[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
   ESSENTIAL AIR SERVICE AND SMALL COMMUNITY AIR SERVICE DEVELOPMENT 
                                PROGRAMS 
=======================================================================
                                (110-34)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                                AVIATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 25, 2007

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia    JOHN L. MICA, Florida
PETER A. DeFAZIO, Oregon             DON YOUNG, Alaska
JERRY F. COSTELLO, Illinois          THOMAS E. PETRI, Wisconsin
ELEANOR HOLMES NORTON, District of   HOWARD COBLE, North Carolina
Columbia                             JOHN J. DUNCAN, Jr., Tennessee
JERROLD NADLER, New York             WAYNE T. GILCHREST, Maryland
CORRINE BROWN, Florida               VERNON J. EHLERS, Michigan
BOB FILNER, California               STEVEN C. LaTOURETTE, Ohio
EDDIE BERNICE JOHNSON, Texas         RICHARD H. BAKER, Louisiana
GENE TAYLOR, Mississippi             FRANK A. LoBIONDO, New Jersey
ELIJAH E. CUMMINGS, Maryland         JERRY MORAN, Kansas
ELLEN O. TAUSCHER, California        GARY G. MILLER, California
LEONARD L. BOSWELL, Iowa             ROBIN HAYES, North Carolina
TIM HOLDEN, Pennsylvania             HENRY E. BROWN, Jr., South 
BRIAN BAIRD, Washington              Carolina
RICK LARSEN, Washington              TIMOTHY V. JOHNSON, Illinois
MICHAEL E. CAPUANO, Massachusetts    TODD RUSSELL PLATTS, Pennsylvania
JULIA CARSON, Indiana                SAM GRAVES, Missouri
TIMOTHY H. BISHOP, New York          BILL SHUSTER, Pennsylvania
MICHAEL H. MICHAUD, Maine            JOHN BOOZMAN, Arkansas
BRIAN HIGGINS, New York              SHELLEY MOORE CAPITO, West 
RUSS CARNAHAN, Missouri              Virginia
JOHN T. SALAZAR, Colorado            JIM GERLACH, Pennsylvania
GRACE F. NAPOLITANO, California      MARIO DIAZ-BALART, Florida
DANIEL LIPINSKI, Illinois            CHARLES W. DENT, Pennsylvania
DORIS O. MATSUI, California          TED POE, Texas
NICK LAMPSON, Texas                  DAVID G. REICHERT, Washington
ZACHARY T. SPACE, Ohio               CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii              JOHN R. `RANDY' KUHL, Jr., New 
BRUCE L. BRALEY, Iowa                York
JASON ALTMIRE, Pennsylvania          LYNN A WESTMORELAND, Georgia
TIMOTHY J. WALZ, Minnesota           CHARLES W. BOUSTANY, Jr., 
HEATH SHULER, North Carolina         Louisiana
MICHAEL A. ACURI, New York           JEAN SCHMIDT, Ohio
HARRY E. MITCHELL, Arizona           CANDICE S. MILLER, Michigan
CHRISTOPHER P. CARNEY, Pennsylvania  THELMA D. DRAKE, Virginia
JOHN J. HALL, New York               MARY FALLIN, Oklahoma
STEVE KAGEN, Wisconsin               VERN BUCHANAN, Florida
STEVE COHEN, Tennessee
JERRY McNERNEY, California
VACANCY

                                  (ii)

  


                        Subcommittee on Aviation

                 JERRY F. COSTELLO, Illinois, Chairman

BOB FILNER, California               THOMAS E. PETRI, Wisconsin
LEONARD L. BOSWELL, Iowa             HOWARD COBLE, North Carolina
RICK LARSEN, Washington              JOHN J. DUNCAN, Jr., Tennessee
RUSS CARNAHAN, Missouri              VERNON J. EHLERS, Michigan
JOHN T. SALAZAR, Colorado            STEVEN C. LaTOURETTE, Ohio
DANIEL LIPINSKI, Illinois            FRANK A. LoBIONDO, New Jersey
NICK LAMPSON, Texas                  JERRY MORAN, Kansas
ZACHARY T. SPACE, Ohio               ROBIN HAYES, North Carolina
BRUCE L. BRALEY, Iowa                SAM GRAVES, Missouri
HARRY E. MITCHELL, Arizona           JOHN BOOZMAN, Arkansas
JOHN J. HALL, New York               SHELLEY MOORE CAPITO, West 
STEVE KAGEN, Wisconsin               Virginia
STEVE COHEN, Tennessee               JIM GERLACH, Pennsylvania
NICK J. RAHALL, II, West Virginia    MARIO DIAZ-BALART, Florida
PETER A. DeFAZIO, Oregon             CHARLES W. DENT, Pennsylvania
ELEANOR HOLMES NORTON, District of   TED POE, Texas
Columbia                             DAVID G. REICHERT, Washington
CORRINE BROWN, Florida               CONNIE MACK, Florida
EDDIE BERNICE JOHNSON, Texas         JOHN R. `RANDY' KUHL, Jr., New 
ELLEN O. TAUSCHER, California        York
TIM HOLDEN, Pennsylvania             LYNN A WESTMORELAND, Georgia
MICHAEL E. CAPUANO, Massachusetts    MARY FALLIN, Oklahoma
DORIS O. MATSUI, California          VERN BUCHANAN, Florida
MAZIE K. HIRONO, Hawaii              JOHN L. MICA, Florida
VACANCY                                (Ex Officio)
JAMES L. OBERSTAR, Minnesota
  (Ex Officio)

                                 (iii)

























                                CONTENTS

                                                                   Page
Summary of Subject Matter........................................    vi

                               TESTIMONY

Courtney, Mark F., A.A.E., Airport Director, Lynchburg Regional 
  Airport........................................................    26
Dillingham, Gerald L. Ph.D, Director, Physical Infrastructure 
  Issues, Government Accountability Office.......................     8
Edwards, Jr., David N., A.A.E., Airport Director, Asheville 
  Regional Airport...............................................    26
Everett, Hon. Terry, a Representative in Congress from the State 
  of Alabama.....................................................     5
Grierson, Robert A., A.A.E., Airport Manager, Dubuque Regional 
  Airport........................................................    26
Hansell, Hon. Bill, Commissioner, Umatilla County, Oregon........    26
Malarkey, Faye, Vice President, Regional Affairs, Regional 
  Airline Association............................................    26
Reynolds, Michael W., Deputy Assistant Secretary for Aviation and 
  International Affairs, U.S. Department of Transportation.......     8
Thompson, Hon. Mike, a Representative in Congress from the State 
  of California..................................................     5

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Braley, Hon. Bruce L., of Iowa...................................    41
Costello, Hon. Jerry F., of Illinois.............................    44
Coble, Hon. Howard, of North Carolina............................    50
Matsui, Hon. Doris O., of California.............................    51
Mitchell, Hon. Harry E., of Arizona..............................    52
Oberstar, Hon. James L., of Minnesota............................    54
Salazar, Hon. John T., of Colorado...............................    59

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Courtney, Mark F.................................................    62
Dillingham, Gerald L.............................................    91
Edwards, Jr., David N............................................   142
Everett, Hon. Terry..............................................   149
Grierson, Robert A...............................................   231
Hansell, Hon. Bill...............................................   236
Malarkey, Faye...................................................   241
Reynolds, Michael W..............................................   250
Thompson, Hon. Mike..............................................   259

                       SUBMISSION FOR THE RECORD

Courtney, Mark F., A.A.E., Airport Director, Lynchburg Regional 
  Airport, Presentation on 2002 Small Community Air Service 
  Development Program............................................    69
Dillingham, Gerald L. Ph.D, Director, Physical Infrastructure 
  Issues, Government Accountability Office, Map of Locations of 
  Communities Receiving Essential Air Service Subsidies and Small 
  Community Air Service Grants...................................   141
Everett, Hon. Terry, a Representative in Congress from the State 
  of Alabama:

  Graph of Enplanements - Dothan Regional Airport................   153
  Constituent Letters to the Congressman.........................   154

                         ADDITION TO THE RECORD

Airport Minority Advisory Council, William A. Kirk, General 
  Counsel, Written Statement.....................................   262
Alaska Air Group, Bill Ayer, President and CEO, Written Statement   303

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


   HEARING ON ESSENTIAL AIR SERVICE AND SMALL COMMUNITY AIR SERVICE 
                          DEVELOPMENT PROGRAMS

                              ----------                              


                       Wednesday, April 25, 2007,

                  House of Representatives,
    Committee on Transportation and Infrastructure,
                                   Subcommittee on Aviation
                                                    Washington, DC.
    The committee met, pursuant to call, at 2:00 p.m., in Room 
2167, Rayburn House Office Building, the Honorable Jerry F. 
Costello [chair of the committee] presiding.
    Mr. Costello. The Subcommittee will come to order.
    The Chair will ask all members, staff and everyone to turn 
their electronic devices off or on vibrate.
    The Subcommittee is meeting today to hear testimony on the 
Essential Air Service Program and the Small Community Air 
Service Development Program.
    I will give my opening statement and then recognize the 
Ranking Member to give his opening statement. We welcome 
everyone here today at our Subcommittee hearing on the 
Essential Air Service and the Small Community Air Service 
Development Program.
    As a long-time supporter of these programs, I believe that 
connecting small communities to the national air transportation 
system is vitally important for the local communities and 
should continue to be of national interest. The EAS was created 
in 1978 as part of the Airline Deregulation Act. It was 
designed to ensure that small communities did not lose their 
air service.
    The EAS program was to last for only 10 years. However, it 
was renewed for another 10 years in 1987 and was made permanent 
in 1996. There is widespread support in Congress for this 
program and for attempting to obtain more service to smaller 
communities. It is important that people who live in small 
communities have access to the national air transportation 
system, and EAS ensures this service, by keeping the cost of 
rural air service from becoming prohibitive to the consumer.
    I was disappointed in the Administration's fiscal year 2008 
budget, which provided only $50 million for the EAS program, 
$77 million less than authorized by Congress and almost $60 
million less than provided in the fiscal year 2007 continuing 
resolution. If the Administration's budget proposal was adopted 
by the Congress, almost half of the communities that receive 
EAS funding would be dropped from the program.
    In its FAA reauthorization proposal, the Administration 
also proposes to freeze the program at the status quo and limit 
EAS funding to $50 million per year, which is insufficient to 
meet the current needs. I strongly oppose freezing the program 
or limiting funding to $50 million per year. Small towns and 
rural areas rely on reliable air transportation to attract and 
retain businesses. Limiting essential air service will 
effectively cut many of these communities off from our air 
transportation network. I cannot and will not support chipping 
away at important rural air transportation service.
    In previous Subcommittee hearings, some have suggested 
adjusting the $200 per passenger subsidy cap to account for 
inflation since it has not been adjusted since the cap was 
first proposed by the Department of Transportation in 1989. I 
am interested in hearing from the GAO and other witnesses on 
this proposal.
    Another program of importance to small and rural 
communities is the Small Community Air Service Development 
Program. While this program is less than 10 years old, it has 
been very well received by small communities and demand for 
funding has far exceeded funds available for the program.
    From my experience with the program, it focuses on 
improvements at individual airports by allocating resources 
directly to those who are most familiar with their needs: the 
local communities. It is my understanding that the GAO's review 
of the program found that the results were mixed. I am 
interested in hearing from our witnesses on further ways to 
improve and maximize benefits from the program.
    Rural airports are an economic lifeline for small 
communities, encouraging business investment and creating 
opportunities for economic growth in the communities they 
serve. We must continue our commitment to the EAS and the SCASD 
programs.
    With that, I will recognize the Ranking Member of the 
Subcommittee, Mr Petri, for any opening statement that he may 
have, and would ask unanimous consent at this time to allow two 
weeks for all members to revise and extend their remarks and to 
permit the submission of additional statements and materials by 
members.
    Without objection, Mr. Petri is recognized.
    Mr. Petri. Thank you very much, Mr. Chairman.
    As you pointed out, today's hearing will focus on air 
service to small communities. Air service is the economic 
lifeblood of our Nation. It keeps communities, businesses and 
families connected over great distances. Since deregulation, 
the annual number of commercial air travelers has grown by 137 
percent to 740 million passengers in 2006. Overall, airline 
deregulation has brought better service and lower prices to the 
majority of communities around this Country.
    Unfortunately, many small and medium size communities 
located throughout the Nation have not seen the benefits of 
deregulation. They have struggled to obtain and retain 
commercial air passenger service. The few communities that are 
large enough to sustain a base level of service have been 
unable to attract multiple carriers to provide consumer choice 
or low fare competition. Since 9/11, the airline industry, as 
we all know, has suffered staggering financial losses. In the 
process, airlines have taken steps to cut costs and reduce 
capacity, which often includes reducing or eliminating service 
to the areas that can least afford to lose it.
    Fortunately, the airlines are slowly returning to 
profitability. I hope that this change in the marketplace will 
result in greater service to small communities.
    Witnesses we have before us today will share their views of 
the essential air service and small community air service 
development programs. Some of the witnesses have been involved 
in innovative programs to help stimulate air carrier service 
and strengthen passenger demand. I look forward to hearing 
about their experiences.
    I am also interested in the witnesses' thoughts about the 
potential impact of very light jets and air taxis on the 
provision of air service to rural communities.
    So I thank you all for participating, and particularly 
would like to welcome our distinguished colleagues from Alabama 
and California, Terry Everett and Mike Thompson. I yield back, 
Mr. Chairman.
    Mr. Costello. The Chair thanks the gentleman, and 
recognizes the gentleman from Oregon, Mr. DeFazio, for his 
opening statement or any comments.
    Mr. DeFazio. Thank you, Mr. Chairman. I will be brief.
    I heartily endorse the sentiments expressed both by you and 
the Ranking Member. I think that the key question that 
confronts the Committee now, as it has in the past, is in a 
deregulated environment, are we going to move toward a system 
where basically most people in America who live outside of a 
major hub airport have to drive for hours to access air 
service. I don't think that is an acceptable future for the 
Country, for our small and mid-size communities, in the 
deregulated environment. It is going to require Government 
intervention, and Government intervention in this case with 
these two programs I think can be improved upon.
    I look forward to hearing from the witnesses and gathering 
suggestions on how we might enhance air service into smaller 
communities and not just fight a rear guard action on these 
existing programs.
    Mr. Costello. The Chair thanks the gentleman and recognizes 
the gentleman from Iowa, Mr. Braley, for any opening statement 
or comments he may have.
    Mr. Braley. Thank you, Mr. Chairman, and thank you for 
holding this hearing on the Essential Air Service Program and 
the Small Community Air Service Development Program. I hope to 
hear today how these two programs can continue to assist small 
and rural airports.
    Growing up in a small town of 1,500 that had a general 
aviation airport and knowing how important it was to the 
lifeblood of my community, it is very important as I go forward 
in my work here on behalf of my constituents in Iowa's First 
District, my home State of Iowa has benefitted tremendously 
from both of these programs, thanks to the coordination between 
the airports, airlines, communities and Federal Government.
    The Small Community Air Program has been a particular 
benefit and has allowed Iowa air passengers greater prices and 
flexibility in their air fares. I believe the Small Community 
Air Program is essential to ensuring that small and rural 
communities have access to our Nation's air transportation 
network. As air traffic suffered in the wakes of the attacks of 
September 11th, small and rural airports felt a tremendous 
impact. When airlines costs go up and enplanements go down, the 
airlines narrow their focus on urban areas. While I understand 
the business principles behind these practices, I also 
understand that there are a lot of families and businesspeople 
in Iowa who need convenient access to air travel.
    The Small Community Air Program is a way to remedy this 
problem, by incentivizing air service to small communities. I 
strongly oppose the Administration's request as it relates to 
the Small Community Air Program. I feel that this program is 
highly valuable to America's heartland and I support 
reauthorization of the program. The economic survival of many 
small communities depends on access to air travel. This access 
to air travel depends on the viability of the small community 
air program.
    I have invited a resident of Dubuque, Iowa to share with us 
his success story with the Small Community Air Program. Mr. Bob 
Grierson is the Airport Manager at Dubuque Regional Airport and 
has seen first-hand how this program provides direct benefits 
to communities. I look forward to his testimony and I thank him 
and the rest of the witnesses for testifying today.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you.
    The Chair now recognizes the gentlelady from the District 
of Columbia, Ms. Norton.
    Ms. Norton. Well, Mr. Chairman, understand that I am a big 
city girl, so I won't take much of your time. But I do want to 
say why I think this a very important hearing and 
reauthorization of the EAS program is also of great importance 
to the entire Congress. After all, I have seen even here and in 
larger cities how the current condition of the airlines makes 
them clamp down on service whenever possible. Everyone knows 
that small and rural communities would be easy targets without 
intervention. They need our protection or they will simply be 
cut down and cut off.
    I identify with small and rural communities in another way, 
because I have been there in the worst way, charter service was 
cut off in the District of Columbia for more than four years. 
To the credit of this Committee, in the strongest bipartisan 
way, it was finally opened, but only after every other airport 
in the United States had been opened and only after the 
Chairman and--this is in the last Congress--the Ranking Member 
took the stick to the TSA.
    In order to do so, we even had an amendment in their 
reauthorization, they ignored it. Chairman Young had to 
threaten to hold people in contempt. Finally it was started, 
but Mr. Chairman, it was started in a way that says everything 
about how far we have gotten after 9/11. It was started in a 
way that makes it close to impossible to even want to come in 
here on charter service. We can't do any better than to require 
for very small planes to have armed guards. What? Should their 
guns be drawn? We had better make sure these regulations go far 
enough. Armed guards, if you come in with an airplane, you have 
to stop at some gateway airport. What do they do then, frisk 
you again after frisking you at the first place? I would think 
we would be the laughingstock of the world if this were better 
known.
    Mr. Chairman, at a later date, I am going to ask if a 
hearing can be held on the conditions under which people can 
fly in here. More than my complaints, sir, you have three or 
four members of this Committee who have been driven apoplectic 
because they fly small airplanes. I think they should be seen 
as proxies or representatives of those who have now even still 
been kept from coming into the Nation's capital, because TSA 
and the Department of Homeland Security haven't been able to 
figure it out after four years. Woe be unto us if it has taken 
them this long and if this is their remedy. I think they can do 
better if we press them just as the Committee pressed them in 
order to get the airport open in the first place.
    I thank you very much, Mr. Chairman.
    Mr. Costello. The Chair thanks the gentlelady. We would be 
happy to work with you and your staff on attempting to schedule 
a hearing.
    If there are no other opening statements or comments from 
members, we will move to our first panel, which of course will 
be to hear from our two colleagues, Congressman Terry Everett, 
from Alabama's Second District and Congressman Mike Thompson 
from California's First District, who testified before the 
Subcommittee just last week.
    The Chair at this time would recognize our colleague, 
Congressman Terry Everett.

 TESTIMONY OF THE HONORABLE TERRY EVERETT, A REPRESENTATIVE IN 
    CONGRESS FROM THE STATE OF ALABAMA; THE HONORABLE MIKE 
   THOMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
                           CALIFORNIA

    Mr. Everett. Thank you, Chairman Costello, Ranking Member 
Petri.
    I would like to begin by thanking you for allowing me to 
appear here today. The issue of rural air service is important 
to me, and it is important one which affects millions of 
Americans. As many of my colleagues from rural and small 
communities across the Country can attest, the weekly flights 
to and from Washington can be a trying experience. The many 
inconveniences associated with these flights are also 
experienced by our constituents.
    The Essential Air Service and Small Community Air Service 
Development programs seek to address the problems associated 
with rural air service by providing assistance to small 
communities across the Country. While southeast Alabama does 
not have a community served by EAS programs, two airports in 
the Second District have been recipients of the Small Community 
grant programs. These grants have bene helpful to my district.
    In 2003, Dothan, Alabama received a Small Community grant. 
Presently, Atlanta Southeast Airlines, or ASA, is the only 
airline which provides service into Dothan. The Dothan airport 
used the grant to develop a marketing program to increase 
enplanements, a program that was really very successful. I will 
ask that this record of that program be made a part of the 
record, please.
    Mr. Costello. Without objection, so ordered.
    Mr. Everett. In 2005, Montgomery, Alabama also received a 
small community grant to expand air services in the State, 
though it has not yet been able to spend any of the money 
allocated. The grant was awarded to increase service between 
Montgomery and Detroit. Under the terms of the grant, the 
Montgomery Airport Authority would use the money to have a 
route operated by Northwest Airlines between Montgomery and 
Detroit. However, Northwest Airlines declared bankruptcy 
shortly after the grant was awarded in 2005. As a result, all 
new plans for expansion were frozen, because the proposed 
direct route between Montgomery and Detroit would be served by 
Northwest Airlines.
    Since they are in bankruptcy, when they applied to, the 
Montgomery Airport Authority applied to be allowed to change 
the grant to another airline, it was informed that the grant 
was awarded to the airport in order to expand services for 
Northwest Airlines. Montgomery said it would like to expend the 
funds on a new purpose, but it would have to submit a new 
application.
    While a Small Community grant program provides much-needed 
assistance to provide air service in southeast Alabama, there 
are several problems which are not addressed by these programs. 
I would like to bring some of them to your attention. Air 
service to small and medium size communities, like Dothan and 
Montgomery, are left at the whim of corporate airlines, whose 
neglect oftentimes results in lengthy delays and cancellations. 
This service impacts both business travelers and families, and 
impedes the ability of the communities to attract and retain 
economic development.
    As I mentioned earlier, Dothan is served by only one 
airline, ASA. According to their own statistics, ASA flights 
from Dothan to Atlanta are delayed 50 percent of the time. It 
is the only location to which ASA flies from Dothan.
    In addition, ASA flights from Atlanta to Dothan are delayed 
70 percent of the time, that is right, 7 out of 10 flights 
leaving Atlanta to Dothan are delayed. This record has led 
Dothan residents to refer to ASA as the Accidentally Scheduled 
Airlines.
    I was particularly interested in comments of both the 
Chairman and the Ranking Member on how important it is for 
rural America and small towns to have airline service. But I 
tell you, I really fear that things are going to happen in a 
negative way if a lot of these schedules are allowed to 
continue, not only the delay, but the possibility of price 
increases.
    Let me real quickly just say that I would like to submit 
these e-mails I received of complaints from my constituents for 
the record, and read one quick paragraph. This is toward price 
schedule, rather than delays. This is from a Mr. Kevin Henson, 
Dothan, Alabama. It says, for example, in early November, ``I 
went online to book air travel to Las Vegas for a February 
leadership convention. A seat from Dothan to Las Vegas through 
Atlanta was going to cost just over $1,700. Having just moved 
from Fort Walton Beach, I compared their price for their 
airport and found the same ticket for just over $300.''
    That is a $1,400 difference. Fort Walton Beach is only 120 
miles from Dothan, Alabama.
    So I again thank you, Mr. Chairman and Ranking Member, for 
allowing me to testify here today. I really do fear that unless 
we do something that we are going to see small airline service 
in rural America and to small cities disappear. Thank you 
again.
    Mr. Costello. We thank you for your testimony, and the e-
mail will be inserted in the record without objection.
    Mr. Costello. At this time, the Chair recognizes the 
gentleman from California, Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman, Ranking Member Petri 
and other Committee members. I appreciate the opportunity to 
come back. I think I have spoken before the Committee more in 
the last two weeks than I did when I was on the Committee. I 
appreciate your indulgence.
    I too support the EAS programs and concur with everything 
that the Chair and the Ranking Member and just about everyone 
else has said. These programs are incredibly important to rural 
communities and to the people who live in this rural 
communities. I appreciate the opportunity to be here today to 
be able to talk about a bill that I have, H.R. 237. It is a 
bill that I introduced with Mr. DeFazio.
    This bill specifically helps EAS programs in areas that are 
in worse shape than some others. As everyone knows, airports, 
small ones, big ones and even private ones are able to get 
Government grants. The problem that some of the EAS airports 
have is they can't come up with their matching portion of the 
grant. As we know, we recognized this as a problem after 
September 11th, because we reduced it down from 10 percent to 5 
percent.
    But even 5 percent is a heavy lift for some of these rural 
communities. So what this bill does, it exempts from their 
share of cost if they meet a list of very specific and very 
demanding criteria. The criteria are, the unemployment rate in 
that area, and this is in the most recent 24 month period, must 
be at least 1 percent greater than the national average, or the 
per capita income is 80 percent or less than the national 
average, or a special need occurs. This could be a natural 
disaster, a human disaster, a military base closure, something 
that really limits the community's ability to generate these 
funds.
    This would provide important help for these communities. 
And I don't think there is anywhere and there are a number of 
airports that fall into this category. As a matter of fact, 
there are three of them on this Committee, other than the ones, 
the area that Mr. DeFazio and I represent.
    But I think our area represents this very, very well. If 
you look at the northernmost part of my district, in Del Norte 
County, which is impacted even more, because about 80 percent 
of the property up there is owned by the Government and 
generates no tax base. And Mr. DeFazio's Brookings part of 
Oregon, these are areas that are trying to grow economically. 
They have great demands for tourism. It is just impossible to 
get there from here. If it weren't for the air service, it 
would be real tough to conduct any business there. It would be 
tough to get medical help if you need it, in the case of a 
public safety issue. It would be tough to get out of that area.
    So a good quality and expanded airport becomes even more 
necessary. If this bill were adopted, it would be much easier 
to do that, and it would benefit the communities all around 
them a great deal and allow them to grow and expand 
economically.
    So I thank you for the opportunity and I look forward to 
seeing the bill on suspension.
    [Laughter.]
    Mr. Costello. I don't know who else caught that, but on the 
suspension calendar.
    The Chair thanks both Congressman Everett and Congressman 
Thompson for your testimony. It is customary, due to our 
schedules, that we allow you to leave without question at this 
time. We thank you for your testimony and look forward to 
working with you on your bill.
    The Chair would ask the second panel to come forward, 
please. I will introduce the witnesses as they are coming to 
the table.
    Faye Malarkey--I am sorry. We almost left out Mr. 
Dillingham, who is a regular witness before the Committee. Dr. 
Gerald Dillingham, who is the Director of Physical 
Infrastructure Issues with the Government Accountability 
Office; Mr. Michael Reynolds, the Deputy Assistant Secretary 
for Aviation and International Affairs at the Department of 
Transportation.
    Gentlemen, if you are prepared to move forward with your 
testimony, the Chair would ask both of you to summarize your 
testimony. Your full statement will be entered into the record. 
The Chair would ask that you summarize your testimony in five 
minutes or so. Then members will have the opportunity to ask 
questions.
    Dr. Dillingham, you are recognized at this time.

  TESTIMONY OF GERALD L. DILLINGHAM, PH.D, DIRECTOR, PHYSICAL 
   INFRASTRUCTURE ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE; 
 MICHAEL W. REYNOLDS, DEPUTY ASSISTANT SECRETARY FOR AVIATION 
  AND INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Dillingham. Thank you, Chairman Costello, Mr. Petri, 
members of the Subcommittee.
    My written statement that was submitted for the record 
discusses some options that the DOT and the Congress could 
consider for reforming the EAS and the Small Community Air 
Service Development Programs. To provide some context for that 
discussion, the statement first discusses what our studies have 
shown about the development and impact of the two programs.
    With regard to the EAS program, the principal impact of the 
EAS program has been consistent with its legislative objective 
of providing Federal subsidies for eligible communities to 
ensure that they continue to have access to air services. Our 
studies have shown that over the last decade, the number of 
communities receiving subsidized service has increased 
significantly. Federal funding for the program has also risen 
by more than four-fold, and the average subsidy per community 
and per passenger has increased substantially.
    It has also been argued that the program is not providing 
the quality of services or fares to attract local passenger 
traffic. This argument tends to be based on the low number of 
passengers using the service and what is called leakage to 
larger, nearby airports. Our work further suggests that if the 
Federal subsidies were removed, air services would end at many 
of these communities.
    Mr. Chairman and members of the Subcommittee, as you know, 
the underlying EAS statutes have remained fundamentally 
unchanged since their inception nearly 30 years ago, while at 
the same time the aviation landscape has changed dramatically, 
especially with respect to the development of the hub and spoke 
systems, the growth of regional jets and the expansion of low 
cost carrier services. These circumstances suggest that there 
are reasons to consider reforming the programs.
    With regard to the Small Community program, during the five 
years that the program has been operating, there have been 182 
grants awarded. To date, 74 grants or about 40 percent of those 
grants, have been completed. When we conducted our review of 
the program in late 2005, 23 grants had been completed. 
Although our analysis has not provided a comprehensive 
evaluation of the program, it does provide a preliminary look 
at some of the program's outcomes.
    For those completed grants, we found that the majority of 
those communities reported service or fare improvements, as 
well as an increase in the number of enplanements. We also 
found that the majority of the communities reported that the 
improvements were still in place after the grant was completed, 
and nearly 50 percent of those improvements were self-
sustaining.
    Now I want to turn to a discussion of potential reforms and 
options for these two programs. Our written testimony provides 
in some detail various legislative options to reform the EAS 
program. For example, the current EAS statute requires a one 
size fits all approach as virtually all communities are 
guaranteed two round trips a day with a 15 seat or larger 
aircraft.
    There are clearly some communities that are receiving 
subsidized services that are within easy driving distance of 
more frequent and less expensive air service. Data shows that 
passengers are especially willing to drive a couple of hours to 
a nearby major hub with a low fare carrier, such as JetBlue and 
Southwest. Also, some communities' traffic data show that they 
do not need a 15 seat or larger aircraft to provide enough 
capacity to meet market demands.
    Regarding the Small Community Air Service program, I 
understand that DOT has recently begun to implement our 
recommendation from 2005 to evaluate a larger sample of 
completed programs than was available to us at that time. This 
evaluation should provide some useful information to the 
Congress and DOT, including identification of some additional 
lessons learned from successful projects.
    Mr. Chairman and members of the Subcommittee, in 
conclusion, for many small communities, air service is not and 
might never be economically viable for airlines. However, in 
many cases there are limited alternative means for the 
residents of small communities to connect to the national air 
transportation system. Reforms to EAS and the Small Community 
Air Service program could incrementally improve the programs. 
But continued subsidies will likely be needed to maintain air 
service to many small and rural communities. It will be the 
Congress' weighing of priorities that will ultimately decide 
whether or not these programs will continue in their current 
form or whether other options will be pursued.
    Thank you, Mr. Chairman.
    Mr. Costello. Thank you, Dr. Dillingham.
    The Chair now recognizes Mr. Reynolds.
    Mr. Reynolds. Mr. Chairman, Ranking Member Petri, thank you 
for inviting me to this hearing.
    I appreciate the opportunity to discuss with you and the 
Subcommittee 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 these 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 overall for 
consumers, we recognize that it can create new challenges for 
some small communities. Many consumers are willing to drive 
places with a broader array of air service options, making it 
more difficult for some individual airports to sustain their 
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 these 
programs in an efficient and effective manner to account for 
such changes. All of us, including the Federal Government, as 
well as States and local communities themselves, need to 
reexamine the way we approach small community air service. 
Recognizing that Federal Government involvement in smaller 
community air service has not kept pace with the 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 
our administration of this program have not changed 
significantly since its inception nearly 30 years ago, 
notwithstanding the changes that have taken place in the 
airline industry, as Dr. Dillingham indicated. As currently 
structured, the EAS program acts only as a safety net for some 
small communities by providing threshold levels of subsidized 
service.
    The Administration has proposed changes to the EAS program 
in the current FAA reauthorization proposal, as well as in the 
latest budget request. The goal of our proposed changes is to 
focus the program's resources on the most isolated communities. 
The first change we propose is to limit eligibility to those 
EAS communities that currently receive subsidized air service. 
Second, we would rank all of the communities by their degree of 
isolation, with the most isolated being funded first until 
available funds were exhausted. Last, we are proposing a $50 
million funding level.
    It is important to note the continued growth of the EAS 
program over the last few years. In the three fiscal years 
before the terrorist attacks of September 11th, the Department 
was subsidizing service to about 100 communities and the budget 
was $50 million a year. We are now subsidizing service at 145 
communities and our budget is $109 million for fiscal year 
2007. Over time, we expect that this program will continue to 
expand if it is not reformed.
    On our other program, the Department is now in its sixth 
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 2007, funding for the program is $10 million, and 
applications for grants are due this Friday.
    Since it began, we have made many awards to communities 
throughout the Country and authorized a wide variety of 
projects seeking to address the diverse types of problems 
presented to us and to test different ideas about how to solve 
them. Over the past six years, the Department has made more 
than 180 grant awards. However, because the majority of the 
projects involve activities over a two to four year period, and 
because many communities have sought and received extensions 
for their grants, only now are some of them coming to the point 
of completion. In this regard, the Department's Inspector 
General recently began reviewing the outcomes of the projects 
that have been completed to date. We hope to have at least 
preliminary results from the IG's review in June.
    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 intermodal 
approaches, and expansion of public-private partnership 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. We look 
forward to working with you and the members of this 
Subcommittee and full committee as we continue to work toward 
these objectives.
    Thank you again. I will be happy to answer any of your 
questions.
    Mr. Costello. We thank you.
    Mr. Reynolds, I am not quite certain that I understand the 
concept of public-private partnership in dealing with these 
programs. Would you explain what you are looking at as far as a 
public-private partnership to help small communities?
    Mr. Reynolds. I think this is in the vein of the small 
communities reaching out to the businesses in their regions to 
help build understanding and awareness of the importance of the 
air service and to help promote the local air services that 
they do have, and perhaps attract air services. One of the 
criteria in the Small Community Air Service Development 
Program, one of the priorities that we give when we are judging 
applications is for communities that have engaged in public-
private partnerships. So it is just a matter of the local 
community working with local officials beyond Government 
officials, so that local businesses are involved as well.
    That is the extent of that. There is no specific idea 
regarding the private sector involvement.
    Mr. Costello. So it is outreach to the local community?
    Mr. Reynolds. That and working with the air carriers 
themselves as private sector entities.
    Mr. Costello. In reading your written testimony, you 
indicate that the EAS program is often viewed as an entitlement 
as opposed to an investment. You talk about how communities, 
instead of an investment of any time and effort, in other 
words, it is an entitlement program, the community doesn't have 
to do anything to get it, and that needs to be addressed. I 
assume that is what you are talking about, private-public 
partnership?
    Mr. Reynolds. Yes.
    Mr. Costello. Is that correct?
    Mr. Reynolds. That is correct.
    Mr. Costello. At the same time, when the Department is 
recommending in the reauthorization bill that we have built 
this private-public partnership and outreach program and 
getting the community involved, as opposed to just viewing this 
as an entitlement, we cut the program significantly, which 
according to our estimation, and no one has challenged the 
figures that we have, that it would cut at least in half the 
number of airports now that receive service under the EAS. 
Would you challenge that or is that roughly a correct figure, 
that half--is that correct?
    Mr. Reynolds. That is correct, at a $50 million funding 
level, yes.
    Mr. Costello. So we are telling these communities, we are 
going to cut you in half, and half of the airports that receive 
EAS service today will not receive it if the FAA 
reauthorization as proposed by the Administration goes through. 
But we want you to invest in your local communities by doing 
public relations.
    What are we saying to them, we are going to take away the 
money so you are left on your own and you find the money to 
provide the service? Isn't that what we are saying in the FAA's 
reauthorization proposal?
    Mr. Reynolds. I think we are just trying, as a general 
matter, to encourage communities, whether there are Federal 
dollars involved or not, whether it is the EAS program or the 
Small Community program, that the local communities need to 
become more involved in any of the air services that they have.
    Mr. Costello. I think everyone would agree with that. But 
for us to say to them, obviously they would have air service, 
if they could afford to have it. The whole purpose of the 
creation of the program was to fund EAS services in areas that 
could not afford, number one, and it is not profitable for the 
airlines to come in and provide the service. So we created this 
national program. Your agency and the Administration is 
proposing, to cut it in half but start a public relations 
program, the way I read it.
    Let me ask another question, Mr. Reynolds. Under Vision 
100, the Department of Transportation was authorized to adjust 
the subsidy paid under the EAS program to carriers if expenses 
were significantly increased. We obviously have seen a major 
increase in fuel in just the past few years.
    That discretion was never exercised by the Department, is 
that correct?
    Mr. Reynolds. Yes.
    Mr. Costello. Is there a reason why, or what are your 
thoughts concerning that?
    Mr. Reynolds. We received a couple of applications two or 
three years ago, on a couple of routes that carriers wanted the 
increased amounts of money paid under the contract. At the 
time, we did not fund that discretionarily, because we did not 
believe we had sufficient funds, if all air carriers were to 
come in, we would not have sufficient funds to do that.
    More generally, carriers already have an opportunity, if 
they are losing money, if the burden of providing that EAS 
service because of change in circumstances is so great, there 
is already a provision for them to pull out of the community 
and they can file notice to leave. When that is done it would 
trigger a rebid of service. So they could rebid at a higher 
level. Of course, they would potentially run the risk of 
another carrier coming in and offering it for a lower amount. 
But there is already an existing mechanism for carriers, if 
they are having trouble providing the service, to withdraw and 
potentially get more money under a rebidded contract.
    Mr. Costello. Dr. Dillingham, I mentioned in my opening 
remarks that some have suggested that we index the $200 per 
passenger subsidy cap under the EAS program. That has not been 
adjusted since its creation in 1989. I wonder what your 
thoughts are on the issue?
    Mr. Dillingham. Mr. Chairman, in principle, you would think 
that that is a good idea. You have a set figure that has been 
in place for 20 plus years. I think that the Congress and DOT 
would have to think about the potential consequences of making 
that kind of adjustment. Keeping it at $200, one of the impacts 
of that is that as airline costs grow, it has a tendency to 
push some communities out of the program, because they go over 
the $200 cap. Now, that means that the program gets smaller.
    On the other hand, if you sort of index it, there is a 
possibility that the program will maintain the communities that 
are in it, but also expand as well, because they can meet that 
$300. So it is in principle a good thing. One has to think 
about the consequences of it, how the Congress or DOT wants 
this to play out.
    Mr. Costello. Thank you.
    Before the Chair recognizes the Ranking Member for any 
questions that he may have, I would ask that pursuant to Rule 
3(d) of the Rules of the Committee on Transportation and 
Infrastructure, I ask unanimous consent for the gentleman from 
North Carolina, Congressman Shuler, a member of the full 
Committee, to participate in today's Aviation Subcommittee 
hearing.
    Without objection, so ordered.
    The Chair recognizes the Ranking Member, Mr. Petri.
    Mr. Petri. Thank you very much.
    I have a couple of questions. One was requested by my 
colleague from North Carolina, Howard Coble. I think it may 
have been because of a problem he encountered in his own 
district. Recently we have learned that some EAS and Small 
Community Air Service Development Program airports that have 
successfully attracted air service ran into a problem when the 
Transportation Security Administration refused to provide 
screening services. So they go ahead and they get their 
service, but they can't actually do it, I guess, because of not 
meeting security guidelines.
    Are you aware of that issue? Is there anything we can do to 
address it?
    Mr. Reynolds. Thank you, Ranking Member Petri. I am aware 
of the issue. Of course, the TSA is no longer part of the 
Department of Transportation. We provide our grants and 
clearly, this is an issue I think maybe a few of the 
communities have encountered.
    I certainly can't speak for TSA and their ability or 
inability to provide screening where it currently doesn't 
exist, if a community has been able to do it. We certainly are 
happy to talk to the TSA about it. I know that they have their 
own issues on the budget front as well. We are happy to try and 
work with them, if that may help. But it is not anything that 
has been brought to our attention as a major problem. So I am 
not sure of anything we could do directly at the Department of 
Transportation.
    Mr. Petri. There are two other questions for either of you, 
if you have any thoughts on it. One has to do with what 
Representative Everett mentioned. I experienced years ago in my 
own district in Wisconsin, where you have someone who is 
providing, I guess, essential air service, and the service is 
not exemplary. In his case, he said 70 percent were not on 
time. In our case, they would take off from another airport and 
decide to land or not land, depending on how many tickets they 
sold at the other airport and this sort of thing. Or at least 
that was our feeling. The flights never seemed to actually 
arrive on many days. Are there things we could do about 
structuring the program so that we could have some guidelines 
as to level of service or something and then reopen it for 
other bidders?
    Then the second question has to do with the change in 
aviation. I know there have been small planes for a long time. 
But there is a huge growth now in this new intermediate market, 
they call it air taxis or whatever_these small jets that most 
businesspeople are very enthusiastic about, because they think 
it will provide real access for the business traveler to many 
small communities. I suspect a lot of fixed-base operators are 
thinking of leasing or having access to those planes so that 
they can be available.
    So what is essential air service? Would it be better to 
open up the program to provide people with the option of 
helping put deals together to provide this type of service in 
their communities if it would help economic development rather 
than something for some people going on vacation somewhere? 
This is very nice, but they could probably do it out of an 
airport 50 or 60 miles away and it wouldn't have the impact on 
business development in that particular community that it is 
targeting. Should we make the subsidy available for people who 
need it to have very efficient travel, because of getting parts 
to a factory or because of having to have repair people there 
or other business needs in an otherwise rural area? Do either 
of you have any comments on either of those questions? I 
certainly would appreciate it.
    Mr. Reynolds. I think we both have some thoughts on that.
    I will let Dr. Dillingham go first.
    Mr. Dillingham. Mr. Petri, in regard to air taxis and the 
extent to which air taxis can be a mechanism for providing 
services, certainly I think that is a possibility. I think that 
in the course of doing our work we found at least one community 
in the Small Community Development program that had in fact 
gotten a grant to develop an on-demand service. So we know that 
is possible.
    On the other side of the coin, though, a lot of small 
communities prefer to have scheduled air service as part of 
that economic development emphasis. If you wanted to do this 
under the EAS program, then there would have to be some change 
in the rules in terms of air taxis. Because the EAS program 
prescribes 2 a day, 15 seats or larger, which is not what an 
air taxi ordinarily is. But certainly, the possibility is 
there.
    Mr. Reynolds. Yes, Congressman Petri, to your first 
question about some of the service quality issues, the 
contracts under EAS do come up every two years. One of the 
things that does weigh into consideration when we are looking 
at the bids is the community input. So clearly if a community 
is very dissatisfied with the quality of the service, that can 
influence the decision of whom the Department ultimately 
chooses.
    Secondly, our office is frequently in contact with these 
communities on a regular basis. When these problems do come up, 
we do try and intercede on their behalf to some degree and work 
with the carriers. If the schedules are truly imbalanced, we 
try and work again with the carrier to see if they can provide 
more reasonable schedules.
    To your second question, yes, I think that very light jets, 
the new breed of aircraft that are becoming available, present 
a lot of great opportunities in the future. They are just now 
coming online. So it is a little early to say what impact they 
will have.
    But I think that the more service options there are out 
there, the more service providers, the different types of 
equipment, the more possibilities you will have to serve 
businesses and others in those communities. It may be that a 
small jet, a few times a day, is better and more economical 
than two flights under the current system, or that it is more 
of an on demand. We don't have traffic today, or the people get 
together and decide they are going to travel several days a 
week.
    I think that does present possibilities, and there is a 
pilot program that unfortunately no one has subscribed to in 
the law that would allow that sort of thing to happen. Maybe 
with VLJs coming online, that may be a greater possibility.
    Mr. Costello. Dr. Dillingham, you wanted to comment?
    Mr. Dillingham. Yes, just as a footnote, I wanted to remind 
Mr. Petri that we have a study underway for you and the 
Chairman looking at the VLJs. One of the issues that we are 
trying to understand is how can this fit into the current 
national airspace system and where can we make it a useful 
addition. We hope to have that study to you and those findings 
before the end of the year.
    Mr. Costello. Thank you.
    The Chair recognizes the gentleman from Oregon, Mr. 
DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman.
    I am a bit puzzled by the position of the Administration in 
this matter. We are saying we can't afford $50 million to serve 
approximately 50 communities. First off, with your new standard 
here, applying the limited budgetary amount, you have talked 
about cutting the program in half, have you drawn up a list, 
given your new criteria, of what communities would lose their 
air service?
    Mr. Reynolds. Yes, we know which communities would be 
involved.
    Mr. DeFazio. Could we have that list, please?
    Mr. Reynolds. Absolutely.
    Mr. DeFazio. We would like to have that list. Mr. Chairman, 
I think that would be useful for the Committee.
    But then to the point, I was just out at Seattle, saw their 
wonderful new runway project. Do you know how much Federal 
money went into that, AIP?
    Mr. Reynolds. I am not familiar off-hand with that. I know 
it is a significant sum.
    Mr. DeFazio. I think it was many hundreds of millions of 
dollars. So we are going to help out the people of Seattle or 
the people of Chicago or the people of ``name the airport'' 
with AIP funds. But somehow, there are 50 communities, we are 
just going to cut them off? I just find that to be very 
shortsighted. If you are going to support deregulation and 
continue deregulation, and cut off the communities, then you 
are abandoning the idea of an integrated national system, 
universal access to an integrated national system of air 
transport.
    Is that the position of the Administration?
    Mr. Reynolds. I think the position is to focus the limited 
resources that we do have, when you are talking about private 
service providers versus public infrastructure, that it has 
been 30 years since deregulation. The decision was to let the 
market work its way with air services. It has been 30 years 
since deregulation. It was originally----
    Mr. DeFazio. So your answer is yes, that is the position of 
the Administration, those people should get in their cars and 
start driving a really long way to the airport.
    Dr. Dillingham, what is the term of an EAS contract, how 
many year?
    Mr. Dillingham. I believe it is two years. Yes, two years.
    Mr. DeFazio. Do you believe that we might be able to let a 
more competitive, have more competition for contracts if we 
allowed a longer term?
    Mr. Dillingham. Yes, sir, the logic says that that would be 
the case.
    Mr. DeFazio. So is the Administration proposing that 
perhaps to save money in the EAS program, get more competition 
in there, we would increase the term?
    Mr. Reynolds. Well, increasing the term would reduce the 
frequency of competitors offering different services.
    Mr. DeFazio. But you might get a lower bid. I have had it 
put to me by a number of regional providers that if they were 
guaranteed more than two years, and had a prospect of being 
able to build a market, that they might be able to, the costs 
and subsidies required could be less.
    Mr. Reynolds. To be honest, I don't know that we have 
specifically had a position on whether it could possibly go 
longer than that. Off-hand, I don't know of any reason why we 
would be fundamentally opposed to that. I think it just 
requires a little more thought and study. Of course, again, it 
helps keep more competition if people can more frequently bid 
on the service. Yes, there is perhaps argument to be made on 
behalf of longer term stability. Of course, costs and a lot of 
other things may change in the interim and the carrier could 
find itself held in for a longer period and be unhappy about 
the longer period as well. It is a balancing issue.
    Mr. DeFazio. Right. We could allow, they could bid, we 
could say we will allow contracts up to five years, if you want 
to bid on a five year contract, if you think you have enough 
hedging for your fuel costs or whatever else out there, that 
you can make a predictable bid for five years, then go to it. 
If you want to bid a shorter term, no less than two, no more 
than five. I just have had credible operators within the 
industry say to me that they would look at other contracts than 
what they currently have if they could be assured of a longer 
term. Otherwise they are not going to make the investment in 
the aircraft.
    Mr. Reynolds. I think we are open to the idea at this point 
and would be happy to think on it further.
    Mr. DeFazio. Okay, thank you. Thank you, Mr. Chairman.
    Mr. Costello. I thank the gentleman.
    The Chair recognizes at this time the gentleman from 
Arkansas, Mr. Boozman.
    Mr. Boozman. Thank you very much, Mr. Chairman.
    As somebody from a rural State, certainly this is something 
that really does concern us and I am very interested in. The 
question I would have is, what is the most important thing that 
we can do to help our small airports? What would you say that 
we need to be doing to bolster these?
    Mr. Reynolds. That is a good question. It is very 
difficult. On and off for the last 12 years, I have been 
dealing with these issues directly and indirectly. There is 
clearly no silver bullet to improving services in a lot of 
smaller communities. Each one has its own set of circumstances.
    Again as a general matter, it is very important for local 
communities to try and become involved. Anything that can 
provide incentives for local communities, States, local 
businesses that can become involved in their local air services 
can make a big difference. People tend to sometimes take their 
air services for granted until they are diminished to a very 
low level or about to go away. Sometimes then it is too late.
    So we are happy to work with this Committee on any ideas 
that it may have going forward, through reauthorization or 
otherwise, in these areas. The Inspector General is making a 
review of our Small Community Air Service Development Program. 
There may be lessons that can be learned from that, from the 
successes as well as the failures, as to what might work for 
particular communities in terms of their involvement of time 
and resources.
    Mr. Dillingham. Mr. Boozman, we had a chance to look at a 
sample of programs when we looked at the Small Community 
programs. What we found as a general principle was, to the 
extent that the risk can be mitigated for the airlines, the 
more likely you are to have more enhanced and robust service 
and fares. The kind of risk mitigation things that seemed to 
work best were revenue guarantees or participating in a 
marketing program. Oftentimes, airlines don't have, these size 
airlines don't have the resources to conduct a marketing 
campaign for a small community. But again, as Mr. Reynolds 
said, working with the community, those kinds of things that 
mitigate risk seem to be the most useful things that can be 
done in the short term.
    Mr. Boozman. I guess along that line, it was probably three 
or four years ago, I was with a group with Congressman Mica, 
Congressman DeFazio. I was referring to our trip out west a few 
years ago. In fact, it might have been in your district where 
they talked about banking airline miles to help, they had a 
situation where they actually kind of prepaid the local 
businesses, prepaid mileage and things like that.
    Do we offer suggestions like that? Do we kind of accumulate 
best practice management like that that is made available to 
our small airports in an effort to help them?
    Mr. Reynolds. We are just now beginning to do that. Again, 
the Inspector General's review, which just began, and we hope 
to have preliminary results in a few months, we hope will offer 
a playbook perhaps, or at least a menu, an a la carte menu, if 
you will, of ideas that might work for different communities. 
Certainly travel banks of various sorts are a possibility. That 
has been explored in a few of the Small Community grants that 
we have given. Some have had more success than others. So that 
certainly is a possibility. So there may be some options there 
that can be laid out more clearly once that review is done, and 
certainly based on some of the earlier look that the GAO did at 
these grants.
    Mr. Boozman. I am very supportive of the current program. 
It does make sense, though, that regardless of what is done, 
that that type of thing would take pressure off the system. If 
we can help the smaller communities help themselves, again, it 
seems like it would be helpful.
    Thank you very much. Thank you, Mr. Chairman.
    Mr. Costello. The Chair thanks the gentleman from Arkansas.
    At this time, the Chair recognizes the gentleman from Iowa, 
Mr. Braley.
    Mr. Braley. Thank you, Mr. Chairman.
    Dr. Dillingham, Vision 100 created a number of pilot 
programs aimed at increasing the effectiveness of the EAS 
program, including the Alternate Essential Air Service pilot 
program, the Community Flexibility pilot program, the Code 
Sharing pilot program and others. Yet none of these programs 
have been used.
    Why do you think these pilot programs were not successful?
    Mr. Dillingham. The first thing I would say is, I wouldn't 
say they weren't successful. I would go with your first comment 
that in many cases, they were not used. There are a number of 
reasons that we have found that they were not used. In some 
cases, DOT announced the program and made it known to the 
communities. The communities decided for one reason or another 
that they did not want to participate in the program.
    There were a couple of cases where the programs were not 
funded. DOT decided not to fund the program. Mr. Reynolds spoke 
about one earlier in terms of the resources they had. They 
determined that from our reading of it, they wanted to fund the 
actual services that were being requested, rather than these 
programs. In one case, the Congress ordered that the program 
not be funded.
    We looked at this, because we couldn't figure this out. 
Some of the reforms that we were thinking made sense were 
included in some of these pilots programs. What we concluded 
was, we think that rather than repeal these programs as is 
being suggested in the current reauthorization, that they might 
need to be looked at and see if they can be incentivized in 
such a way that they will be useful to the small communities. 
In other words, try to find out from the communities, maybe as 
a part of the DOT IG study, I don't know whether that will be 
beyond the scope, but ask the communities why they didn't 
participate, see if there is an incentive that can be changed, 
so that the communities would be.
    For example, one of the programs said, we will give your 
community a two year grant if you will give up your EAS subsidy 
for ten years. Well, getting two for ten, communities figured 
that really wasn't a good exchange.
    So the short answer is, there are lots of reasons. But we 
think there is still some merit to looking at these programs.
    Mr. Braley. Well, I am new here, so you will have to 
forgive me. I think back in Iowa, if people were told there was 
a program that was put in place and no one utilized it, that by 
definition that program is not successful. And if you are 
talking about ways to incentive small airports from 
participating in the programs, and you are talking about things 
that could be done, I guess I am confused why that input has 
not been sought so that these programs can be tailored, so that 
they are successful.
    Mr. Dillingham. I will pass that question over to Mr. 
Reynolds, and he can ask why they did or did not check with the 
communities in terms of why they didn't participate.
    Mr. Braley. I will give him that chance. I have another 
question for you before I turn to Mr. Reynolds. One of the 
things that is not currently part of the requirements to 
participate in the EAS service plan is that you submit a 
marketing plan. One of the things I want to ask you is whether 
you believe that requiring a marketing plan would be helpful in 
increasing enplanements under the EAS program.
    Mr. Dillingham. Yes, sir, I think they would be helpful. 
When we looked at the Small Community program, it was one of 
the leading positive initiatives in terms of that program. So 
to the extent that more people know about the service and the 
fares and so forth, it has to be a positive thing.
    Mr. Braley. All right, thank you.
    Mr. Reynolds, one of your recommendations in your 
testimony, or one of the comments you made in your written 
remarks, was that the financial conditions of the network 
carriers has added further uncertainty for the regional co-
chair partners. As someone who depends on those regional co-
chair partners every time I come out here to work, and who has 
had a nightmare of personal experiences dealing with delays, 
where justifications are provided by regional co-chair partners 
at a rural airport that are inconsistent with the delay 
explanations I receive at a hub airport.
    I would like you to elaborate on your comment and talk 
about what recommendations can be made to improve that 
instability that exists.
    Mr. Reynolds. The larger instability of the major carriers 
is that they have obviously gone through a very difficult 
period since September 11th. We are starting to see some more 
positive results more broadly. I think that the better 
financial results throughout the industry are, we hope, 
certainly cutting across all sectors, including the regional 
air carriers, many of which did relatively well compared to 
their larger compatriots during the last few years.
    As to the specific issues of the customer service of the 
regional partners, certainly that is a concern. I can't speak 
to why they were given inconsistent information at different 
times. That is obviously something that is not very good for 
either's customer service, and we certainly hope and expect the 
airlines to do better in terms of the information it provides.
    In terms of a healthy, stable airline industry across the 
board, that will probably mean better healthy, stable 
relationships between the majors and the regionals, as well as 
just healthier and stabler regionals.
    Mr. Costello. The Chair thanks the gentleman and recognizes 
Ms. Norton.
    Ms. Norton. Thank you, Mr. Chairman.
    I have a question for Mr. Reynolds. Mr. Reynolds, you are 
the Deputy Assistant Secretary for Aviation. You are aware, of 
course, that this hearing is for the purpose of making 
necessary changes in the EAS program as a part of the FAA 
reauthorization. You may also be aware that this Committee, in 
the strongest bipartisan terms in the last FAA reauthorization 
put in an amendment, it was my amendment, that required that 
the necessary regulations be passed to open small charter 
service general aviation at Reagan National Airport, after 
waiting some time, certainly more than a year and I think even 
more than that. The Committee got angry, frankly. The whole 
notion of ignoring a committee, when in fact there is a 
statutory provision, seemed particularly insulting to the 
entire Committee.
    I mentioned in my opening statement that the Chairman 
threatened to hold the responsible parties in contempt. 
Thereafter, there came forward a set of regulations that cast 
real doubt upon the ability of the Department to protect the 
American people. And I say this, not only as a member of this 
Committee, but as a member of the Homeland Security Committee, 
on which I have served since it was formed.
    These regulations required a private security guard who was 
in essence the functional equivalent of an air marshal, 
carrying a gun. Someone who had to be hired to carry a gun on a 
plane, a small plane. It required that these small planes, this 
general aviation be screened twice in some cases. First, at the 
place of origin and them come down to a gateway and be screened 
again.
    These are but the two most flagrant and quite frankly, 
astonishing requirements. First, I have to ask you, if these 
requirements have been altered at all after now, what is it, 
five years, has the Department learned enough so that it can 
protect us in the ordinary course of business without such 
draconian measures?
    Mr. Reynolds. I believe the regulations you are referring 
to, if they were promulgated by the Federal Aviation 
Administration, it was probably done in close cooperation with 
the Department of Homeland Security and the Transportation 
Security Administration.
    Ms. Norton. It was done in cooperation with GSA, who I must 
tell you, had come forward earlier with some regulations. So 
they had the regulations, but had refused to publish them. But 
this occurred in the FAA reauthorization.
    Mr. Reynolds. You will have to forgive me, unfortunately I 
am not intimately familiar with this particular rulemaking, as 
it was in the Federal Aviation Administration. I am certainly 
aware of it. So I can't speak to what changes may have been 
made more recently with regard to it or what lessons may have 
been learned.
    My office tends to focus on the economic regulatory issues 
associated with the airline industry, rather than the FAA, the 
operational issues that are the purview of the FAA within the 
Department of Transportation. I would be happy to try and 
provide a written response on behalf of the Department after I 
contact the Federal Aviation Administration on your question, 
however.
    Ms. Norton. I very much appreciate that, Mr. Reynolds. May 
I ask that within 30 days we get a written response, addressed 
to the Chairman and the Ranking Member, concerning the status, 
whether there have been any changes?
    Secondly, how many planes, how much general aviation has 
flown into Reagan National since these regulations were passed, 
and any comments from the public that may be in the position of 
the agency. You heard the Chairman say that we intend to hold a 
hearing. To the extent that we can show that the agency has 
done anything except sit on this as your final answer, to 
protecting the Nation's capital when planes come in, we would 
be very pleased to know it.
    I must say, I represent the District of Columbia. I have no 
reason to want anything but the most stringent kind of 
protection for the city where I was born, where my father was 
born, my grandfather was born, where my great-grandfather was 
born. My affection for this city knows no end.
    Then I have great responsibility. So it is not likely that 
I would say that I believe, both as a member of this Committee 
and as a member of the Homeland Security Committee that the 
United States of America can do better than that. So I would 
appreciate within 30 days a letter addressed to the Chairman, 
perhaps a copy to me, and of course to the Ranking Member.
    Mr. Reynolds. I would be happy to provide that for you.
    Mr. Costello. The Chair thanks the gentlelady and 
recognizes the distinguished Chairman of the full Committee, 
Chairman Oberstar.
    Mr. Oberstar. Well, Mr. Chairman, I greatly appreciate your 
continuing work on aviation and the partnership with the 
gentleman from Wisconsin, Mr. Petri, and the continued presence 
of the gentleman from Tennessee, former chair of the 
Subcommittee. It is going to take our combined efforts to move 
this reauthorization along smartly and effectively and in 
support for the future of aviation.
    But essential to the future of aviation is essential air 
service. I would say without a shadow of a doubt that had 
essential air service language not prevailed in the 1978 
Deregulation Act, deregulation might not have occurred. It 
certainly would not have occurred in the way that it has 
happened, because there would have been way more resistance to 
the notion of taking the Government out of market entry and 
pricing, and protection of community interests.
    As it was, the Deregulation Act raised a number of concerns 
and has continued to over the years. Every time you get a 
little disruption, a hiccup of some sort, such as the problem 
with Northwest Airlines in Detroit, the problem with JetBlue 
more recently and the carriers don't seem to learn from one 
another how they need to conduct their business, there are 
repeated calls for re-regulation, get the Government back in 
the business of deciding market entry and pricing.
    And our Committee completed a five day review of aviation 
and surface transportation matters with European community 
authorities, with members of the European Parliament committee 
on transportation, the transport minister of the European 
Community, Jacque Barrot, and authorities in France as well. We 
made very clear that the new Open Skies bilateral that does not 
include ownership and control, it is a good thing and it is 
going to stay in place. And while there are subsequent 
negotiations, don't expect the Congress to stand still for 
foreign ownership of U.S. airlines that will result in loss of 
air service to small communities. That is clearly what would 
happen. We know. We have seen it happen just with domestic 
ownership of U.S. airlines.
    I think the vote, 291 to 137, I pointed out to the 
Europeans, had that occurred in European parliamentary action, 
the government would fall, there would be new elections, the 
landscape would change. That is not the way our system works. 
But it sure sent a message to DOT and to the State Department 
about the interest that members of Congress have in protecting 
air service to their vulnerable communities. Essential air 
service is a critical part of it. We have seen it eroding over 
the years.
    I sat, I don't know, somewhere down here in 1978, maybe 
further down. We didn't have as many members on the Committee 
then. I think there were 40 total, 45 total members on the 
Committee on both sides. But I offered the amendment to hold in 
air service in the aftermath of deregulation until succeeding 
service could be provided. And secondly, essential air service 
to provide service to small towns with limited options, distant 
from, there wasn't hub and spoke. No one was even talking about 
hub and spoke service. But I knew there was going to be a 
concentration, most of us know at the time, there was going to 
be a concentration of air service in a deregulated environment.
    I concluded my debate with Mr. Howard, was it Howard, the 
Chair? No, Vince Johnson was in the chair. I said, Mr. 
Chairman, if this amendment doesn't pass, there are towns in my 
district that are so remote that the only way, without air 
service, to get there is to be born there. And the place was 
full, a big crowd. I don't know how I got the idea, but there 
it was, and everyone laughed. When the laughter subsided, the 
Chair put the question and the amendment passed. It was one of 
those fortuitous moments of legislative history.
    But it is not a joke. It is a reality. And in 1996, we took 
essential air service a step further with the funding of EAS 
through the over-flight fees. So you have a guaranteed account, 
a floor of $50 million. Over time, that number has been 
increased through general revenues. But it see-saws back and 
forth over time. Some Appropriations Committee at one time or 
another put some standards in that didn't go through our 
Committee, didn't go through the authorization process. It was 
simply a product of OMB and the appropriators in the House and 
the Senate.
    So there has been a good deal of arbitrariness to this 
process of assuring air service to small communities. And 
however good our road system is, however good the rail is and 
where we have inter-city passenger rail, the public's 
imagination is stirred by aviation. We are determined in the 
reauthorization to strengthen essential air service.
    I am puzzling over a new policy or new promulgation by the 
DOT on the grant application form, ``grant funds will not be 
authorized for EAS-subsidized communities to support either 
additional flights by EAS carriers or changes to those 
carriers' existing schedules.'' What is the underlying--there 
was no explanation for it. It just appeared. What is the 
explanation for it?
    Mr. Reynolds. That was consistent with some of our earlier 
guidance that we provided. We didn't want the small community 
grants to conflict with what is going on in EAS. For example, 
if you provided service on top of existing EAS service, you 
would basically have Federal dollars competing. So you could 
ultimately damage_for example, someone could go over the $200 
cap because the EAS paid for service was being hit to the 
detriment_it was being detrimentally affected by the new 
Smaller Community service to a new hub. So we didn't want them 
to be competing.
    We have and do provide_EAS communities can receive Small 
Community grants. We just try and prevent them from coming in 
conflict. We just don't want the Federal dollars working at 
odds. That is really the point there.
    Mr. Oberstar. That is not bad if you have enough money in 
the Small Community Grants program. I think that is due to 
expire and that funding has not been sustained at an acceptable 
level. Some communities have done very imaginative things with 
those Small Community grants. They have bene able to create 
small commuter service airlines and the business community in 
various towns has been energized to provide service.
    But in this era of bankruptcy of carriers, we are seeing 
scaled-back service by major airlines and their regional 
carriers, changing the character of the regional carrier, 
changing the way they are managed. We are just seeing a 
diminution of air service to small towns. In southern Illinois, 
Mount Vernon Airport, is a good example. I was there a few 
years ago with our former colleague. All around, we need you to 
put your creative thinking cap on and work with the Committee 
as we shape legislation to strengthen community service 
airlines.
    Mr. Reynolds. I would be happy to do that, Mr. Chairman.
    Mr. Oberstar. And there are circumstances I will cite. 
There was a carrier that was interested, under EAS, in 
providing service from Duluth to Chicago. I cite this as a case 
study. It happened elsewhere around the Country. As part of the 
service, this carrier wanted slots, which are hard to obtain at 
O'Hare. But I smelled something going on, just sort of 
something in the air. I said, fine, but those slots do not 
attach to the carrier. I negotiated with DOT and FAA to provide 
the service, get the EAS funding. But when you leave the 
service, the slots go back into the pool, they do not attach to 
the bank account of the carrier.
    Are there other circumstances around the Country where 
their asset values attach to such EAS operations?
    Mr. Reynolds. I believe the only EAS point that is going 
into a controlled airport is Lebanon, New Hampshire, going into 
LaGuardia. Other than that, I don't believe there are any more 
services presently under EAS that are going into Chicago or 
DCA, for example. JFK, of course, really doesn't cater to that 
service as much, although that is changing as JetBlue and other 
carriers change the nature of their services at JFK.
    So at the moment, there are actually a few slots that are 
tagged for service to West Virginia that no one wanted to avail 
themselves of. If someone wants to provide service to the 
communities in question, those slots or slot exemptions would 
be withdrawn from the carrier using them now. Because no one 
wanted them, we didn't want the capacity going unused. So we 
let other carriers use them in the meantime.
    But there are provisions for slots to be provided for 
essential air service, if that is needed. Of course, EAS is not 
airport specific as much as it is community specific, and a 
determination could say that you shall go to New York, which of 
course could include LaGuardia, JFK or even Newark, as opposed 
to a specific airport.
    Mr. Oberstar. Thank you. Does the Administration have a 
position on one, dollar amount of support for EAS; two, numbers 
of communities to be served in EAS, either spelled out in 
legislation or in some more general fashion?
    Mr. Reynolds. The Administration has proposed $50 million 
to fund EAS.
    Mr. Oberstar. That is the bare minimum. That is what we are 
getting out of the over-flight fees.
    Mr. Reynolds. That is correct, sir. So that would be about 
81 of the currently 145 communities.
    Mr. Oberstar. That is all that the Administration proposes 
to limit by dollar amount?
    Mr. Reynolds. That is correct. Of course, as always, as 
frequently happens, the Administration makes a proposal 
regarding EAS funding and Congress fully funds the program. 
That seems to happen year after year. The reforms that we are 
proposing, at a fully funded program of about $110 million, 
would cap the program at those that are currently being 
subsidized, as opposed to adding any new communities in the 
future.
    Mr. Oberstar. Dr. Dillingham, do you have a view on that 
issue of whether there is a baseline universe of communities 
that ought to be continued in the EAS program or an expansion 
thereupon?
    Mr. Dillingham. Mr. Chairman, I think we agree with you 
that many small communities need to be connected to the 
national airspace system, that that in fact was the 
Congressional intent at that point. We don't have a set number, 
but we say that things have changed since this original 
legislation was passed, and including the fact that the 
Government is operating at a deficit at this point. So we need 
to find a way to get the maximum use out of the resources that 
are available. We don't have a set number, but certainly it 
should be part of the system.
    Mr. Oberstar. Thank you very much.
    Thank you, Mr. Chairman. I appreciate the extra time.
    Mr. Costello. Thank you.
    Mr. Petri. Mr. Chairman, I would ask unanimous consent that 
a statement by our colleague Howard Coble be included in the 
record.
    Mr. Costello. Without objection.
    Mr. Costello. The Chair thanks Dr. Dillingham and Mr. 
Reynolds for their testimony. We have another panel that we 
will hear from.
    Mr. Reynolds, before you leave, you made a commitment to 
Ms. Norton to respond to her questions in writing. Also, you 
made a commitment to get a list of those essential air service 
airports that will be eliminated under the Administration's 
proposal. You indicated that the list is available now, so I 
would ask that you fax that tomorrow, and we will give you a 
fax number to fax it to, either yet today or tomorrow and then 
respond to Ms. Norton's inquiries as well.
    The Chair thanks Dr. Dillingham and Mr. Reynolds, and would 
ask the second panel to come forward, please.
    While the second panel is coming forward, let me mention to 
members and to those who are in the room, we are scheduled to 
go back in the full House at 3:30. We will immediately have 
five recorded votes. So we will get to our witnesses, get as 
much of the testimony as we can. But if need be, we will come 
back immediately after the last vote. So there are five 
scheduled votes, after the last vote we will come back.
    Let me introduce our witnesses and call on a couple of our 
colleagues here to introduce witnesses as well. Faye Malarkey 
is the Vice President, Legislative Affairs, Regional Airline 
Association. Bill Hansell is the immediate past President of 
the National Association of Counties. Mark Courtney, the 
Airport Director for the Lynchburg Regional Airport in 
Lynchburg, Virginia.
    At this time, the Chair would call on our colleague, Mr. 
Braley, to introduce his witness that his on the panel.
    Mr. Braley. Thank you, Mr. Chairman. I would like to 
introduce Bob Grierson, who is the Airport Manager for the 
Dubuque Regional Airport. I am very pleased that Mr. Grierson 
has agreed to testify because I believe it is important for the 
Subcommittee to hear of the success of the Dubuque Airport. It 
is also important to the City of Dubuque, the Dubuque Chamber 
of Commerce and the Iowa Department of Transportation to have 
him here representing aviation in Iowa.
    So thank you, Mr. Grierson, for joining us, and I am 
looking forward to your testimony.
    Mr. Costello. The Chair would call on our colleague from 
North Carolina, Mr. Shuler, to introduce Mr. Edwards.
    Mr. Shuler. Thank you, Mr. Chairman.
    On a quick note, after my travels being a freshman to and 
from, I should have actually selected this Committee as a 
Subcommittee because of my travels in airports. I want to thank 
you for extending the invitation for me to recognize David 
Edwards, a constituent and a great member of our community that 
we so appreciate. Mr. Edwards has 19 years of experience 
working in airport management, most recently as the Director of 
Asheville Regional Airport in western North Carolina. Prior to 
his time at Asheville Regional served at Titusville-Cocoa 
Airport Authority, Greater Orlando Airport Authority and the 
Dade County Aviation Department. Mr. Edwards also serves as a 
board member of the North Carolina Airports Association and 
President of the Southeast Chapter of American Association of 
Airport Executives.
    I would like to welcome Mr. Edwards and welcome him to our 
Nation's capital.
    Mr. Costello. The Chair thanks the gentleman and at this 
time, welcomes our panel and would recognize and ask that each 
witness know that your full statement will be submitted and 
entered into the record. We would ask you to try and summarize 
your statement to five minutes. The Chair recognizes under the 
five minute rule at this time Ms. Malarkey.

 TESTIMONY OF FAYE MALARKEY, VICE PRESIDENT, REGIONAL AFFAIRS, 
   REGIONAL AIRLINE ASSOCIATION; THE HONORABLE BILL HANSELL, 
 COMMISSIONER, UMATILLA COUNTY, OREGON; DAVID N. EDWARDS, JR., 
A.A.E., AIRPORT DIRECTOR, ASHEVILLE REGIONAL AIRPORT; ROBERT A. 
 GRIERSON, A.A.E., AIRPORT MANAGER, DUBUQUE REGIONAL AIRPORT; 
MARK F. COURTNEY, A.A.E., AIRPORT DIRECTOR, LYNCHBURG REGIONAL 
                            AIRPORT

    Ms. Malarkey. Chairman Costello, Representative Petri and 
members of the Subcommittee, thank you for this opportunity to 
testify today on this important topic. My name is Faye Malarkey 
and I am Vice President for legislative affairs with the 
Regional Airline Association.
    As you may know, regional airlines link together more than 
600 communities in the United States. At more than 70 percent 
of these communities, regional airlines are the only source of 
scheduled air service. Nowhere is this service more important 
than at the more than 140 communities across the Country that 
receive service through the EAS program.
    Since 9/11, more than 40 communities have been forced onto 
the EAS rolls and 17 EAS communities have been dropped out of 
the program. As members of the Subcommittee know, EAS was 
initially created as part of the Airline Deregulation Act of 
1978 to ensure communities receiving scheduled air service back 
then would continue to receive it after deregulation.
    Last year, appropriators in both chambers slated $117 
million for EAS, but because Congress adjourned before passing 
a final package, the program continues to receive funding at 
2006 levels. Congress also included a provision in the Deficit 
Reduction Act of 2005, appropriating an additional $15 million 
for EAS in fiscal year 2007 and 2008. Unfortunately, the 
revision contained a trigger mechanism permitting the release 
of funds only if Congress funded the program at $110 million. 
Because Congress simply extended 2006 funding levels, that 
level was not met and the additional funding has not been 
released.
    The proposal you heard about this morning from my 
colleague, and also contained in the FAA's reauthorization 
package, would severely cut and potentially dismantle the EAS 
program, telling residents of these communities that 
convenient, reliable air service is a luxury and one they can't 
have. Instead, DOT would set up a tiered system to grant 
subsidies to communities in descending order of distance from 
hub airports, starting in Alaska, and continuing until the 
funding runs out, which it is sure to do, long before DOT's 
obligation to EAS communities has been fulfilled.
    Of 140 current EAS communities, 85 of them, including 36 in 
Alaska alone, are farther than 210 miles away from a medium or 
large hub airport. Dozens more are farther than 150 miles away 
from the nearest medium or large hub airport. While we have 
deep respect for our colleagues at FAA and DOT, if enacted, 
this proposal would be very harmful. We urge Congress to reject 
it.
    One of the greatest factors contributing to small community 
air service loss has been the staggering impact of fuel price 
increases. As part of the competitive EAS application process, 
carriers negotiate subsidy rates that remain in effect for two 
years, projecting over the same time span for revenues and 
costs.
    In cases of unexpected cost increases, EAS carriers lack a 
mechanism to renegotiate rates. Instead, they must file 90 day 
service termination notices in order to seek rates that cover 
increased costs. This fosters a sense of unreliability that 
undermines community trust in and use of the program.
    This existing mechanism is not acceptable. One of the 
fundamental tenets of the EAS program states that no carrier 
should be expected to serve any market at a loss. Yet faced 
with climbing costs, carriers are unable to provoke rate 
changes without filing termination notices. Even after these 
notices are filed, DOT still holds carriers in the market at a 
loss for 180 days while the agency undertakes the competitive 
bidding process all over again.
    In recent weeks, crude oil has climbed over $60 a barrel. 
To put this in perspective, please consider, EAS contracts have 
a two year life span. A winning carrier who negotiated a 
competitive contract a year ago would have done so based on 
cost projections of then-current fuel rates of $1.80 a gallon. 
That same carrier would then be providing the service with fuel 
costs at $2 a gallon and climbing. Because EAS carriers are 
strictly limited to 5 percent profit margins, rising fuel costs 
can turn once-profitable routes into losses very quickly.
    Congress addressed the rate adjustment issue already. In 
Section 402 of Vision 100, DOT was afforded a rate indexing 
mechanism to make real time adjustments during periods of 
significantly increased costs. Unfortunately, DOT has been 
unwilling to implement the program to date, citing a lack of 
funds. In response, Congress included a provision in the 
Deficit Reduction Act of 2005, appropriating an additional $15 
million to offset costs.
    Unfortunately, the trigger mechanism, detailed earlier in 
this briefing, has not been met, so the funds have yet to be 
released. RAA asks Congress to include language in the expected 
FAA bill to require DOT to make real time rate adjustments and 
asks that Congress reverse the $110 million trigger for release 
of additional funding for fiscal years 2007 and 2008.
    RAA also asks Congress to carefully examine all evidence 
suggesting that the EAS program is not facing a funding 
shortfall. The demonstrability of funding needs and 
expenditures relating to the program is closely tied to its 
management. DOT should not be allowed to cut service levels or 
eliminate points in order to lower expenditures and retain fund 
without reinvesting in the program. In doing so, DOT trades a 
funding problem for a service commitment problem, one that 
carriers can do little to reverse.
    In order to fully explore these issues, RAA requests that 
Congress require an audit on unspent, unobligated funds in the 
EAS coffers. To speak to Congressman DeFazio's earlier 
question, with respect to the DOT term length, currently with 
the increasing amount of aircraft being sold overseas, there 
are fewer available here in the United States for this type of 
service. The issue is financing.
    Unfortunately, the airlines' ability to commit aircraft in 
a diminishing market has likewise grown more difficult. 
Aircraft financing models are not well suited to two year time 
commitments. By upgrading EAS contract terms to four or five 
year service commitments, existing carriers would be better 
able to review current contracts, and a significant barrier to 
market entry would be removed.
    A recent press release from the FAA characterized our 
belief that the FAA's proposal would jeopardize service to 
small communities is a myth. I assure you, the FAA user fee 
scenario, if enacted as is, would certainly and undeniably 
increase regional airline costs and would certainly and 
undeniably reduce service to smaller communities.
    The FAA's proposals could also directly affect the EAS 
program by blocking service to congested airports. Carriers 
simply cannot amortize the costs of increased fees over this 
type of aircraft that is typically deployed along EAS routes.
    Mr. Costello. Ms. Malarkey, we will put the rest of your 
statement in the record and we appreciate your testimony.
    Ms. Malarkey. Thank you.
    Mr. Costello. The Chair now recognizes Mr. Hansell.
    Mr. Hansell. Good afternoon, Chairman Costello, Ranking 
Member Petri and members of the Subcommittee on Aviation. My 
name is Bill Hansell, and I am a county commissioner from 
Umatilla County, Oregon. I am here representing the National 
Association of Counties, NACO, where I serve as immediate past 
president. I want to thank you for the invitation to testify on 
essential air service.
    The county seat of Umatilla County is Pendleton, Oregon. 
Pendleton is the only commercial service airport in 
northeastern Oregon and has EAS service to Portland. Beginning 
in 2001, enplanements on our non-subsidized service provided by 
our only air carrier, Horizon Airlines, dropped dramatically. 
This was because of 9/11, which caused Horizon to change the 
flight schedule.
    In 2004, Horizon made the decision to end non-subsidized 
service. Subsequently, Horizon was selected as the EAS 
provider. While we retain three flights per day, we did not get 
back our return flight from Portland in the late evening that 
had been earlier dropped. A later flight would require an 
overnight stay in Pendleton and a new crew adding, according to 
Horizon, $250,000 to the cost of their service.
    This means that flying to Portland for the day to do 
business is no longer very practical. Prior to 9/11, Portland 
was the final destination for many of our passengers. Since 
then, our data shows that many of the remaining passengers are 
simply flying through Portland on their way to other 
destinations.
    There is nothing intrinsically wrong about that, except 
that our area citizens have lost the convenient, business-
friendly service, and we continue to experience a 50 percent 
downturn from the pre-9/11 levels. Our airport and economic 
development staff are quite confident that Pendleton could 
return to the 15,000 passengers per year if we added a fair and 
reasonable amount to Horizon's contract, and we would soon be 
down the road of leaving the EAS program altogether.
    EAS service is important to our region mainly because of 
economic development. My county is the number one food 
producing county in Oregon. EAS has allowed Umatilla County to 
continue to be the regional center of northeastern Oregon. For 
any company looking to relocate or expand our community, one of 
the first questions we are asked is, how far are you from a 
commercial airport. Because of EAS, we have had some success in 
attracting and retaining industry to our region.
    Let me comment briefly on the Administration's proposal for 
EAS program. First and foremost, it would provide only $50 
million in funding, limiting the program to 70 communities. 
Cutting 74 communities from the program is a bad idea. 
Pendleton, Mr. Chairman, would lose its service, as would 
Williamson County Regional Airport in your district, and the 
Chisholm Hibbing Airport in Chairman Oberstar's district.
    NACO has a number of suggestions for improving the 
essential air service program. Number one, there needs to be 
more funding. It is certainly fair to say that the cost of 
fuel, equipment and operations of air service has increased. We 
also need more funds so we can subsidize better service. Like 
any other product or service, EAS has to be attractive to the 
customer.
    Secondly, we believe that the 10 percent match requirement 
currently in law but never implemented should be eliminated. 
Many of the smaller rural communities that would be required to 
provide a local match are not able to find the tens of 
thousands of dollars the match would require.
    Thirdly, we also ask this Subcommittee to help identify a 
guaranteed source of revenue for the EAS program. The Airport 
Improvement Program has it, the highway program, the 
transportation program, transit program both have it. A 
dependable source that assures communities and air carriers 
that the program will be fully funded would make EAS a stronger 
program.
    Fourthly, the $200 subsidy cap should be increased and 
indexed. It has been in place since 1989 and while we are not 
opposed to the concept of a cap, one that hasn't been changed 
for 18 years needs adjustments.
    Fifth, there needs to be more marketing of EAS service to 
the community. Marketing funding should be provided directly 
through the EAS program, and some thought should be given to 
requiring airlines who are bidding on EAS service to include a 
funded marketing plan in their proposal.
    One final suggestion to improve EAS service is that we need 
to study approaches to encourage more airlines to bid on 
providing EAS service. More competition may result in better 
service.
    As I conclude, let me also indicate NACO's support for the 
Small Community Air Service program. This program needs to be 
funded at a level that comes close to meeting the demand. This 
includes my testimony. I would be happy to answer any questions 
the Subcommittee members might have.
    Mr. Chairman, if I also may bear upon your good graces, in 
order for me to get back to rural Eastern Oregon and my EAS 
airport, I have to fly out of Reagan National today at 5:20. So 
if I may at the appropriate time be excused to catch that 
airplane, I would greatly appreciate it.
    Mr. Costello. We would not want you to miss your plane, so 
please, whenever you need to leave, please do so, and we thank 
you for your testimony.
    Mr. Hansell. Thank you, sir.
    Mr. Costello. Mr. Edwards, you are recognized at this time. 
Again, as you hear the bells going off, we are on a countdown. 
We have about 12 or 13 minutes left.
    Mr. Edwards. Chairman Costello, Ranking Member Petri, 
members and staff of the House Subcommittee on Aviation, thank 
you for allowing me the opportunity to participate in this 
important hearing.
    My name is David Edwards, and I presently serve as the 
Airport Director for the Asheville Regional Airport, located in 
the pristine Blue Ridge Mountains of western North Carolina. I 
also serve as the Chairman of the Small Airports Committee for 
Airports Council International North America. ACINA members 
enplane more than 95 percent of the domestic and virtually all 
of the international and cargo traffic in North America. Nearly 
400 aviation related businesses are also members of ACINA.
    As you know, this is a critical year for aviation in the 
United States. The expiration of the FAA's programs, taxes and 
fees provides a historic opportunity to make the needed changes 
to enhance and strengthen our national air transportation 
system.
    At the beginning of this year, there were 656 U.S. airports 
with scheduled airline service. More than two-thirds of these 
airports are only served by regional airlines and are generally 
considered small airports. These airports are vital for 
economic growth nationally and essential for the survival of 
many smaller communities.
    Unfortunately, the environment in which small airports 
operate continues to remain fierce, high airfares, lack of 
airline competition, decreasing passenger traffic and leakage 
to bigger airports are just a few of the issues facing smaller 
airports today. Since its creation, the Small Community Air 
Service Development program has helped smaller communities like 
Asheville secure enhancements that are responsive to 
communities' air transportation needs. The program should be 
preserved, not eliminated, and funded at $50 million annually.
    In 2002, the Asheville Regional Airport received a Small 
Community Air Service grant in the amount of $500,000. This 
grant and related matching funds were utilized to support new 
air service by Continental Airlines to Houston. I am pleased to 
inform you that the flight continues to successfully operate 
today, four years from its original inception date.
    In addition, this grant was instrumental in preserving 
Continental's existing Newark service. That service commenced 
just months prior to the terrorist attacks of September 11th 
and successfully continues today.
    Thanks in large part to this grant, during the two years 
following the inauguration of Houston's service, Asheville saw 
explosive growth with 20 percent increases in passenger traffic 
for both 2004 and 2005. The airport also attracted Northwest 
Airlines to begin service to Detroit and Minneapolis-St. Paul, 
as well as Delta beginning non-stop service to Orlando.
    Prior to receiving this grant, Asheville was served by two 
commercial caries with non-stop service to four primary hubs. 
Today the airport has more than doubled those statistics with 
non-stop service to nine cities. The Asheville Regional Airport 
strongly believes that the original grant provided the impetus 
for the success over the last five years in the airport's 
ability to bring new price and service competition to western 
North Carolina.
    Given the proven benefits of the program, the airport 
community was very disappointed that the Administration did not 
include any mention of the program in its proposed 
reauthorization legislation. We agree there are ways to improve 
the program and hope the Subcommittee will incorporate our 
following suggestions in the program itself in the new FAA 
reauthorization legislation.
    First, the current program precludes communities that have 
previously received a grant under the program from seeking 
another grant to support the same or a similar type project. 
While this rule attempts to maintain a form of accountability, 
small airports that have been successful with previous grants 
should be allowed to expand on those same successful type 
projects.
    Secondly, airports are barred from using airport revenues 
for direct air carrier subsidy, which is a permitted use of a 
Small Community Air Service Development grant funds, allowing 
airports that are eligible for grants under the program to use 
airport revenues or provide direct air carrier subsidies for a 
maximum of one year would give many small airports the 
additional flexibility needed to attract, maintain and expand 
upon the air service needs of their community.
    Additionally, the restrictions pertaining the number of 
applications per State should be eliminated from the program, 
as several States have more than a dozen airports receiving 
schedule service. If an applicant has a sound application, it 
should stand on its own merit and not be limited by the four 
per State restriction.
    Finally, we do not believe that the current program 
structure for the level of local contribution is appropriate. 
Small hub airports typically have greater access to capital and 
revenue versus non-hub airports. Therefore a sliding scale 
match contribution should be included within the program.
    Turning to the essential air service program, I urge the 
members of the Subcommittee on Aviation to extend EAS during 
the reauthorization process and provide $110 million annually 
for meeting the demands and costs of the program. The 
Government has made a commitment to those airports and airlines 
and the program should be funded at least at the current level. 
The commercial air transportation system is a system which 
warrants the support of air service to communities of all 
sizes.
    In addition to both programs previously mentioned, the 
Airport Improvement Program and passenger facility charge 
remain vitally important for the implementation of capital 
programs at small airports. As such, Congress must approve at 
lest $3.8 billion in 2008, $4 billion in 2009, $4.1 billion in 
2010 and the PFCs should be raised to only 750 and fully 
indexed for construction cost inflation.
    In closing, I thank you for the privilege of sharing my 
experiences and thoughts. I look forward to answering your 
questions.
    Mr. Costello. We thank you, Mr. Edwards. Mr. Grierson?
    Mr. Grierson. Good afternoon, Chairman Costello, Ranking 
Member Petri and members of the House Transportation and 
Infrastructure Subcommittee. Most particularly, thank you, 
Representative Braley, for inviting me to come before you 
today.
    My name is Robert Grierson. I am the Airport Manager for 
the Dubuque Regional Airport and for the City of Dubuque. The 
Dubuque Regional Airport is a non-hub commercial service 
airport, located on the eastern Iowa border adjacent to the 
Wisconsin and Illinois borders, and provides air service and 
connectivity to the tri-State region. We are situated 180 miles 
due west of Chicago's O'Hare International Airport, and we are 
presently served by one airline with eight daily arrivals and 
departures to and from O'Hare.
    In calendar year 2006, Dubuque had 47,000 passenger 
enplanements which reflects a 16.5 percent growth over the 
previous year. To give you some historical perspective, in 
calendar year 2000, Dubuque generated in excess of 58,000 
enplanements, boasted three air carriers with service to two 
major hubs, with 26 daily arrivals and departures. By 2003, 
Dubuque was down to one carrier and could only generate 38,600 
enplanements on six daily departures and arrivals. Our 
community could easily generate 200,000 passengers. We 
determined that through a number of ticket studies.
    But we have lost 49 percent of the seats at our airport. We 
just didn't have the capacity any longer.
    Thanks to the $610,000 grant that the U.S. Department of 
Transportation awarded Dubuque in 2003, we were able to reverse 
that trend. We had two primary goals as part of that grant. 
Goal number one was marketing. And it was simply to focus the 
awareness of the service being provided by American to the 
community and also to inform the community of the availability 
of an air carrier at the airport. So it was kind of a two-
pronged approach within marketing itself.
    To do this, we took $240,000 from the $610,000 grant and 
began working with the chamber of commerce, convention and 
visitors bureau and local businesses. We received in-kind 
contributions that assisted us to bring it up into billboard 
marketing, television, radio ads, newspaper ads. We continued 
that for a two-year program. From the $240,000, we brought it 
up to $354,000 worth of value.
    Goal number two required expanding existing services 
through frequency and/or hub access. As I mentioned before, we 
are only dealing with O'Hare at this time. We would like to see 
an additional hub, but working with American, we sat down with 
the m and said, gentlemen, what do we have to do, recognizing 
that American was an inch away from bankruptcy at that time, we 
said, what do we need to do to share the risk of this venture. 
And they said, cover the cost of our fuel. It was a new 
concept. Nothing I had ever dealt with before. And this was 
handled by my predecessor, I do want to point that out.
    So $333,000 were put together in remaining funds and also 
contributions from the travel bank, which was put together 
through our community. We had a fairly large pot of funds then 
to cover the costs of the fuel for the fourth flight to and 
from Chicago O'Hare. At this time, there is also a transition 
over to regional jets.
    Today, two years later, we still have this flight in place. 
We no longer have a fuel arrangement. We have over 70 percent 
load factors on this flight and our numbers are now up to 
47,000. I consider Dubuque and this program to be a success 
story. We wouldn't have this service if it wasn't for that 
additional flight and for this program. And for that we thank 
you.
    Now, positive attributes of the program, it is critical for 
the small and non-hub airports to increase service by use of 
marketing funds. These funds are provided to us that give us 
that impetus and that support we need to go forward with this 
sort of project.
    The negative aspect is working with DOT. They keep 
recognizing this is a pilot program and treat it as a lab 
experiment. Communities need to have the flexibility to use the 
program for air service development and develop initiatives 
that fit each situation. As it stands, you can't get a second 
grant for your plan if it is the same or a follow-up to an 
existing method. In other words, if you market to one carrier, 
you can't go marketing to another, even if it is to a different 
carrier. That is one of our problems.
    What I believe they need to do is rewrite the guidelines 
and award grants based on need, quality of the plan and 
community participation. While I have six recommendations, they 
are included in my submission, but quickly put, reauthorize the 
Small Community Air Service program. Do not restrict marketing 
to only one grant. We may seek multiple grants and solicit 
multiple carriers. Reduce the local match portion, I think to 
be consistent with AIP match requirements, but I have to admit, 
Mr. Edwards brings up a very salient point of having a sliding 
scale.
    I believe in fully funding the program. Allow some flexibly 
following the award of funds. The aviation industry changes so 
dramatically and rapidly, you need to have some flexibility to 
address the change in the market.
    Lastly, and this was brought up by your panel itself, we 
would like to get DOT to analyze how the program was working. 
With that, I am free to take any of your questions.
    Mr. Costello. The Chair thanks the gentleman.
    The Subcommittee will stand in recess. We would ask the 
witnesses to return and we expect in 30 minutes, we would hope 
that you would be back here by 4:30. As soon as we can get 
back, we will hear Mr. Courtney's testimony and go into 
questions.
    The Subcommittee stands in recess.
    [Recess.]
    Mr. Costello. The Subcommittee will come to order.
    At this time, the Chair recognizes Mr. Courtney under the 
five minute rule.
    Mr. Courtney. Thank you very much, Chairman Costello.
    My name is Mark Courtney. I am the Airport Director of 
Lynchburg Regional Airport. My testimony this afternoon will 
focus on the results and success of our first grant under the 
Small Community Air Service program back in 2002.
    First of all, Lynchburg Regional Airport is a non-hub 
airport. We are also the primary commercial service airport 
serving central Virginia, with a population of just over 
200,000. To give you an example, out of around 425 commercial 
service airports in the Country, we rank about 247 in terms of 
passengers. At the same time, we also consistently tend to rank 
about in the top 20 in terms of the highest airfares in the 
Country.
    We applied for our first grant under the program in April 
of 2002 specifically to address problems and concerns that we 
had as a result of Lynchburg being so hard hit after service 
reductions after September 11th. Prior to September 11th, we 
had a total of three airlines, United, U.S. Airways and Delta. 
Prior to September 11th, we had a total of 19 daily departures. 
That plummeted down to a total of just 12 as a result of both 
service reductions by U.S. Airways as well as the complete 
elimination of all service by United Express. The result, of 
course, was that our daily departure seats, our capacity also 
plummeted, reaching a low of 305 daily departure seats by 
January of 2002.
    Our traffic, of course, had an impact as well. We saw our 
traffic go down by as much as 40 percent and we bottomed out 
actually in 2003 at less than 100,000 passengers per year.
    We also saw a tremendous increase in the number of our own 
local passengers using other airports. At the time, in 
September 2002, when we first went under grant, we were just 
handling a total of just four passengers out of ten in our 
service area, so just 41 percent we were capturing from our own 
service area, with the largest loss to Raleigh-Durham and 
Roanoke. Historically, we have been able to capture around 65 
percent and 60 percent of our passengers. So that was a 
tremendous decline and loss of passengers.
    A 2002 program, the proposal revolved around an upgrade in 
service to regional jets, with a minimum of three round trips 
per day. Of course, we wanted to see added seats to address the 
under-served market needs of the region, as well as an attempt 
to obtain some kind of a fare relief. We targeted the incumbent 
carriers in order to be able to keep our start-up costs as low 
as possible, and had the revenue guarantee go more towards 
their bottom line. We incorporated that public-private 
partnership with our local chamber of commerce, through 
formation of the air service development partnership.
    We have relied upon a revenue guarantee methodology, we 
established through negotiation a revenue amount. And then we 
made up the difference. We have looked at it as one year in 
duration to be able to keep with the program to have quick 
results, and have proposed a $500,000 grant with a $100,000 
local match. With the $500,000 earmarks in revenue guarantee 
and $100,000 for marketing and promotion, and that was the 
local portion.
    We are one of 40 communities that were originally selected 
by DOT in June of 2002. We were awarded a grant in September of 
2002. Then we went and made proposals to both U.S. Airways and 
Delta. Delta was the first to respond. We entered into an 
agreement with them in April of 2003. They announced the 
service actually, though, in March of 2003 and started up the 
new service in May of 2003, with three CRJ regional jet flights 
a day to Atlanta.
    In terms of our passenger traffic results, we saw an 
immediate increase in the total number of passengers. However, 
we did not see such a related increase in terms of the load 
factor, the percentage of seats filled. So what we went to 
Delta with was the idea of having a sister city program in 
terms of pricing. We recognized that because of fare 
disparities with the nearby Roanoke Regional Airport, which is 
about an hour away, we were seeing discontinued leakage to 
Roanoke. We convinced Delta to offer comparable fares with 
Roanoke. They reluctantly agreed, but they did. Shortly 
thereafter we saw a jump in our load factors. Then by the fall, 
we were seeing load factors in the 70 percent range, which is 
excellent by any standards.
    At the same time, we saw the market share increase. We had 
a better balance of service and more competitive forces at 
work.
    Finally, you see in the middle there, we had a decrease in 
our fares with the sister city program. That of course 
stimulated additional passenger traffic. Then even toward the 
end of the program, even though fares started to go up, and 
again, these went up with Roanoke, they were co-rated, our 
passenger traffic held up relatively strongly, resulting in 
higher revenues and higher profit for the airline. So this is 
kind of the bottom line that we saw, and that we were below the 
target at the beginning of the program, we saw a return or 
comparable fares with Roanoke, we saw further stimulation 
because of fare competition, and then we saw revenues in excess 
of what had been targeted.
    The keys to success for us, we started with a tremendously 
under-served market and we typically have been able to support 
500 daily seats. We were down to 300. We started with a high 
yield revenue base which in essence was a high percentage of 
business travelers, which is very attractive to the airlines. 
We upgraded to jet service, which of course is very attractive 
to passengers and to air travelers. We lowered the air fares 
and obtained fare parity with Roanoke as a result of the sister 
city program, and then of course the local autonomy began to 
improve.
    Since then, we saw traffic increase. It leveled off in 
2006. Service levels and quality have remained relatively 
stable. However, fares have risen significantly. Local market 
demand is increased, but without additional capacity, we have 
seen fares go up substantially. Therefore, leakage has 
worsened, although revenues remain strong. We continue to be 
under-served and we are struggling to maintain what we have, 
even though we have much more potential.
    As a result, we now have a new grant under the 2006 Small 
Community Air Service Development program, and that was awarded 
in September. We are trying to attract a third carrier, 
specifically United Express, back to Dulles. It has been a big 
challenge for us, but we are hopeful that we will eventually be 
successful with that.
    With that, I would conclude my remarks. Thank you.
    Mr. Costello. We thank you, Mr. Courtney.
    Let me ask you, in the private-public partnership, can you 
tell us what the chamber of commerce did for you?
    Mr. Courtney. We have had a partnership with the chamber 
even pre-dating the actual grant program. But because we have a 
strong business community, we partnered with the chamber 
through their, by creation of an air service development 
partnership, that had as its members the largest users, 
business users, of the airport. What they did specifically for 
our grant was number one, they provided the local match. They 
individually provided matching funds to be able to make the 
grant possible.
    Mr. Costello. The chamber put up the local match?
    Mr. Courtney. The businesses that made up the community, 
our partnership.
    Mr. Costello. They came up with the local share?
    Mr. Courtney. That is correct.
    Mr. Costello. Okay. As far as a marketing program, other 
than the chamber going to the business community promoting this 
and the businesses putting up the local match, was there an 
advertising campaign?
    Mr. Courtney. We instituted a multi-media advertising 
program that focused on TV, radio, print and billboard. We had 
a strong focus on of course, visually, with the improved 
service being jet service. Then once we had the fare parity, we 
were able to promote new lower fares. That was a key to getting 
the attention of our local air travel market.
    Mr. Costello. How was that funded?
    Mr. Courtney. That was funded through the $100,000. But at 
the same time, we were able to augment that through a State 
grant program that the airport has available, so that we could 
maximize the amount of funds that were available when the 
opportunity was present.
    Mr. Costello. Very good. Ms. Malarkey, let me ask you, you 
state in your testimony that the DOT EAS restructuring proposal 
would severely cut or even eliminate the program altogether. I 
want you to elaborate on that if you will.
    Ms. Malarkey. As you know, for the past couple of years, we 
have seen the EAS program targeted for cuts by the 
Administration. It has been done in a variety of ways. It is 
either the community cost share match, which is, I don't think 
is still off the table, which would require communities to 
provide a portion of money that they may not have. We are 
talking about communities that are struggling to pay for 
essential services, trying to pay a significant amount of air 
service.
    Also, the current proposal that is in the FAA 
reauthorization would set up this tiered system. So you start 
with Alaska and you go from there in the descending order of a 
nearby hub, you fund those communities until it runs out.
    But the exigencies of this plan, first of all, you can't 
meaningfully fund this program at $50 million a year. Currently 
it is at $109 million, and that may or may not be enough this 
year. So we are talking in this Committee about halving it, you 
are more than halving it, you are cutting it by $59 million.
    Secondly, there is no safety net for the new communities 
that come on. We think that essentially Congress made a promise 
to EAS communities during deregulation that they wouldn't lose 
their scheduled air service. We think that this forces Congress 
to go back on that promise and leave those new communities that 
are losing air service high and dry.
    Also, it puts a cap on changing the routes and the 
frequency along routes of existing carriers. We have seen 
evidence, carriers have told me that any time you increase the 
frequency on a route, you increase the community's perception 
of reliability and you can increase ridership. That can bring 
the fares down. There were a couple of situations that I could 
provide to you where that actually led to some, now, of course, 
other factors weighed in. But there were some routes that 
became viable under those circumstances.
    Mr. Costello. Thank you. The Chair recognizes the Ranking 
Member, Mr. Petri.
    Mr. Petri. Thank you very much. I really just have one 
question for maybe each of you to address. That is, what would 
you think would be the single most important thing that we 
could do to help small regional airports in this 
reauthorization bill?
    Ms. Malarkey. I will take that first if I may.
    The single most important thing that we need as carriers is 
to know that that service and the promise that we have made, 
the equipment commitments we have made, is going to continue. 
So we want full funding and consistent and stable funding for 
those programs. We don't want to feel that it would be subject 
to these cuts that get introduced and then rejected year in and 
year out.
    Secondly, we want the funding of that Section 402. This 
becomes more and more important, as I mentioned, with fuel 
costs at $60 a barrel and climbing. The Federal Reserve 
Chairman said that he would not be shocked to see them at $3 a 
gallon by this year. So with that in mind, not having an 
ability to make real-time rate adjustments is really a 
significant hindrance for carriers that are operating the 
service.
    Mr. Edwards. Mr. Petri, I don't know that there is just one 
solution here. I think it is a combination of options, which 
include the EAS program as we discussed and having it fully 
funded, a fully funded Small Community Air Service Development 
program, a fully and well funded AIP program and an increase in 
the PFC. I think if small airports are going to continue to be 
able to serve their communities, we need all of these programs 
to assist us to be successful.
    Mr. Grierson. I really have to echo those same comments. 
Probably the single most important thing from my perspective, 
since we are not an EAS airport, I would say, support the Small 
Community Air Service program. But beyond that scope, you 
really have to look at the overall AIP system, how it is 
structured, how it is allocated, why are large airports getting 
such a disproportionate share of AIP funding, when all the 
smaller airports traditionally have had to scramble for 
everything they can get.
    Keeping the 95-5 split has been very helpful for these 
smaller airports to be able to come up with that local match. 
Back when it was a 25-75 split, a lot of that money just was 
left untaken. So to me, having an affordable, implementable 
funding mechanism, NAIP, I think is probably the single most 
crucial thing that we could have.
    Mr. Courtney. For me, one of the things that we have 
noticed in terms of the Small Community Air Service Development 
Program is of course the fact that there is insufficient 
funding. But there is so much competition under that program, 
because it is so broad. Clearly, there are some essential air 
service airports that may or may not be well suited for this 
type of program.
    Some of the larger airports, certainly small hubs, have the 
wherewithal, the financial wherewithal to be able to implement 
and come up with the funding and resources to be able to fund 
these kinds of things themselves. There is kind of a range of 
non-hub airports that have viable markets like ours, however, 
they cannot get the attention of the airlines and need 
increasing grant funds to be able to get us over the hump when 
it comes to getting the initial service back, because we have a 
record of success of keeping the service and supporting the 
service once we have it.
    So I have indicated that I think it needs to be a little 
tighter.
    Mr. Costello. Thank you. The Chair recognizes Mr. Braley.
    Mr. Braley. Thank you.
    Mr. Grierson, can you talk a little bit about the links 
that you see between increased access to air service, such as 
that afforded through the Small Community Air program an the 
overall economic viability of the surrounding community, like 
Dubuque, Iowa?
    Mr. Grierson. Certainly, Mr. Braley. Here is what it really 
comes down to for Dubuque and I am sure many other airports as 
well. If you don't have a major highway going right through 
your community, you are very limited as to how you can get 
people to your business, how you can get them to your State, to 
your area. Dubuque is right on the Mississippi. We get river 
traffic, but that is only good during the summer. So if you are 
going to get to Dubuque, you are either going to drive or you 
are going to fly.
    The reality of it is, we have two-lane roads coming from 
Chicago out to Dubuque. Not very good for transporting goods 
and materials. We have John Deere as a major manufacturer and 
employer in the community. We also have headquarters of McGraw-
Hill as well as many other major corporations located in our 
town. Air service is critical. The old saying is, if you can't 
get there, you can't do business. And that is really the case 
for Dubuque.
    Mr. Braley. Some people have claimed that the Small 
Community Air Program is not working as well as expected. But 
the story you shared today of Dubuque is one of successes as a 
direct results of this program. Do you have any thoughts on why 
some other communities have trouble fully utilizing the program 
and any advice for them?
    Mr. Grierson. This is where I think having a report from 
the DOT where they could publish the results of what has worked 
and what hasn't. Five years ago, it was very common for people 
to recommend a travel bank. Meetings that I had with American 
Airlines two months ago, they said, we don't want a travel 
bank. Some communities have undertaken efforts now to procure 
ground support equipment and to even have airport employees 
providing ticketing and baggage handling services and 
representing an airline. American said they don't want to have 
that liability placed on the airport.
    So what is working one day is not necessarily working the 
other. But I would really like to see a report come from the 
FAA to show what has worked. In our case, the fuel purchase 
really worked. And the marketing, I think, is always going to 
be a constant.
    Mr. Braley. You mentioned some recommendations in your 
testimony for the reauthorization. Can you tells how some of 
those recommendations are likely to increase the success rate 
of the Small Community Air Program?
    Mr. Grierson. Some of the key areas of my six 
recommendations, number two, don't restrict marketing to only 
one grant. We may seek multiple grants to solicit multiple 
carriers. Some airports may take several years in negotiating 
with a single carrier.
    You are penalized for your success. In our case we were 
able to market with $300,000 of the grant fund. Because we used 
those funds, we can never solicit a grant again for marketing. 
Well, if you are not going to market, how else are you going to 
bring in a carrier? You are being penalized for your own 
success in this case. So I think removing that restriction, 
recognizing that I may be going after American one day and 
United the next, and it may take me several years to get 
through a full negotiation process. So I think that is critical 
to allow us the flexibility to go after multiple carries over a 
time line.
    Mr. Braley. Thank you.
    Ms. Malarkey, in your testimony you mentioned recent DOT 
initiatives to solicit ideas on EAS reform. Can you tell us 
some of the ideas that you have heard from your members that 
would be relevant to making that a greater success?
    Ms. Malarkey. Yes. Our members, the things that we have 
outlined here in our testimony, of course, are paramount. One 
is the funding, two is the fuel cost adjustment that I have 
already detailed. Three is the extension of the DOT rates. We 
talked a little bit today about the difficulty of financing 
aircraft, more and more are being sold overseas.
    So a significant barrier for new entrants and the kind of 
competition that would enhance the program is the inability to 
finance markets for these short-term periods. So we have asked 
that DOT consider a longer rate structure, four or five years, 
perhaps. Of course, it would be important under this rate 
structure for that Section 402 to be implemented, so the 
carriers could come in and get a cost adjustment.
    Some of the other things that we have looked at are 
distance criteria and understanding that what is a reasonable 
distance in the east may not be a reasonable distance in 
mountainous terrain and other things like that. They tend to 
get parochial between the members. But those are the main 
issues that our members are discussing.
    Mr. Braley. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Mr. Costello. I thank the gentleman, and the Chair thanks 
all of our witnesses here today. We appreciate your thoughtful 
testimony and want you to know, as we move forward to the 
reauthorization, that we will keep your testimony in mind.
    With that, the Subcommittee stands adjourned. Thank you.
    [Whereupon, at 4:55 p.m., the subcommittee was adjourned.]

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