air
service or have a monopolistic service that is unnecessarily
penalized as a customer.
It fosters economic development. New or diversified air
service results in additional travel from both local and
recipient communities, bolstering their economies, allowing for
expanded routing and competitive fares that fosters an increase
in travel.
It has--the program has great administrative support from
start to finish; clear and relatively simple process from the
application through the award; excellent support from
knowledgeable DOT staff. We have received immediate responses
to all our questions and our concerns in regard to the program
and its structure.
From Alaska's perspective, we have high expectations that
this program will attract service for a new city pair, increase
the economic opportunities for our communities, and add
diversity to the traveling public.
Mr. Chairman, thank you for the opportunity to comment, and
I'd be glad to take your questions.
[The prepared statement of Mr. Torgerson follows:]
Prepared Statement of John Torgerson, Deputy Commissioner of Aviation,
Department of Transportation and Public Facilities, State of Alaska
Good Morning Mr. Chairman and members of the Committee.
You have requested testimony on the purpose, importance, obstacles,
and possible reforms for the U.S. Department of Transportation's
Essential Air Service, and the Small Community Air Service Development
program.
To Alaskans, aviation is the critical transportation mode that
provides the basic necessities of life. In rural Alaska, air
transportation is the sole method of transportation to get to the
doctor, dentist, and, in some communities, even the grocery store. Some
Alaskans even rely on daily air service to attend school. Every morning
and evening kids in South Naknek load into a Piper Cherokee Six
aircraft to fly to school. Schools programs around the state routinely
fly students to school events because there are no road connections.
The State of Alaska owns and operates 260 airports:
2 large international airports located in Anchorage and
Fairbanks.
258 community class airports located across the state from as
far north as Barrow to Ketchikan in the south and Adak in the
east. This distance, is the same as flying from Michigan to
Florida, and then to California.
A vast majority of these communities are land locked and not
connected by any road link. The small communities of rural Alaska,
which most depend on the Essential Air Service program, are the very
communities that are not connected by roads to the rest of the state.
Thirty-nine Alaska communities are currently receiving Essential
Air Service, with fourteen separate air carriers providing that
service. One carrier provides jet service to six communities and the
other thirty-three communities are serviced by smaller propeller
aircraft. The aircraft used, include Cessna 185s, Beaver floatplanes
and even Grumman Goose.
Over the last 3 years, the amount of funds administered under the
Essential Air Service program to Alaskan air carriers have increased
less than the general rate of inflation, despite greater inflation in
fuel costs. During this same time period the total number of passengers
using Essential Air Service has increased from 69,770 to 73,133.
In 2002 the GAO indicated that further fiscal discipline may be
necessary and identified four options to control costs and improve the
program's sustainability.
First, target subsidized service to more remote communities. That
is exactly what is happening in Alaska. Most of Alaska's rural
communities are completely dependent on air service because the state
has only 4,732 miles of paved roads. In comparison, the State of
Virginia has over 70,000 miles of paved roads.
Second, better match capacity, with community use, by increasing
the use of smaller aircraft. Again, this is exactly what we are doing
in Alaska. As I have already stated, only six of our Essential Air
Service communities receive jet service. The others are served by some
of the smallest aircraft in commercial use. Alaskan air carriers
regularly use planes that can only hold three passengers. The citizens
of Akutan rely on a Grumman Goose, last built in 1947, for their
Essential Air Service.
Third, consolidate service into regional airports. Again, this is
exactly what happens in Alaska. The Essential Air Service program
subsidizes the movement of passengers and freight from the 39 smaller
community class airports to one of nine primary regional airports.
Fourth, change the form of Federal assistance from carrier
subsidies, to local grants. Alaskans believe the program is working
well and request that no changes in the funding method be made.
Mr. Chairman, Alaska and her rural communities rely everyday on the
Essential Air Service program, we know that it is well administered and
are happy with the program as it is regulated today.
Small Community Air Service Development Grant
Mr. Chairman, I was also asked to testify about the Small Community
Air Service Development Grant program. The State of Alaska applied for
a grant in April 2006 and was awarded $500,000 to foster diversified
air service to Fairbanks. Having just completed this process, I will,
provide you with my impressions of the program:JLW
Creates Public-Private Partnerships: Fosters interagency and
community partnerships by encouraging a local match and involvement in
the marketing strategic plan to attract new and diversified air
service.
Creates Competition: Provides funding for new air service in
challenging markets that either do not have air service and/or
monopolistic service that unnecessarily penalizes the customer.
Fosters Economic Development: New and/or diversified air service
results in additional travel for both local and recipient communities--
boosting their economy. Allows for expanded routing and competitive
fares that fosters an increase in travel opportunities for all types of
travelers.
Supportive Program from Start to Finish: Clear and relatively
simple process from the application through the award. Excellent
support from knowledgeable DOT staff. We have received immediate
responses to all questions and/or concerns in regards to the program
and its structure.
From an Alaskan perspective, we have high expectations that this
program will attract service for a new city pair, increase the economic
opportunity for the communities, and add diversity for the traveling
public.
Mr. Chairman, Thank you for the opportunity to comment today.
I would be glad to answer any questions that you and the Committee
might have.
Senator Burns. Thank you. We thank you.
And I'm sorry I mispronounced your name, Commissioner.
Kaercher, I guess it is. Is that correct?
Mr. Kaercher. Much closer, but you're not the only one that
misses it.
[Laughter.]
Senator Burns. Thank you for coming and making the trip. We
look forward to your testimony.
STATEMENT OF HON. DOUGLAS KAERCHER, COUNTY
COMMISSIONER, HILL COUNTY, MONTANA; ON BEHALF OF THE PRESIDENT,
MONTANA ASSOCIATION OF COUNTIES (MACo); NATIONAL ASSOCIATION OF
COUNTIES
Mr. Kaercher. Good morning. Chairman Burns, my name is Doug
Kaercher. I am a County Commissioner from Hill County, Montana.
I am here representing Hill County, the Montana Association of
Counties, as its President, and the National Association of
Counties. I want to thank you, Senator Burns and the rest of
the Committee, for the invitation to testify on Essential Air
Service.
Essential Air Service is extremely important to NACo
members from rural areas, to Hill County, to the seven
additional communities in Montana that receive EAS, and to the
approximately 143 other communities in 36 states, such as
Alaska, Hawaii, West Virginia, Maine, and North Dakota, that
have EAS.
In a nutshell, EAS keeps these communities linked to the
rest of America. It provides a link for citizens to travel to
larger communities plus a link to the Nation and the world
through the hub airports that EAS connects. EAS plays a key
role in local communities by attracting and retaining
businesses that depend on commercial air service; in
healthcare, by enabling our citizens to easily access
sophisticated healthcare that is often absent in rural
communities; and by making the business of government work
better when elected officials, such as myself, can fly to the
state capital to confer with key state officials.
When the Commerce Committee, in 2007, considers the
reauthorization of Federal airports and aviation programs, we
urge you to extend EAS and provide an authorized level of
funding that is adequate to meet the demands and costs of the
program.
The Havre City-County Airport is located in Hill County and
is jointly administered by a City-County Board. Big Sky
Airlines has EAS service to Billings, Montana, and flies into
and out of Havre twice daily, Monday through Friday, and once a
day on Saturday and Sunday, using a 19-passenger turboprop
aircraft. This service carried 2,973 passengers in 2005.
What does commercial service mean to our region? Hill
County, with a population of about 17,000, is 250 miles from
Billings, the commercial, financial, and healthcare hub of
Montana. Without EAS service, our economic development efforts
would be seriously hampered. Often, the first question we get
when recruiting industry is whether we have passenger air
service. It is unlikely that a company would locate in our
community if the closest good air service was a 2-hour drive.
Our current employers depend on EAS. Havre is the home of a
Burlington Northern Santa Fe Railroad regional headquarters and
a General Electric repair facility. These two large
corporations are constantly flying their employees in and out.
A substantial amount of oil and gas exploration is taking place
in Hill County and the adjoining region, with many workers
using Big Sky Airlines. Montana State University is located in
Havre. The air service makes it easier for faculty, students,
and visitors to take advantage of the university.
Because of declining number of acres in agriculture
production, the agriculture equipment dealers in our community
are fewer, and farmers and ranchers are dependent upon Big Sky
to ship those needed parts to keep their equipment running in a
timely fashion.
Billings is the medical capital of Montana, where our
citizens go for specialized and advanced medical care. EAS
service makes it possible for citizens in rural communities
such as ours to take advantage of the type of medical care that
is easily accessible to residents of metropolitan areas. EAS
allows an individual in need of such critical care to avoid a
10-hour roundtrip drive to Billings.
EAS also allows citizens and elected officials in Hill
County to better participate in government. As a County
Commissioner, I need to travel frequently to our state capital
in Helena to work with the legislature, state agencies, and the
state association of counties. EAS flies to Billings, where I
make a connection on Big Sky to Helena. How many elected
officials and citizens are going to make that 420-mile
roundtrip to talk to a legislator?
We have a substantial Native-American population in Hill
County, and the residents of Rocky Boy's Reservation use EAS to
go on training programs and attend meetings throughout the
region and this Nation. EAS makes democracy in Montana a little
more accessible.
There are seven other EAS communities in Montana, and
members of the Commerce Committee need to understand Montana to
understand why we have so many EAS-subsidized air service
communities. Montana is the fourth-largest state in the Union,
and the distances between communities are substantial. Our
state is 255 miles by 630 miles. Imagine, from Wolf Point,
Montana, an EAS community, it is 317 miles to Billings, or 5
hours in a car. That's about the distance from Hartford,
Connecticut, to Washington, D.C., or St. Louis to Chicago. If
you want to get to Helena, the distance is 412 miles, or 8
hours. Just think about a 10-hour road trip to see a medical
specialist, or a 16-hour trip to visit the state capital.
From Glasgow, the drive to Billings is 277 miles, or 6
hours, and 363 miles, or 7 hours, to Helena.
The other EAS communities are also long distances from
Billings. From Glendive, it's 222 miles; from Sidney, 272
miles; from Miles City, it's 146 miles.
West Yellowstone, our eighth EAS community, has a service
on Sky West to Salt Lake City, on a seasonal basis.
Without EAS, there would be no alternatives to these long
drives--no Amtrak, no bus service. To a varying degree, this
describes all of the approximately 150 communities currently
served by EAS, about 115 in the continental United States,
Hawaii, and Puerto Rico, and 35 in Alaska. In Montana, the EAS
subsidy is about $7 million per year, which provides air
service to nearly 60 percent of Montana's population. Those of
us that live in rural Montana believe this is a small price to
pay to keep the citizens of small and rural communities
connected. The current total cost of EAS program is about $110
million, with about $60 million coming from the general fund.
For $110 million a year, we have been able to keep 150 rural
communities linked to the rest of America. That's a great
investment.
Mr. Chairman, this concludes my testimony. I'd be happy to
answer any questions.
[The prepared statement of Mr. Kaercher follows:]
Prepared Statement of Hon. Douglas Kaercher, County Commissioner, Hill
County, Montana; on Behalf of the President, Montana Association of
Counties (MACo); National Association of Counties
Good morning, Chairman Burns and Members of the Subcommittee on
Aviation. My name is Doug Kaercher and I am a County Commissioner in
Hill County, Montana. I am here representing Hill County, the Montana
Association of Counties (MACo) as its President, and the National
Association of Counties (NACo). *
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* The National Association of Counties (NACo) is the only national
organization that represents county governments in the United States.
Founded in 1935, NACo provides essential services to the Nation's 3,066
counties. NACo advances issues with a unified voice before the Federal
Government, improves the public's understanding of county government,
assists counties in finding and sharing innovative solutions through
education and research, and provides value-added services to save
counties and taxpayers money. For more information about NACo, visit
www.naco.org.
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I want to thank Senator Burns, and the rest of the Committee for
the invitation to testify on Essential Air Service.
Essential Air Service (EAS) is extremely important to NACo members
from rural areas, to Hill County, to the seven additional communities
in Montana that receive EAS service, and to the approximately 143 other
rural communities in 36 states, such as Alaska, Hawaii, West Virginia,
Maine, and North Dakota, that have EAS air service. In a nutshell, EAS
keeps these communities linked to the rest of America. It provides a
link for citizens to travel to the larger communities plus a link to
the Nation and world through the hub airports that EAS connects to. EAS
plays a key role in local communities by attracting and retaining
businesses that depend on commercial air service, in heathcare by
enabling our citizens to more easily access sophisticated healthcare
that is often absent in rural communities, and by making the business
of government work much better when elected officials, such as myself;
can fly to the state capital to confer with key state officials. When
the Commerce Committee in 2007 considers the reauthorization of the
Federal airport and aviation programs, we urge you to extend EAS and
provide an authorized level of funding that is adequate for meeting the
demands and cots of the program.
The Havre City-County Airport is located in Hill County and is
jointly administered by a City-County Board. Big Sky Airlines has EAS
service to Billings and flies into and out of Havre twice daily Monday
through Friday and once a day on Saturday and Sunday using a 19
passenger turboprop aircraft. This service carried 2,973 passengers in
2005. What does commercial service mean to our region? Hill County,
with a population of about 17,000, is 250 miles from Billings, the
commercial, financial, and healthcare hub of Montana. Without EAS
service, our economic development efforts would be seriously hampered.
Often the first question we get from recruiting industry is whether we
have passenger air service. It is unlikely that a company would locate
in our community if the closest good air service was a 2-hour drive.
Our current employers depend on EAS. Havre is the home of a Burlington
Northern Santa Fe Railway regional headquarters and a General Electric
repair facility and these two large corporations are constantly flying
their employees in and out. A substantial amount of oil and gas
exploration is taking place in Hill County and the adjoining region
with many industry workers using Big Sky. Montana State University
Northern is located in Havre and air service makes it easier for
faculty, students and visitors to take advantage of the university.
Because of declining number of acres in agricultural production, the
agricultural equipment dealers in our community are fewer and farmers
and ranchers are dependent on Big Sky to ship those needed parts to
keep their equipment running in a timely fashion.
Billings is the medical capital of Montana, where our citizens go
for specialized and advanced medical care. EAS service makes it
possible for citizens in a rural community such as ours to take
advantage of the type of medical care that is easily accessible to
residents of metropolitan areas. EAS allows an individual in need of
such critical care to avoid a 10 hour round trip drive to Billings.
EAS also allows the citizens and elected officials in Hill County
to better participate in government. As a County Commissioner I need to
travel frequently to our state capital in Helena to work with the
legislature, state agencies and our state association of counties. EAS
flies to Billings where I can make a connection on Big Sky to Helena.
How many elected officials and citizens are going to make that 420-mile
roundtrip by car to talk with a legislator? We have a substantial
Native American population in Hill County and the residents of Rocky
Boy's Reservation use EAS to go to training programs and attend
meetings throughout the region. EAS makes democracy in Montana a little
more accessible.
There are seven other EAS communities in Montana and members of the
Commerce Committee need to understand Montana to understand why we have
so many EAS subsidized air service communities. Montana is the 4th
largest state in area and the distances between communities are
substantial. Our state is 255 miles by 630 miles. Imagine, from Wolf
Point, Montana, an EAS community, it is 317 miles to Billings or 5
hours. That's about the distance from Hartford, Connecticut to
Washington, D.C. or St. Louis to Chicago. If you want to get to Helena,
the distance is 412 miles or 8 hours. Just think about a 10-hour roa
trip to see a medical specialist or a 16-hour trip to visit the state
capital. From Glasgow the drive to Billings is 277 miles or 6 hours and
363 miles or 7 hours to Helena. The other EAS communities are also long
distances from Billings. From Glendive it's 222 miles, from Sidney it's
272 miles, from Miles City it's 146 miles. West Yellowstone, our eighth
EAS community, has service on Sky West to Salt Lake City on a seasonal
basis. Without EAS, there would be no alternative to these long
drives--no Amtrak and no Greyhound service. To a varying degree, this
describes all the approximately 150 communities currently served with
EAS service--about 115 in the continental United States, Hawaii and
Puerto Rico and 35 in Alaska.
In Montana, the EAS subsidy is about $7 million per year, which
provides air service to nearly 60 percent of Montana's population.
Those of us who live in rural Montana believe this is a small price to
pay for keeping the citizens of small and rural communities connected.
The current total cost of the EAS program is about $110 million a year,
with about only $60 million coming from the general fund. For $110
million a year, we have been able to keep 150 rural communities linked
to the rest of America. That's a great investment.
Mr. Chairman, this concludes my testimony. I would be happy to
answer any questions you or other Members of the Subcommittee have.
Senator Burns. Thank you very much.
I have another way of describing how big our state is. From
the Yaak, which is up in the northwest corner of the state, to
Alzada, which is down in the southeast part of the state, it is
further than it is from Chicago to Washington, D.C. And we have
folks who live in every corner in--of the state, and it's a
truly remarkable kind of place.
Ms. Malarkey, have you--you heard the--Mr. Reynolds talk
about new formulas being considered by the Department of
Transportation, and maybe a new approach in taking that. Do you
agree with some of those? And does--is it time that we take a
look at reforms to be made in the program?
Ms. Malarkey. Yes, our Association stands ready to look at
those reforms, and would like to provide leadership in that
area. We recognize that it's been about three decades since
these were written. And, of course, some of the eligibility
criteria do need to be reevaluated.
With this said, our largest concerns centers on program
funding. Our first priority, with respect to program reform, is
to ensure that potential eligibility rewrites do not end up
diverting money away from the program in the long-term. Any
money that's moved around as a result of program reform should
actually be reinvested in the program.
Some of the things that we think could be particularly
helpful would be increasing frequency along some routes where
the community has seen some viability. We need to be sure the
funding is there for the program, overall. If we start to talk
about possible incentives to increase use, such as marketing
programs, we must ensure that the base program is fully funded
first.
Senator Burns. Mr. Torgerson, Alaska is a huge state. We
can't even hold a candle to you. You heard the Assistant
Secretary. Do you have a--do you have some opinion on what--his
testimony, this morning?
Mr. Torgerson. Mr. Chairman, when I was researching my
facts for this hearing, I found a 2002 GAO report which
basically stipulated the four points that were reiterated
earlier this morning. I believe that Alaska is the poster child
for those four points.
So, does the program need some reforms? I believe it
probably does. I mean, finding a stable funding source so that
we're not scrambling every year to know if we're in or out of
the program; you know, inflation-proofing, and some of the
other things.
But everything else, I'd have to wait and see what was
proposed by the Department before I would really be able to
give a qualified answer.
Senator Burns. With regard to--you say you have some
communities that do not have staff to deal with the grant
programs. Does your Department in Anchorage--do you assist
those people in preparing those grants, and help them manage
those grants, where they don't have enough staff to do so
themselves?
Mr. Torgerson. Mr. Chairman, my Department does not, but we
do have a Department of Commerce and Economic Development and
Community Advocacy who do receive grants and do things for
those communities, some of those communities. But a lot of
these don't really have--they have community councils, they
don't necessarily have, you know, a government, per se, or
there might be tribal entities that are there.
Senator Burns. Did you--but has that--have you given any
thought to that, of helping those folks out?
Mr. Torgerson. Well, there's--we do, all the time, as a
state, but, of course, this program hasn't had a requirement
that it would go down to a community level. If there was such a
requirement, I'm sure the state would step up and work either
through the Department of Transportation--it would take a
legislative change for us to be able to do that, but primarily
through the Department of Commerce, they would probably step up
and do something.
Senator Burns. Mr. Kaercher, I would imagine that Havre
would serve, what, Liberty and Blaine Counties, along with Hill
County, in that--your airport there. What can we do, or what
can you do, in order to increase your ridership out of Havre,
Montana?
Mr. Kaercher. Well, I believe Hill County and the City-
County Airport has been pretty progressive in funding their
airport improvements, as far as keeping the airport up and in
good shape. We've just recently finished a terminal upgrade.
But I believe our airport's in good shape; it looks nice. I
think that gives confidence to the riders that come up to the
airport. But I believe, through our Chambers of Commerce and
certainly through our universities, just in that marketing
alone, and trying to promote this service, a lot has been done
just to get those in our region to use our air service.
Senator Burns. Now, the flights out of--let's say, out of
Havre, do they have intermediate stops before you get to
Billings?
Mr. Kaercher. Yes, sir, they stop in Lewistown.
Senator Burns. Lewistown. No--and--OK. What if you had one
that stopped in Helena?
Mr. Kaercher. I think our ridership would probably double
if it was to go that direction. Besides Billings being a
regional hub for financial and healthcare, Helena is certainly
the governmental hub of Montana, and a lot of our residents and
businesspeople make that trip to Helena on a regular basis.
Senator Burns. Have you--have--do you--is the--is Big Sky--
are they open for some dialogue on--when they--when you talk
about schedules and service?
Mr. Kaercher. As far as I know, sir, that dialogue is
actually pretty new with Big Sky, but I believe they are
starting to look at that side of the riders.
Senator Burns. Also, I guess, whenever we start talking
about the reauthorization of the FAA, I would hope that some of
the ideas that you put forward, say, as a result of this
hearing, and some ideas, new ideas, and some reform ideas, that
we have to--I think, in some areas, we have to think outside
the box, and--in order to serve some of our areas. The
improvement on the program, knowing that funds are going to be
tight again, as far as the Federal Government and subsidies are
concerned--but--well, I happen to believe that this is very,
very important, and some new ideas, some reform ideas on how we
can serve it better, maybe increase our ridership, and take
care of--I know parts is a big thing for--in our state, as you
well know, and so, we will continue to work on that.
But always keep a little notebook of things, of how we
could improve it. And as we march down this--this business of
reauthorization of FAA, we'll keep those ideas in mind. And I
want to thank you for your testimony.
We'll leave the--just like it's--I stated a while ago,
Chairman Stevens wanted to be here this morning. He's managing
a bill on the floor now. We're going to have a vote here at
11:30, and it looks like we've timed it pretty good. But I
thank you for your testimony and making the long trip, because
it's very, very important that this town understands the
challenges that we face in states where we have large distances
and no alternative transportation other than air, and it be--it
would fall under the subsidization plan of the Essential Air
Service. So, I thank you for your testimony, and I will--and
your testimony will be taken very, very seriously as we move
forward.
If you will--if the other members of this committee want to
ask you questions, why, keep your record open, reply to the
Committee and the individual Senator, I would certainly
appreciate that.
That is just about all I have. We will leave--we'll leave
the record open for a week, and I thank you for your testimony.
This committee is adjourned.
[Whereupon, at 11:26 a.m., the hearing was adjourned.]