Commercial Aviation: Programs and Options for the Federal
Approach to Providing and Improving Air Service to Small
Communities (14-SEP-06, GAO-06-398T).
Over the last decade, significant changes have occurred in the
airline industry. Network carriers are facing challenging
financial conditions and low-cost carriers are attracting
passengers away from some small community airports. These
changes, and others, have challenged the ability of small
communities to attract adequate commercial air service. In
response to these challenges, Congress has established two key
funding programs--the Essential Air Service (EAS) and the Small
Community Air Service Development Program (SCASDP)--to help small
communities retain or attract air service. However, the
sustainability of such funding could be affected by the federal
government's fiscal imbalance. In addition, GAO reports have
raised questions about how these programs support commercial air
service to small communities. Given this environment, this
testimony discusses (1) the development and impact of EAS, (2)
the status of SCASDP and (3) options for reforming EAS and
evaluating SCASDP. The testimony is based on previous GAO
research and interviews related to these programs, along with
program updates.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-398T
ACCNO: A60924
TITLE: Commercial Aviation: Programs and Options for the Federal
Approach to Providing and Improving Air Service to Small
Communities
DATE: 09/14/2006
SUBJECT: Airlines
Commercial aviation
Cost analysis
Federal aid for transportation
Financial analysis
Grants to local governments
Program evaluation
Strategic planning
Subsidies
Transportation costs
Essential Air Service Program
Small Community Air Service Development
Program
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GAO-06-398T
* Background
* Number of Airports and Amount of EAS Subsidies Has Been Grow
* The Small Community Grant Program Has Had Mixed Results
* Options Exist for Reforming EAS and Evaluating SCASDP
* Examine Options for Enhancing EAS
* Targeting Subsidized Service to More Remote Communities
* Better Matching Capacity with Community Use
* Consolidating Subsidized Service Provided to Multiple Commun
* Changing Carrier Subsidies to Local Grants
* Vision-100 Small Community Programs Have Not Progressed
* Evaluate the Effectiveness of SCASDP before Reauthorization
* Contact Information
* Appendix I: Additional Department of Transportation Selectio
* Appendix II: Essential Air Service Airports and Small Commun
* Appendix III: Status of SCASDP Grants Awarded, 2002 - 2006
* Appendix IV: Essential Air Service Communities and Subsidies
* Related GAO Products
* Order by Mail or Phone
Testimony
Before the Subcommittee on Aviation, Committee on Commerce, Science and
Transportation, U.S. Senate
United States Government Accountability Office
GAO
For Release on Delivery Expected at 10:00 a.m. EDT
Thursday, September 14, 2006
COMMERCIAL AVIATION
Programs and Options for the Federal Approach to Providing and Improving
Air Service to Small Communities
Statement of Gerald L. Dillingham, Director Physical Infrastructure Issues
GAO-06-398T
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to testify today on issues related to the
federal approach to providing air service to small and underserved
communities. Over the last decade, significant changes have occurred in
the airline industry that have affected service to small communities.
Service to small communities decreased as a result of the weak financial
condition of the airline industry that was exacerbated by the events of
September 11, 2001. Some network carriers are still facing challenging
financial conditions which can negatively affect small community air
service.1 For example, small communities may become cost-cutting targets
because they are often the carrier's least profitable operation. This, as
well as other changes, have challenged small communities to obtain
adequate commercial air service at reasonable prices.2
Two key federal programs help support air service to small communities-the
Essential Air Service (EAS) program and the Small Community Air Service
Development Program (SCASDP).3 EAS, established after airline deregulation
in 1978, is designed to ensure that small communities that received
scheduled passenger air service before deregulation continue to have
access to the nation's air transportation system. In fiscal year 2006,
Congress appropriated about $109 million to the Department of
Transportation (DOT) for EAS. For fiscal year 2007, the administration
requested that $50 million be allocated for the program and paid for by
overflight fees,4 while both the House and Senate Appropriations
Committees are proposing $117 million for the program. Congress
established SCASDP in 2000 and has appropriated $20 million annually from
2002 through 2005 for DOT to award up to 40 grants each year to
communities that have demonstrated air-service deficiencies or
higher-than-average fares. However, in fiscal year 2005, DOT transferred
$5 million of these funds from SCASDP to EAS.5 For fiscal year 2006,
Congress authorized $10 million. For fiscal year 2007, the administration
proposed no funding for SCASDP while the House and Senate Appropriations
Committees are proposing $20 million and $10 million, respectively. In
addition, we have reported that it was too early to assess the
effectiveness of SCASDP and have raised questions about the current
structure of EAS.
1The U.S. network carriers are Alaska Airlines, American Airlines,
Continental Airlines, Delta Air Lines, Northwest Airlines, United
Airlines, and US Airways.
2The nation's commercial airports are categorized into four main groups
based on annual passenger enplanements-large hubs, medium hubs, small
hubs, and nonhubs. The 30 large hubs and 37 medium-hub airports together
enplaned about 89 percent of the almost 703 million U.S. passengers in
2004. In contrast, the 69 small hubs enplaned about 8 percent, and the 374
nonhub airports enplaned about 3 percent of U.S. passengers.
3Small community airports also receive other financial support from the
federal government. For example, under the Airport Improvement Program
small airports receive certain funds for addressing capital improvement
needs-such as for runway or taxiway improvements.
4 Overflight fees are user fees for air traffic control services provided
by the Federal Aviation Administration (FAA) to aircraft that fly over,
but do not land in the United States, as authorized by the Federal
Aviation Reauthorization Act of 1996 (P.L. 104-264).
While the airline industry has been facing fiscal challenges, the federal
government's financial condition and long-term fiscal outlook also
deteriorated. We have reported on the nation's long-term fiscal imbalances
and the need for a fundamental and periodic reexamination of the base of
government, ultimately covering discretionary and mandatory programs as
well as the revenue side of the budget.6 In light of these challenges, we
have identified some options for reforming EAS and recommended that DOT
evaluate SCASDP.
My testimony today will discuss (1) the development and impact of EAS, (2)
the status of SCASDP, and (3) options for reforming EAS and evaluating
SCASDP. My statement is based primarily on the body of research that we
have conducted related to these programs, program updates, and recent
interviews with (and data from) key stakeholders. We obtained information
on the status of projects from the Office of the Secretary (OST). Based on
assessments conducted during previous reviews, we concluded that the data
are reliable for the purposes of this report. Appendix V contains a list
of our related testimonies and reports. We conducted our work on EAS from
March through December 2002 and our work on SCASDP from September 2004
through October 2005 in accordance with generally accepted government
auditing standards.
5The Emergency Supplemental Appropriations Act for Defense, the Global War
on Terror, and Tsunami Relief, 2005, Pub. L. No. 109-13, recognized that
the funds appropriated for EAS may not be sufficient to meet the service
needs of communities encompassed by that program. The Emergency
Supplemental Appropriations Act provided that the Secretary of
Transportation could transfer "such sums as may be necessary to carry out
the essential air service program from any available amounts appropriated
to or directly administered by the Office of the Secretary."
6GAO, 21st Century Challenges: Reexamining the Base of Federal Government.
GAO-05-325SP . (Washington, DC: 2005). February 2005.
In summary:
o In recent years, a growing number of communities have received
subsidies under EAS-expanding from 95 communities in fiscal year
1997 to 152 in fiscal year 2006. Similarly, funding for EAS has
risen more than four-fold over this 10-year period-from $25.9
million in fiscal year 1997 to $109.4 million in fiscal year 2006.
In addition, EAS funds were used to subsidize about 1 million
passenger enplanements in 2004-about 0.15 percent of the nation's
706 million annual passenger enplanements.7 It is possible that
air service might end at many of these communities, if these
subsidies were removed.
o Our recent review of SCASDP found that the number of grant
applications was declining, grantees were pursuing a variety of
goals and strategies for supporting air service, and completed
grants had mixed results. Specifically, we found that the number
of applications for SCASDP has declined-from 179 in 2002 to 75 in
2006. We also found that the goals grantees are pursuing include
trying to add flights and destinations, or trying to obtain lower
fares. The different strategies grantees are employing to improve
air service in their communities include offering subsidies or
revenue guarantees to airlines, marketing, hiring personnel, and
conducting studies. Finally, although we could not assess the
effectiveness of the program, since few projects-23 of 157-had
been completed at the time of our review, we found the results of
the completed projects were mixed. Of the 23 projects, 11 had
implemented a self-sustaining improvement to air service, while
the remaining 12 had not.
o To ensure the effective use of scarce resources, these programs
need to be examined and options for program improvement need to be
addressed. We have previously reported on some options for
changing EAS to potentially make it more cost-effective. These
options include (1) targeting subsidized service to more remote
communities, (2) better matching capacity with community use, (3)
consolidating service to multiple communities into regional
airports, and (4) changing the form of the federal assistance from
carrier subsidies to local grants. These changes require
legislative action. Although these options might make EAS more
cost-effective, they could also reduce service to some areas. In
2003, the Vision 100-Century of Aviation Reauthorization Act,
(Vision-100) provided for several alternative programs for EAS
communities. However, these programs have not progressed due, in
part, to a lack of response from EAS communities. Regarding
SCASDP, as we recommended, DOT plans to conduct a comprehensive
evaluation of completed projects after fiscal year 2006. The
results of such an evaluation will be useful when Congress
considers the reauthorization of this program in 2008 and could
result in identifying "lessons learned" from successful projects.
These lessons could be shared with other small communities that
are trying to improve air service, and, if needed, to reform and
refocus the program.
Background
Before I discuss these issues in detail, let me sketch the
background of air service to small communities and these programs.
Air service to many small communities has declined in recent
years, particularly after the September 11, 2001 attacks. As of
2005, scheduled departures at small-, medium-, and large-hub
airports had largely returned to 2000 levels. However, departures
from nonhub airports continued to decline-the number of departures
declined 17 percent at nonhub airports between July 2000 and July
2005. Small-hub airports actually had more scheduled departures in
July 2005 than in July 2000, a fact that clearly distinguishes
them from nonhub airports.
Several factors may help explain why some small communities,
especially nonhubs, face relatively limited air service. First,
small communities can become cost-cutting targets of air carriers
because they are often a carrier's least profitable operation.
Consequently, many network carriers have cut service to small
communities and regional carriers now operate at many small
communities where the network carriers have withdrawn.8 Second,
the "Commuter Rule" that FAA enacted in 1995 brought small
commuter aircraft under the same safety standards as larger
aircraft-a change that made it more difficult to economically
operate smaller aircraft, such as 19-seat turboprops.9 For
example, the Commuter Rule required commuter air carriers who flew
aircraft equipped with 10 or more seats to improve ground deicing
programs and carry additional passenger safety equipment.
Additionally, the 2001 Aviation and Transportation Security Act
instituted the same security requirements for screening passengers
at smaller airports as it did for larger airports, sometimes
making travel from small airports less convenient than it had
been.10 Third, regional carriers had reduced the use of turboprops
in favor of regional jets, which had a negative effect on small
communities that have not generated the passenger levels needed to
support regional jet service. Finally, many small communities
experience passenger "leakage"-that is, passengers choosing to
drive longer distances to larger airports instead of using closer
small airports. Low-cost carriers have generally avoided flying to
small communities but have offered low fares that encourage
passengers to drive longer distances to take advantage of them.11
Mr. Chairman, as you know, Congress established EAS as part of the
Airline Deregulation Act of 1978 to help areas that face limited
service. The act guaranteed that communities served by air
carriers before deregulation would continue to receive a certain
level of scheduled air service.12 In general, the act guaranteed
continued service by authorizing DOT to require carriers to
continue providing service at these communities. If an air carrier
could not continue that service without incurring a loss, DOT
could then use EAS funds to award that carrier a subsidy.13 Under
the Airline Deregulation Act, EAS was scheduled to sunset, or end,
after 10 years. In 1987, Congress extended the program for another
10 years, and in 1998, it eliminated the sunset provision, thereby
permanently authorizing EAS.
Funding for EAS comes from a combination of permanent and annual
appropriations. The Federal Aviation Reauthorization Act of 1996
(P.L. 104-264) permanently appropriated the first $50 million of
such funding-for EAS and safety projects at rural airports-from
the collection of overflight fees. Congress can appropriate
additional funds from the general fund on an annual basis.
To be eligible for this subsidized service, communities must meet
three general requirements. They (1) must have received scheduled
commercial passenger service as of October 1978, (2) may be no
closer than 70 highway miles to a medium- or large-hub airport,
and (3) must require a subsidy of less than $200 per person
(unless the community is more than 210 highway miles from the
nearest medium- or large-hub airport, in which case no average
per-passenger dollar limit applies).14 Federal law also defines
the service that subsidized communities are to receive under
EAS.15 For example, carriers providing EAS flights are required to
use aircraft with at least 15 seats unless the community seeks a
waiver. In addition, flights are to occur at "reasonable times"
and at prices that are "not excessive." EAS operations to
communities in Alaska are subject to different requirements (e.g.,
carriers may use smaller aircraft).
Air carriers apply directly to DOT for EAS subsidies. Air carriers
set the subsidy application process in motion when they file a
90-day notice of intent to suspend or terminate service. If no air
carrier is willing to or able to profitably provide replacement
air service without a subsidy, DOT solicits proposals from
carriers who are willing to provide service with a subsidy. DOT
requires that air carriers submit historical and projected
financial data, such as projected operating expenses and revenues,
sufficient to support a subsidy calculation. DOT then reviews
these data in light of the aviation industry's pricing structure,
the size of aircraft required, the amount of service required, and
the number of projected passengers who would use this service in
the community.16 Finally, DOT selects a carrier and sets a subsidy
amount to cover the difference between the carrier's projected
cost of operation and its expected passenger revenues, while
providing the carrier with a profit element equal to 5 percent of
total operating expenses, according to statute.17
Turning now to SCASDP, Congress authorized SCASDP as a pilot
program in the Wendell H. Ford Aviation Investment and Reform Act
for the 21st Century (AIR-21),18 to help small communities enhance
their air service. AIR-21 authorized the program for fiscal years
2002 and 2003, and subsequent legislation19 reauthorized the
program through fiscal year 2008 and eliminated the "pilot" status
of the program.
The Office of Aviation Analysis in DOT's Office of the Secretary
is responsible for administering the program. The law establishing
SCASDP allows DOT considerable flexibility in implementing the
program and selecting projects to be funded. The law defines basic
eligibility criteria and statutory priority factors, but meeting a
given number of priority factors does not automatically mean DOT
will select a project. DOT also considers many other relevant
factors in making decisions on projects, and the final selection
of projects is at the discretion of the Secretary of
Transportation.20 (See app. I for a list of the factors used in
DOT selections.)
SCASDP grants may be made to single communities or a consortium of
communities, although no more than four grants each year may be in
the same state. Consortiums are considered one project for the
purpose of this program. Inclusion of small hubs for eligibility
means that some relatively large airports qualify for this
program. For example, Buffalo Niagara International Airport in
Buffalo, New York, and Norfolk International Airport in Norfolk,
Virginia, are eligible for the program; these airports enplaned
over 2.4 million and over 1.9 million passengers in 2005,
respectively. In contrast, small nonhub airports, such as those in
Moab, Utah (with about 2,600 enplanements) or Owensboro, Kentucky
(with about 3,600 enplanements) are also eligible. SCASDP grants
are also available in the 50 states, the District of Columbia,
Puerto Rico, and U.S. territories and possessions. As shown in
appendix II, DOT's awards have been geographically spread
out-covering all states except Delaware, Hawaii, Maryland, New
Jersey, and Rhode Island. To date, no communities in Delaware or
Rhode Island have applied for a grant. Appendix III includes
information on all SCASDP grants awarded as of August 31, 2006.
Number of Airports and Amount of EAS Subsidies Has Been Growing
Mr. Chairman, demand for EAS subsidies has been growing over the
past 10 years, as has the amount of funds appropriated for the
program. As shown in table 1, for fiscal year 2006, EAS is
providing subsidies to air carriers to serve 154 communities-an
increase of 57 communities over the 1997 low point.21 The funding
for EAS has also grown from $25.9 million in 1997 to $109.4
million in 2006. This amounts to an average of about $720,000 per
EAS community in fiscal year 2006. Appendix II includes a map
showing the locations of current EAS communities and appendix IV
lists EAS communities and their current subsidy amounts.
Table 1: EAS Program Appropriations and Communities Served, Fiscal
Years 1992-2006
Fiscal year Number of communities Total EAS appropriations (in millions)
1992 130 $38.6
1993 126 38.6
1994 112 33.4
1995 107 33.4
1996 97 22.6
1997 95 25.9
1998 101 50.0
1999 100 50.0
2000 106 50.0
2001 115 50.0
2002 123 113.0
2003 126 101.8
2004 140 101.7
2005 146 101.6
2006 154 109.4
Source: DOT.
In addition, in recent years, the number of communities and states
receiving EAS funding has increased. Since 1998, when a $50
million funding level was established, eight additional states now
have EAS communities. These states include Alabama, Georgia,
Kentucky, Maryland, Mississippi, Oregon, Tennessee and Virginia.
Excluding Alaska, where different program rules apply, four states
now have had significant increases in the total number of
communities served by EAS, compared to 1998. The number of EAS
communities in Pennsylvania increased by five, West Virginia and
Wyoming increased by four, and New York increased by three. These
states are now among the largest participants in the program, in
terms of the number of communities served.
In 2004, slightly more than 1 million passengers enplaned at
airports that received EAS-subsidized service-about 0.15 percent
of the more than 706 million passenger enplanements in the United
States that year.22 As of May 1, 2006, 13 regional air carriers
served the subsidized communities in the continental United
States, and 15 served those in Alaska, Hawaii, and Puerto Rico.
The carriers serving the communities in the continental United
States typically used turboprop aircraft seating 19 passengers,
whereas in Alaska, Hawaii, and Puerto Rico, the most commonly used
aircraft seated 4 to 9 passengers.
If EAS subsidies were removed, air service may end at many small
communities. EAS subsidies have helped communities that were
served by air carriers before deregulation continue to receive
scheduled air service. Since air carriers have to show financial
data to support a subsidy calculation, it is likely that if the
subsidy is no longer available commercial air service would also
end. Furthermore, according to a DOT official, once a community
receives subsidized air service it is rare for an air carrier to
offer to provide unsubsidized air service. Finally, in previous
work, we reported that subsidies paid directly to air carriers
have not provided an effective transportation solution for
passengers in many small communities.23
The Small Community Grant Program Has Had Mixed Results
Mr. Chairman, our previous work was not able to evaluate the
overall effectiveness of SCASDP; however, we found that SCASDP
grantees pursued several goals and strategies to improve air
service, and that the projects have obtained mixed results. In
addition, the number of applications for SCASDP has declined each
year.
As shown in figure 1, in 2002 (the first year SCASDP was funded)
DOT received 179 applications for grants; and by 2006 the number
of applications had declined to 75. DOT officials said that this
decline was, in part, a consequence of several factors, including:
(1) many eligible airport communities had received a grant and
were still implementing projects at the time; (2) the airport
community as a whole was coming to understand the importance DOT
places on a fulfilling the local contribution commitment part of
the grant proposal; and (3) legislative changes in 2003 that
prohibited communities or consortiums from receiving more than one
grant for the same project, and that established the timely use of
funds as a priority factor in awarding grants.24 There have been
182 grant awards made in the 5 years of the program. Of these, 56
grants are now completed-34 from 2002, 15 from 2003, and seven
from 2004.25 Finally, as of August 31, 2006, DOT had terminated
seven grants it initially awarded.26
Figure 1: SCASDP Grant Proposals, Awards, Terminations, and
Completions, 2002 - 2006
Note: DOT granted 6 grants in 2004, from reallocated program
funds.
Although at the time of our review it was too soon to determine
the overall effectiveness of the program, our review of the 23
projects completed by September 30, 2005, found mixed results. The
kinds of improvements in service that resulted from the grants
included adding an additional air carrier, destination, or
flights; or changing the type of aircraft serving the community.
In terms of numbers, airport officials reported that 19 of the 23
grants resulted in service or fare improvements during the life of
the grant. In addition, during the course of the grant,
enplanements rose at 19 of the 23 airports. However, after the 23
SCASDP grants were completed, 11 grants resulted in improvements
that were self-sustaining. Three additional improvements were
still in place, although not self-sustaining; thus 14 improvements
were in place after the grants were completed. (See fig. 2.)
Charleston, West Virginia provides an example of a successful
project. With the aid of a SCASDP grant, Charleston was able to
add a new carrier and new nonstop service to a major market,
Houston. At the time of our review, and after the grant was
completed, this service was continuing at the level the grant
provided.
Figure 2: Air Service Improvement during the Course of 23 Grants
and after Project Completion
Finally, for SCASDP grants awarded from 2002 though 2004, we
surveyed airport officials to identify the types of project goals
they had for their grants. We found that grantees had identified a
variety of project goals to improve air service to their
community. These goals included adding flights, airlines, and
destinations; lowering fares; upgrading the aircraft serving the
community; obtaining better data for planning and marketing air
service; increasing enplanements; and curbing the loss of
passengers to other airports. (See fig. 3 for the number and types
of project goals identified by airport directors.)
Figure 3: Project Goals as Identified by Airport Directors for
Grants Awarded 2002 - 2004
Note: The number of airport directors surveyed may exceed the
number of grants in a year because grants are sometimes awarded to
consortiums of airports. We surveyed all grantee airports.
To achieve these goals, grantees have used many strategies,
including subsidies and revenue guarantees to the airlines,
marketing, hiring personnel and consultants, and establishing
travel banks in which a community guarantees to buy a certain
number of tickets. (See fig. 4.) In addition, grantees have
subsidized the start-up of an airline, taken over ground station
operations for an airline, and subsidized a bus to transport
passengers from their airport to a hub airport. Incorporating
marketing as part of the project was the most common strategy used
by airports. Some airline officials said that marketing efforts
are important for the success of the projects. Airline officials
also told us that projects that provide direct benefits to an
airline, such as revenue guarantees and financial subsidies, have
the greatest chance of success. According to these officials, such
projects allow the airline to test the real market for air service
in a community without enduring the typical financial losses that
occur when new air service is introduced. They further noted that,
in the current aviation economic environment, carriers cannot
afford to sustain losses while they build up passenger demand in a
market. The outcomes of the grants may be affected by broader
industry factors that are independent of the grant itself, such as
a decision on the part of an airline to reduce the number of
flights at a hub.
Figure 4: Strategies Included in Grant Projects
Note: Since grant agreements were not available at the time of
this analysis, 2006 figures are based solely on proposals.
Options Exist for Reforming EAS and Evaluating SCASDP
Mr. Chairman, let me now turn to a discussion of options both for
the reform of EAS and the evaluation of SCASDP. I raise these
options, in part, because they link to our previous report on the
challenges facing the federal government in the 21st century,
which notes that the federal government's long-term fiscal
imbalance presents enormous challenges to the nation's ability to
respond to emerging forces reshaping American society, the United
States' place in the world, and the future role of the federal
government.27 In our previous report, we call for a more
fundamental and periodic reexamination of the base of government,
ultimately covering discretionary and mandatory programs as well
as the revenue side of the budget. In light of these challenges,
Congress may wish to weigh options for reforming EAS and obtaining
additional information about SCASDP's effectiveness-information
that could be obtained if DOT follows our recommendation to
evaluate the program's effectiveness once more grant projects have
been completed.
Examine Options for Enhancing EAS
In previous work, we have identified options for enhancing the
effectiveness of EAS and controlling cost increases. These options
include targeting subsidized service on more remote communities
than is currently the case, improving the matching of capacity
with community use, consolidating service to multiple communities
into regional airports, and changing the form of federal
assistance from carrier subsidies to local grants; all of these
options would require legislative changes. Several of these
options formed the basis for reforms passed as part of Vision-100.
For various reasons these pilot programs have not progressed, so
it is premature to assess their impact. Let me now briefly discuss
each option, stressing at the outset that each presents potential
negative, as well as positive, effects. The positive effects might
include lowered federal costs, increased passenger traffic at
subsidized communities, and enhanced community choice of
transportation options. Potential negative effects might include
increased passenger inconvenience and an adverse effect on local
economies that may lose scheduled airline service.
The first option would be to target subsidized service to more
remote communities. This would mean increasing the highway
distance criteria between EAS-eligible communities and the nearest
qualifying airport, and expanding the definition of qualifying
nearby airports to include small hubs. Currently, to be eligible
for EAS-subsidized service, a community must be more than 70
highway miles from the nearest medium- or large-hub airport. We
found that, if the distance criterion was increased to 125 highway
miles and the qualifying airports were expanded to include
small-hub airport with jet service, 55 EAS-subsidized communities
would no longer qualify for subsidies-and travelers at those
communities would need to drive to the nearby larger airport to
access air service.28
Limiting subsidized service to more remote communities could
potentially save federal subsidies. For example, we found that
about $24 million annually could be saved if service were
terminated at 30 EAS airports that were within 125 miles of
medium- or large-hub airports. This estimate assumed that the
total subsidies in effect in 2006 at the communities that might
lose their eligibility would not be obligated to other communities
and that those amounts would not change over time. On the other
hand, the passengers who now use subsidized service at such
terminated airports would be inconvenienced because of the
increased driving required to access air service at the nearest
hub airport. In addition, implementing this option could
potentially negatively impact the economy of the affected
communities. For instance, officials from some communities, such
as Brookings, South Dakota, told us that they are able to attract
and retain local businesses because of several factors relating to
the quality of life there-with one important factor being its
scheduled air service.
Better Matching Capacity with Community Use
Another option is to better match capacity with community use. Our
past analysis of passenger enplanement data indicated that
relatively few passengers fly in many EAS markets, and that, on
average, most EAS flights operate with aircraft that are largely
empty. To better match capacity with community use, air carriers
could reduce unused capacity-either by using smaller aircraft or
by reducing the number of flights. Carriers could use smaller
aircraft. For example, we reported that from 1995 to 2002, total
passenger traffic dropped at 9 of 24 EAS communities where
carriers added flight frequencies.
Better matching capacity with community use could save federal
subsidies. For instance, reducing the number of required daily
subsidized departures could save federal subsidies by reducing
carrier costs in some locations. Federal subsidies could also be
lowered at communities where carriers used smaller-and hence less
costly-aircraft. On the other hand, there are a number of
potential disadvantages. For example, passenger acceptance is
uncertain. Representatives from some communities, like Beckley and
Bluefield, West Virginia, told us that passengers who are already
somewhat reluctant to fly on 19-seat turboprops would be even less
willing to fly on smaller aircraft. Such negative passenger
reaction may cause more people to drive to larger airports-or
simply drive to their destinations. Additionally, the loss of some
daily departures at certain communities would likely further
inconvenience some passengers. Lastly, reduced capacity may have a
negative impact on the economy of the affected community.29
Consolidating Subsidized Service Provided to Multiple Communities
into Service at Regional Airports
Another option is to consolidate subsidized service at multiple
communities into service at regional airports. As of July 1, 2002,
21 EAS subsidized communities were located within 70 highway miles
of at least one other subsidized community. We reported that if
subsidized service to each of these communities were regionalized,
10 regional airports could serve those 21 communities.
Regionalizing service to some communities could generate federal
savings. However, those savings may be marginal, because the total
costs to serve a single regional airport may be only slightly less
than the cost to serve two or three neighboring airports. For
example, in 2002, DOT provided $1.9 million in annual subsidies to
Air Midwest, Inc., to serve Ogdensburg and Massena, New York, with
stops at another EAS-subsidized community (Watertown, New York)
before arriving at its final destination of Pittsburgh,
Pennsylvania. According to an official with Air Midwest, the
marginal cost of operating the flight segments to Massena and
Ogdensburg are small in relation to the cost of operating the
flight from Pittsburgh to Watertown. Another potential positive
effect is that passenger levels at the proposed regional airports
could grow because the airline(s) would be drawing from a larger
geographic area, which could prompt the airline(s) to provide
better service (i.e., larger aircraft or more frequent
departures).
There are also a number of disadvantages to implementing this
option. First, local passengers would be inconvenienced, since
they would likely have to drive longer distances to obtain local
air service. Moreover, the passenger response to regionalizing
local air service is unknown. Passengers faced with driving longer
distances may decide that driving to an altogether different
airport is worthwhile, if it offers better service and air fares.
Additionally, as with other options, the potential impact on the
economy of the affected communities is unknown. Regionalizing air
service has sometimes proven controversial at the local level, in
part because regionalizing air service would require some
communities to give up their own local service for the
hypothetical benefits of a less convenient regional facility. Even
in situations where one airport is larger and better equipped than
others (e.g., where one airport has longer runways, a superior
terminal facility, and better safety equipment on site), it is
likely to be difficult for the other communities to recognize and
accept surrendering their local control and benefits.
Changing Carrier Subsidies to Local Grants
Another option is to change carrier subsidies into local grants.
We have noted that local grants could enable communities to match
their transportation needs with individually tailored
transportation options to connect them to the national air service
system. As we previously discussed, DOT provides grants to help
small communities to enhance their air service via SCASDP.
Our work on SCASDP identified some positive aspects of the program
that could be beneficial for EAS communities. First, in order for
communities to receive a Small Community grant, they had to
develop a proposal that was directed at improving air service
locally. In our discussion with some of these communities, it was
noted that this required them to take a closer look at their air
service and better understand the market they serve-a benefit that
they did not foresee. In addition, in one case developing the
proposal caused the airport to build a stronger relationship with
the community. SCASDP also allows for flexibility in the strategy
a local community can choose to improve air service, recognizing
that local facts and circumstances affect the chance of a
successful outcome. In contrast, EAS has one approach-a subsidy to
an air carrier.
However, there are also differences between the two programs that
make the grant approach problematic for some EAS communities;
these differences should be considered. First, because the grants
are provided on a one-time basis, their purpose is to create
self-sustaining air service improvements. The grant approach is
therefore best applicable where a viable air service market can be
developed. This could be difficult for EAS communities to achieve
because, currently, the service they receive is not profitable
unless there is a subsidy. While some EAS communities might be
able to transition to self-sustaining air service through use of
one of the grants, for some communities this would not be the
case. In addition, the grant program normally includes a local
cash match, which may be difficult for some EAS communities to
provide. This could systematically eliminate the poorest
communities, unless other sources of funds-such as state support
or local industry support-could be found.
Vision-100 Small Community Programs Have Not Progressed
In Vision-100, Congress authorized several programs relevant to
small communities. These programs have not progressed for various
reasons. The Alternate Essential Air Service Pilot Program allows
the Secretary of Transportation to provide assistance directly to
a community, rather than paying compensation to an air carrier.
Under the pilot program, communities could provide assistance to
air carriers using smaller aircraft, fund on-demand air taxi
service, provide transportation services to and from several EAS
communities to a single regional airport or other transportation
center, and purchase aircraft. Vision-100 also authorized the
Community Flexibility Pilot Program, which requires the Secretary
of Transportation to establish a program for up to 10 communities
that agree to forgo their EAS subsidy for 10 years in exchange for
a grant twice the amount of the EAS subsidy. The funds may be used
to improve airport facilities. (The grants can be used for things
other than general aviation.) DOT has solicited proposals for
projects in both of these programs. However, according to a DOT
official, no communities expressed any interest in participating
in these programs. Finally, the EAS Local Participation Program
allows the Secretary of Transportation to select no more than 10
designated EAS communities within 100 miles, by road, of a small
hub (and within the contiguous states) to assume 10 percent of
their EAS subsidy costs for a 4-year period. However, Congress has
prohibited DOT from obligating or expending any funds to implement
this program since Vision-100 was enacted.
Evaluate the Effectiveness of SCASDP before Reauthorization
We recently recommended that DOT examine the effectiveness of this
program when more projects are complete.30 Such an evaluation
would provide DOT and Congress with information about whether
additional or improved air service was not only obtained, but
whether it continues after the grant support has ended. This may
be particularly important since our work on the limited number of
completed projects found that, 11 of 23 grantees reported that the
improvements were self-sustaining after the grant was complete. In
addition, our prior work on the air service to small communities
found that once financial incentives are removed, additional air
service may be difficult to maintain. Since our report, an
additional 33 grants have been completed and DOT's plans to
examine the results from these completed grants should provide a
clearer and more complete picture of the value of this program.
Any improved service achieved from this program could then be
weighed against the cost to achieve those gains. This information
will be important as Congress considers the reauthorization of
this program in 2008.
In addition to the benefit of providing Congress with information
upon which to evaluate the merits of SCASDP, the evaluation would
likely have additional benefits. In conducting this evaluation,
DOT could potentially find that certain strategies the communities
used were more effective than others. For example, during our
work, we found some opposing views on the usefulness of travel
banks31 and some marketing strategies as incentives for attracting
improved service. As DOT officials identify strategies that have
been effective in starting self-sustaining improvements in air
service, they could share this information with other small
community airports and, perhaps, consider such factors in its
grant award process. In addition, DOT might find some best
practices and could develop some lessons learned from which all
small community airports could benefit. For example, one airport
used the approach of assuming airline ground operations such as
baggage handling and staffing ticket counters. This approach
served to maintain airline service of one airline and to attract
additional service from another airline. Sharing information on
approaches like this that worked (and approaches that did not) may
help other small communities improve their air service, perhaps
even without federal assistance.
In conclusion, Mr. Chairman, Congress is faced with many difficult
choices as it tries to help improve air service to small
communities, especially given the fiscal challenges the nation
faces. Regarding EAS, I think it is important to recognize that
for many of the communities, air service is not-and might never
be-commercially viable and there are limited alternative
transportation means for nearby residents to connect to the
national air system. In these cases, continued subsidies will be
needed to maintain that capability. In some other cases, current
EAS communities are within reasonable driving distances to
alternative airports that can provide that connection to the air
system. It will be Congress' weighing of priorities that will
ultimately decide whether this service will continue or whether
other, less costly options will be pursued. In looking at SCASDP,
I would emphasize that we have seen some instances in which the
grant funds provided additional service, and some in which the
funds did not work. When enough experience has been gained with
this program, the Congress will be in a position to determine if
the air service gains that are made are worth the overall cost of
the program. I would be pleased to answer any questions that you
or other Members of the Subcommittee may have at this time.
Contact Information
For further information on this testimony, please contact Gerald
L. Dillingham at (202) 512-2834 or [email protected] .
Individuals making key contributions to this testimony and related
work include Robert Ciszewski, Catherine Colwell, Daniel
Concepcion, Brandon Haller, Dave Hooper, Stuart Kaufman, Alex
Lawrence, Bonnie Pignatiello Leer, Maureen Luna-Long, John Mingus,
and Glen Trochelman.
7The analysis is based on 2004 national enplanement data-the most recent
data available.
8A network carrier operates a significant portion of its flights using at
least one hub where connections are made for flights on a spoke system.
Regional carriers provide service from small communities primarily using
regional jets to connect the network carriers' hub-and-spoke system.
9 Code of Federal Regulations Title 14 Part 121 (14 CFR Part 121) provides
details on aircraft certification requirements for aircraft that operate
scheduled service with 10 or more seats. The Commuter Rule was instituted
with 60 Fed. Reg. 65832, December 20, 1995.
10Aviation and Transportation Security Act, Section 110 of P.L. 107-71,
115 Stat. 597 (2001).
11Low-cost carriers follow a business model that may include
point-to-point service between high-density city pairs, a standardized
fleet with high aircraft utilization, low fares, and minimal onboard
service.
12Special provisions guaranteed service to Alaskan communities.
13Subsidies are used to cover the difference between a carrier's projected
revenues and expenses and to provide a minimum amount of profit.
14The average subsidy per passenger does not equate to a specific portion
of a passenger's ticket price paid for by EAS funds. Ticket pricing
involves a complex variety of factors relating to the demand for travel
between two points, the supply of available seats along that route,
competition in the market, and how air carriers choose to manage and price
their available seating capacity.
1549 USC 41732.
16DOT officials said that they check the reasonableness of the cost and
revenue information received from the air carriers against other data
reported to DOT and in documents filed with the Securities and Exchange
Commission.
17At any time throughout the year, an air carrier providing unsubsidized
service to an EAS-eligible community can file a notice to suspend service
if the carrier determines that it can no longer provide profitable
service, thus triggering a carrier selection case. In addition, after DOT
selects an air carrier to provide subsidized service, that agreement is
subject to renewal, generally every 2 years, at which time other air
carriers are permitted to submit proposals to serve that community with or
without a subsidy.
18P.L. 106-181.
19Vision-100, P.L. 108-176
20DOT must give priority consideration to communities that (1) have air
fares higher than average for all communities, (2) provide a portion of
the cost of the project from local sources other than airport revenues,
(3) have-or plan to establish-a public-private partnership to facilitate
air carrier service to the public, (4) will provide material benefits to a
broad segment of the public that has limited access to the national air
transportation system, and (5) will use the assistance in a timely manner.
21The highest number of communities served during the program's history
was 405 in 1980.
22DOT did not have ridership data available for all EAS communities.
23GAO, Commercial Aviation: Factors Affecting Efforts to Improve Air
Service at Small Community Airports, GAO-03-330 (Washington, D.C.: 2003).
January 17, 2003.
24The authorizing legislation provides one limitation on the timing of
expenditures. If funds are used to subsidize air service, the subsidy
cannot last more than 3 years. However, the time needed to obtain the
service is not included in the subsidy time limit. The legislation does
not limit the timing of expenditures for other purposes. In fiscal year
2005, DOT issued an order specifying that in general, grant funds should
be expended within 3 years.
25We considered a grant to be complete when the activities associated with
the grant were finished and FAA had made final reimbursements of allowable
costs.
26According to DOT officials, the agency only initiated the termination
for the grant awarded to Casper/Gillette, Wyoming. The communities awarded
the other six grants requested the termination of the grants.
27 GAO-05-325SP
28This information was current as of January 2006.
29As we reported in our 2002 report, although scheduled commercial air
service is positively correlated with local economic activity, we were
unable to locate reliable studies that describe the extent to which
scheduled commercial air service is directly responsible for economic
development in small communities in the United States (i.e., whether air
service precedes, follows, or develops simultaneously with local economic
activity).
30GAO, Initial Small Community Air Service Development Projects Have
Achieved Mixed Results, GAO-06-21 (Washington, D.C.: Nov. 2005).
31Businesses or individuals deposit or promise future travel funds to a
carrier providing new or expanded service. Contributing businesses and
individuals can then draw down from this account.
Appendix I: Additional Department of Transportation Selection Factors for
SCASDP Grants
1. e serving the community?
2. s are served?
3. of flights?
4. ice the community?
5. e been increasing or decreasing over the past
3 years?n increasing or decreasi
7. atistical Area population increasing or
decreasing?
8. e increasing or decreasing? esses in the area
10. to larger air service centers?
11. road access to other air service centers? k
service in identifi
13. ed to provide:
ice,
o More frequent flig
If this is an air service
proje
willing and committed
If his is an air service
would serve?
Source: G
Project-related Factors
ess the stated problem?
4. have a firm plan for promoting the
service?
5. e a definitive plan for monitoring,
modifying, and t, if necessary?
6. have a plan for continued support of the
project
on is not attained after the
grant expires? proposal,
n place? ating consortium?
10. unique geographical traits or other
considerations? requested reasonable
compared with the total
ilable? easonable compared with
the amount requestedeted duri
14. ll hub now?
15. e nonhub now?
16. ll nonhub now?
17. 18. bsidized through Essential Air Service?
eting only? y?
20. ve intermodal services?
21. 22. er incentive? air fare focused?
23. ve a low-fare service provider?
24. ft costs from the local or state level to
t
25. ow that proximity to other service would
detract from it?
26. aphically close to a past grant recipient?
Appendix II: Essential Air Service Airports and Small Community Air
Service Development Program Grantees
Figure 5: Airports Receiving Essential Air Service (EAS) as of May 2006
and All Small Community Air Service Development Program (SCASDP) Grantees,
through August 10, 2006
Note: Alaska, Hawaii and Puerto Rico are not to scale.
Appendix III: Status of SCASDP Grants Awarded, 2002 - 2006
2002 Grant Year
Status as of
Location Grant amount August 31, 2006
1. Abilene, TX $85,010 Completed
2. Akron/Canton, OH 950,000 Completed
3. Aleutians East Borough, AK 240,000 Completed
4. Asheville, NC 500,000 Completed
5. Augusta, GA 759,004 Terminated
6. Baker City, OR 300,000 Terminated
7. Beaumont/Port Arthur, TX 500,000 Completed
8. Bellingham, WA 301,500 Ongoing
9. Binghamton, NY 500,000 Completed
10. Bismarck, ND 1,557,500 Ongoing
11. Brainerd, St Cloud, MN 1,000,000 Completed
12. Bristol/Kingsport/Johnson City, TN 615,000 Completed
13. Cape Girardeau, MO 500,000 Completed
14. Casper, Gillette, WY 500,000 Terminated
15. Charleston, WV 500,000 Completed
16. Chico, CA 44,000 Completed
17. Daytona Beach, FL 743,333 Completed
18. Fort Smith, AR 108,520 Completed
19. Fort Wayne, IN 398,000 Completed
20. Hailey, ID 600,000 Completed
21. Lake Charles, LA 500,000 Completed
22. Lake Havasu City, AZ 403,478 Completed
23. Lamar, CO 250,000 Completed
24. Lynchburg, VA 500,000 Completed
25. Manhattan, KS 388,350 Completed
26. Marion, IL 212,694 Completed
27. Mason City, IA 600,000 Terminated
28. Meridian, MS 500,000 Completed
29. Moab, UT 250,000 Completed
30. Mobile, AL 456,137 Completed
31. Paducah, KY 304,000 Completed
32. Presque Isle, ME 500,000 Completed
33. Rapid City, SD 1,400,000 Completed
34. Reading, PA 470,000 Completed
35. Rhinelander, WI 500,000 Completed
36. Santa Maria, CA 217,530 Completed
37. Scottsbluff, NE 950,000 Completed
38. Somerset, KY 95,000 Completed
39. Taos/Ruidoso, NM 500,000 Completed
40. Telluride, CO 300,000 Completed
Total $19,999,056
Source: GAO analysis of DOT data.
2003 Grant Year
Status as of August 31,
Location Grant amount 2006
1. . Aguadilla, PR $626,700 Ongoing
2. Aleutians East Borough, AK 70,000 Ongoing
3. AZ Consortium, AZ 1,500,000 Ongoing
4. Bakersfield, CA 982,513 Ongoing
5. Bangor, ME 310,000 Ongoing
6. Charleston, SC 1,000,000 Terminated
7. Cut Bank, MT 90,000 Completed
8. Dickinson, ND 750,000 Completed
9. Dothan, AL 200,000 Completed
10. Dubuque, IA 610,000 Ongoing
11. Duluth, MN 1,000,000 Ongoing
12. Elmira, NY 200,000 Ongoing
13. Erie, PA 500,000 Completed
14. Fresno, CA 1,000,000 Ongoing
15. Friday Harbor, WA 350,000 Completed
16. Gainesville, FL 660,000 Completed
17. Grand Island, NE 380,000 Ongoing
18. Greenville, MS 400,000 Terminated
19. Gunnison, CO 200,000 Completed
20. Joplin, MO 500,000 Ongoing
21. Knoxville, TN 500,000 Terminated
22. Laredo, TX 400,000 Ongoing
23. Lewiston-Nez Perce, ID 675,000 Ongoing
24. Mountain Home (Baxter), AR 574,875 Ongoing
25. Muskegon, MI 500,000 Completed
26. NC Consortium, NC 1,200,000 Ongoing
27. Owensboro, KY 500,000 Ongoing
28. Parkersburg-Marietta, WV/OH 500,000 Ongoing
29. Pierre, SD 150,000 Completed
30. Redmond, OR 515,000 Completed
31. Savannah, GA 523,495 Completed
32. Shreveport, LA 500,000 Completed
33. Staunton, VA 100,000 Ongoing
34. Taos Consortium, NM 1,400,000 Completed
35. Tupelo, MS 475,000 Completed
36. Victoria, TX 20,000 Completed
Total $19,862,583
Source: GAO analysis of DOT data.
2004 Grant Year
Status as of
Location Grant amount August 31, 2006
1. Albany, GA $500,000 Ongoing
2. Alpena, MI 583,046 Ongoing
3. Beckley/Lewisburg, WV 300,000 Ongoing
4. Bloomington, IL 850,000 Ongoing
5. Butte, MT 360,000 Ongoing
6. Champaign-Urbana, IL 200,000 Completed
7. Charlottesville, VA 270,000 Ongoing
8. Chattanooga, TN 750,000 Ongoing
9. Clarksburg/Morgantown Ongoing
(reallocation), WV 372,286
10. 0 Columbus, MS 260,000 Ongoing
11. Del Rio, TX 318,750 Ongoing
12. Dubois, PA 400,000 Ongoing
13. Eau Claire, WI 500,000 Ongoing
14. Elko, NV 222,000 Completed
15. Evansville/South Bend, IN 1,000,000 Ongoing
16. Farmington, NM 650,000 Ongoing
17. Hot Springs (reallocation), AR 195,000 Completed
18. Huntsville, AL 479,950 Completed
19. Kalamazoo, MI 500,000 Ongoing
20. Lafayette, LA 240,000 Ongoing
21. Latrobe, PA 600,000 Ongoing
22. Lebanon, NH 500,000 Ongoing
23. Lincoln, NE 1,200,000 Ongoing
24. Logan City, UT 530,000 Ongoing
25. Marquette, MI 700,000 Ongoing
26. McCook/North Platte, NE 275,000 Ongoing
27. New Haven, CT 250,000 Ongoing
28. Pocatello, ID 75,000 Completed
29. Redding/Arcata, CA 500,000 Ongoing
30. Richmond, VA 950,000 Ongoing
31. Rutland (reallocation), VT 240,000 Ongoing
32. Salem, OR 500,000 Ongoing
33. Santa Rosa, CA 635,000 Ongoing
34. Sarasota, FL 1,500,000 Ongoing
35. Sioux City, IA 609,800 Ongoing
36. Sioux Falls, SD 350,000 Ongoing
37. Steamboat Springs, CO 500,000 Ongoing
38. Sumter, SC 50,000 Completed
39. Syracuse (reallocation), NY 480,000 Ongoing
40. Tyler, TX 90,000 Ongoing
41. Visalia (reallocation), CA 200,000 Ongoing
42. Walla Walla, WA 250,000 Ongoing
43. Waterloo, IA 550,000 Ongoing
44. Wilkes-Barre/Scranton, PA 625,000 Completed
45. Worcester (reallocation), MA 442,615 Ongoing
46. Youngstown, OH 250,000 Ongoing
Total $21,803,447
Source: GAO analysis of DOT data.
Note: Program funds from 2002 and 2003 were reallocated to six cities in
2004.
2005 Grant Year
Status as of August
Location Grant amount 31, 2006
1. Aberdeen, SD $450,000 Ongoing
2. Alexandria, LA 500,000 Ongoing
3. Bradford, PA 220,000 Ongoing
4. CA Consortium, CA 245,020 Ongoing
5. Cedar City, UT 155,000 Ongoing
6. Durango, CO 750,000 Ongoing
7. Fargo, ND 675,000 Ongoing
8. Florence, SC 500,000 Ongoing
9. Great Falls, MT 220,000 Ongoing
10. Greenville, NC 450,000 Ongoing
11. Gulfport/Biloxi, MS 750,000 Ongoing
12. Hancock/Houghton, MI 516,000 Ongoing
13. Hibbing, MN 485,000 Ongoing
14. Huntington, WV 500,000 Ongoing
15. Idaho Falls, ID 500,000 Ongoing
16. Ithaca, NY 500,000 Ongoing
17. Jacksonville, NC 500,000 Ongoing
18. Killeen, TX 280,000 Ongoing
19. Knox County, ME 555,000 Ongoing
20. Lawton/Ft. Sill, OK 570,000 Ongoing
21. Macon, GA 507,691 Ongoing
22. Marathon, FL 750,000 Ongoing
23. Marshall, MN 480,000 Ongoing
24. Massena, NY 400,000 Ongoing
25. Modesto, CA 550,000 Ongoing
26. Monterey, CA 500,000 Ongoing
27. Montgomery, AL 600,000 Ongoing
28. Oregon/Washington Consortium, 180,570 Ongoing
OR/WA
29. Rockford, IL 1,000,000 Ongoing
30. Ruidoso, NM 600,000 Ongoing
31. Somerset, KY 950,000 Ongoing
32. Stewart (Newburgh), NY 250,000 Ongoing
33. Vernal, UT 40,000 Ongoing
34. Williamsport, PA 500,000 Ongoing
35. Wyoming Consortium, WY 800,000 Ongoing
Total $17,429,281
Source: GAO analysis of DOT data.
2006 Grant Year
Location Grant amount
1. Abilene, TX $465,100
2. Big Sandy Region, KY 90,000
3. Brunswick, GA 500,000
4. Cedar Rapids, IA 200,000
5. Chico, CA 472,500
6. Fairbanks, AK 500,000
7. Gallup, NM 600,000
8. Garden City/Dodge City/Liberal, KS 150,000
9. Gary, IN 600,000
10. Grand Forks, ND 350,000
11. Harrisburg, PA 400,000
12. Jackson, MS 400,000
13. Jamestown, NY 150,000
14. Jamestown/Devil's Lake, ND 100,000
15. Kalispell, MT 450,000
16. Longview, TX 225,000
17. Lynchburg, VA 250,000
18. Melbourne, FL 800,000
19. Monroe, LA 50,000
20. Montrose, CO 450,000
21. North Bend, OR 400,000
22. Palmdale, CA 900,000
23. Springfield, IL 390,000
24. Toledo, OH 400,000
25. Tuscaloosa, AL 400,000
Total $9,692,600
Source: DOT data.
Appendix IV: Essential Air Service Communities and Subsidies as of May 1,
2006
Table 2: Essential Air Service (EAS) Communities in the Contiguous United
States, Hawaii, and Puerto Rico
States and communities May 1, 2006 annual subsidy amounts
ALABAMA
Muscle Shoals $1,364,697
ARIZONA
Kingman 1,001,989
Page 1,057,655
Prescott 1,001,989
Show Low 779,325
ARKANSAS
El Dorado/Camden 923,456
Harrison 923,456
Hot Springs 1,385,183
Jonesboro 923,456
CALIFORNIA
Crescent City 816,025
Merced 696,788
Visalia 450,000
COLORADO
Alamosa 1,083,538
Cortez 853,587
Pueblo 780,997
GEORGIA
Athens 392,108
HAWAII
Hana 774,718
Kamuela 395,053
Kalaupapa 331,981
ILLINOIS
Decatur 954,404
Marion/Herrin 1,251,069
Quincy 1,097,406
IOWA
Burlington 1,077,847
Fort Dodge 1,080,386
Mason City 1,080,386
KANSAS
Dodge City 1,379,419
Garden City 1,733,997
Great Bend 621,945
Hays 1,540,392
Liberal 1,008,582
Manhattan/ Ft. Riley 487,004
Salina 487,004
KENTUCKY
Owensboro 1,127,453
MAINE
Augusta/Waterville 1,065,475
Bar Harbor 1,065,475
Presque Isle 1,116,423
Rockland 1,065,475
MARYLAND
Hagerstown 649,929
MICHIGAN
Escanaba 290,952
Ironwood/Ashland, WI 409,242
Iron Mountain/Kingsford 602,761
Manistee/Ludington 776,051
MINNESOTA
Chisholm/Hibbing 1,279,329
Thief River Falls 777,709
MISSISSIPPI
Laurel/Hattiesburg 1,100,253
MISSOURI
Cape Girardeau 1,147,453
Columbia/Jefferson City Order 2006-4-6 requested proposals for
Columbia/Jefferson City
Fort Leonard Wood 683,201
Joplin 755,762
Kirksville 840,200
MONTANA
Glasgow 922,103
Glendive 922,103
Havre 922,103
Lewistown 922,103
Miles City 922,103
Sidney 1,306,313
West Yellowstone 247,122
Wolf Point 922,103
NEBRASKA
Alliance 655,898
Chadron 655,898
Grand Island 1,198,396
Kearney 1,166,849
McCook 1,502,651
North Platte 870,504
Scottsbluff 494,887
NEVADA
Ely 784,463
NEW HAMPSHIRE
Lebanon 998,752
NEW MEXICO
Alamogordo/Holloman Order 2006-3-26 requested proposals on an
emergency basis
Carlsbad 599,671
Clovis 859,057
Hobbs 519,614
Silver City/Hurley/Deming 859,057
NEW YORK
Jamestown 1,217,414
Massena 585,945
Ogdensburg 585,945
Plattsburgh 753,964
Saranac Lake 753,964
Watertown 585,945
NORTH DAKOTA
Devils Lake 1,329,858
Dickinson 1,697,248
Jamestown 1,351,677
OKLAHOMA
Enid 636,279
Ponca City 636,279
OREGON
Pendleton 649,974
PENNSYLVANIA
Altoona 893,774
Bradford 1,217,414
DuBois 643,818
Johnstown 464,777
Lancaster 1,611,707
Oil City/Franklin 683,636
PUERTO RICO
Mayaguez 688,551
Ponce 622,056
SOUTH DAKOTA
Brookings 1,039,364
Huron 1,039,364
Pierre 449,912
Watertown 1,211,589
TENNESSEE
Jackson 1,179,026
TEXAS
Victoria 510,185
UTAH
Cedar City 1,068,608
Moab 783,608
Vernal 555,771
VERMONT
Rutland 849,705
VIRGINIA
Staunton 650,123
WASHINGTON
Ephrata/Moses Lake 1,698,922
WEST VIRGINIA
Beckley 977,858
Clarksburg/Fairmont 306,109
Greenbrier/Lewisburg/White
Sulphur Springs 540,579
Morgantown 306,109
Parkersburg 439,115
Princeton/Bluefield 977,858
WYOMING
Laramie 397,400
Riverton 394,046
Rock Springs 390,488
Sheridan 336,701
Worland 797,844
Source: DOT
Table 3: Alaskan EAS Communities
Community May 1, 2006 annual subsidy
Adak $1,617,923
Akutan 350,381
Alitak 106,054
Amook Bay 16,622
Atka 336,303
Cape Yakataga 30,920
Central 61,421
Chatham 6,433
Chisana Order 2006-4-13 held in 40-Mile Air and Requested
Proposals
Circle 61,421
Cordova 1,763,179
Elfin Cove 108,297
Excursion Inlet 9,212
Funter Bay 6,433
Gulkana 199,839
Gustavus 732,217
Healy Lake 51,781
Hydaburg 54,733
Icy Bay 30,920
Karluk 38,880
Kitoi Bay 16,622
Manley 24,768
May Creek 69,759
McCarthy 69,759
Minto 24,768
Moser Bay 16,622
Nikolski 173,603
Olga Bay 16,622
Pelican 108,297
Petersburg 732,217
Port Alexander 48,746
Port Bailey 16,622
Port William 16,622
Seal Bay 16,622
Uganik 15,715
West Point 16,622
Wrangell 732,217
Yakutat 1,763,179
Zachar Bay 16,622
Source: DOT.
Related GAO Products
Airline Deregulation: Reregulating the Airline Industry Would Reverse
Consumer Benefits and Not Save Airline Pensions. GAO-06-630 Washington,
D.C.: June 9, 2006.
Commercial Aviation: Initial Small Community Air Service Development
Projects Have Achieved Mixed Results. GAO-06-21 Washington, D.C: November
30, 2005.
Commercial Aviation: Survey of Small Community Air Service Grantees and
Applicants. GAO-06-101SP . Washington, D.C.: November 30, 2005
Commercial Aviation: Bankruptcy and Pension Problems Are Symptoms of
Underlying Structural Issues. GAO-05-945 Washington, D.C.: September 30,
2005.
Commercial Aviation: Legacy Airlines Must Further Reduce Costs to Restore
Profitability. GAO-04-836 Washington, D.C.: August 11, 2004
Commercial Aviation: Issues Regarding Federal Assistance for Enhancing Air
Service to Small Communities. GAO-03-540T . Washington, D.C.: March 11,
2003
Federal Aviation Administration: Reauthorization Provides Opportunities to
Address Key Agency Challenges. GAO-03-653T . Washington, D.C.: April l0,
2003.
Commercial Aviation: Factors Affecting Efforts to Improve Air Service at
Small Community Airports. GAO-03-330 Washington, D.C.: January 17, 2003
Commercial Aviation: Financial Condition and Industry Responses Affect
Competition. GAO-03-171T . Washington, D.C.: October 2, 2002.
Options to Enhance the Long-term Viability of the Essential Air Service
Program. GAO-02-997R . Washington, D.C.: August 30, 2002.
Commercial Aviation: Air Service Trends at Small Communities Since October
2000. GAO-02-432 . Washington, D.C.: March 29, 2002.
Proposed Alliance Between American Airlines and British Airways Raises
Competition Concerns and Public Interest Issues. GAO-02-293R . Washington,
D.C.: December 21, 2001.
"State of the U.S. Commercial Airlines Industry and Possible Issues for
Congressional Consideration," Speech by Comptroller General of the United
States David Walker. The International Aviation Club of Washington:
November 28, 2001.
Financial Management: Assessment of the Airline Industry's Estimated
Losses Arising From the Events of September 11. GAO-02-133R . Washington,
D.C.: October 5, 2001.
Commercial Aviation: A Framework for Considering Federal Financial
Assistance. GAO-01-1163T . Washington, D.C.: September 20, 2001.
Aviation Competition: Restricting Airline Ticketing Rules Unlikely to Help
Consumers. GAO-01-832 Washington, D.C.: July 31, 2001.
Aviation Competition: Challenges in Enhancing Competition in Dominated
Markets. GAO-01-518T . Washington, D.C.: March 13, 2001.
Aviation Competition: Regional Jet Service Yet to Reach Many Small
Communities. GAO-01-344 Washington, D.C.: February 14, 2001.
Airline Competition: Issues Raised by Consolidation Proposals. GAO-01-402T
. Washington, D.C.: February 7, 2001.
Aviation Competition: Issues Related to the Proposed United Airlines-US
Airways Merger. GAO-01-212 , Washington, D.C.: December 15, 2000.
Essential Air Service: Changes in Subsidy Levels, Air Carrier Costs, and
Passenger Traffic. RCED-00-34, Washington, D.C.: April 14, 2000.
(540116)
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Highlights of GAO-06-398T , a report to the Subcommittee on Aviation,
Committee on Commerce, Science and Transportation, U.S. Senate
September 14, 2006
COMMERCIAL AVIATION
Programs and Options for the Federal Approach to Providing and Improving
Air Service to Small Communities
Over the last decade, significant changes have occurred in the airline
industry. Network carriers are facing challenging financial conditions and
low-cost carriers are attracting passengers away from some small community
airports. These changes, and others, have challenged the ability of small
communities to attract adequate commercial air service.
In response to these challenges, Congress has established two key funding
programs-the Essential Air Service (EAS) and the Small Community Air
Service Development Program (SCASDP)-to help small communities retain or
attract air service. However, the sustainability of such funding could be
affected by the federal government's fiscal imbalance. In addition, GAO
reports have raised questions about how these programs support commercial
air service to small communities.
Given this environment, this testimony discusses (1) the development and
impact of EAS, (2) the status of SCASDP and (3) options for reforming EAS
and evaluating SCASDP. The testimony is based on previous GAO research and
interviews related to these programs, along with program updates.
The EAS program guarantees that communities that were served by air
carriers before deregulation continue to receive a certain level of
scheduled air service, under certain conditions. A growing number of
communities are receiving subsidies under this program and funding for the
EAS program has risen more than four-fold over the past 10 years. The
federal subsidies have resulted in continued air service to the EAS
communities, but if the subsidies were removed, air service might end at
many of these communities.
SCASDP grantees have used their grants to pursue a variety of goals and
have used a variety of strategies, including marketing and revenue
guarantees, to improve air service. The program has had mixed results: 11
of the 23 projects completed as of September 30, 2005, showed
self-sustaining improvements to air service; while the remaining 12
grantees either discontinued the improvement or the improvement was not
self-sustaining. Finally, the number of applications for SCASDP grants has
declined-from 179 in 2002 to 75 in 2006.
There are options for reforming EAS such as consolidating service into
regional airports, which might make it more cost-effective, but also could
reduce service to some communities. In 2003, Congress established several
programs as alternatives for EAS, but these programs have not progressed.
The Department of Transportation has agreed to evaluate completed SCASDP
projects, an effort that will be useful when Congress considers the
reauthorization of this program in 2008; this could also identify "lessons
learned" from successful projects.
EAS Communities as of May 2006; SCASDP Communities, 2002-2006
*** End of document. ***