EAS Balances Budgetary Requirements with Rural Air Service Needs

 - September 3, 2013, 1:15 AM
Great Lakes Aviation lost its $1.7 million subsidy to serve Ely, Nev., due to a new Congressionally mandated per-passenger limit of $1,000.
Great Lakes Aviation lost its $1.7 million subsidy to serve Ely, Nev., due to a new Congressionally mandated per-passenger limit of $1,000.

The Essential Air Service (EAS), a $193 million DOT program that subsidizes scheduled airline service to approximately 160 rural communities, saw an initial 2013 budget cut of $16 million in response to sequestration. The media response in rural communities was shrill, with headlines such as “Sequester could ground commercial air services statewide” (Mississippi Business Journal, March 22) and “Sequester could ground Great Lakes airline” (Wyoming Business Report, March 7).

According to a DOT spokesman, however, none of the above actually happened. “Despite the sequester, we have been able to continue [EAS] without adversely impacting any communities,” he said. “We used a limited amount of unobligated funds carried forward into FY2013, transferred funding from another [DOT] account as allowed in appropriations language, and used the increased mandatory appropriation from overflight fees provided in the FAA Modernization and Reform Act of 2012.”

About $6.5 million of the EAS shortfall funding came from the Compensation for Air Carriers account. According to the DOT spokesman, this program compensated air carriers for the losses they incurred after 9/11, and “has been completed for a number of years, so the unobligated balance was not needed for that program.”

While critics characterize the EAS program as outdated and a waste of taxpayer funds, the DOT has worked to balance the EAS mission with recent Congressional mandates. In response to the 2011 Airport and Airway Extension Act, Part IV, which contained a provision that prohibits the DOT from providing EAS to communities whose annual subsidies are greater than $1,000 per passenger, the DOT terminated the EAS eligibility of seven airports between May last year and July this year. For example, this past March the DOT terminated EAS eligibility at Miles City, Mont., where Silver Airways received a $1.6 million subsidy to fly a total of 694 passengers in FY2012, resulting in a subsidy rate of $2,337 per passenger. In Ely, Nev., the DOT terminated EAS eligibility and the $1.7 million subsidy to Great Lakes Aviation, which carried 1,070 passengers in FY2012 at a subsidy rate of $1,637 per passenger.

Such moves reduced the EAS “payments to air carriers” budget from $163 million in 2010 to $143 million this year. But even with budget cuts, the EAS program is still fulfilling its mission of providing air service to communities when their scheduled carriers leave.

Rhinelander/Oneida County Airport (RHI) in northern Wisconsin may be the last “new” airport allowed under new rules set by the FAA Modernization and Reform Act of 2012. The law caps the communities in the 48 states plus Puerto Rico eligible to participate in the program to those that had received EAS funding at any time between Sept. 30, 2010, and Sept. 30, 2011, or that received a 90-day notice of service suspension from their incumbent carrier during that time.

For decades until September 2011, multiple carriers offered scheduled service into RHI and carried as many as 5,500 passengers per month during the summer and about half that during winter months. Then RHI became the victim of a so-called perfect storm of airline economics, beginning with Delta’s 2008 merger with Northwest Airlines, which had been providing scheduled service to Minneapolis, and Republic Airways’ 2009 purchase of Midwest Express, which had been providing scheduled service to Milwaukee and Chicago.

“When Delta took over Northwest in 2008, we saw fares go up and schedules reduced,” said RHI airport director Joseph Brauer. “But the fares and schedules at our competitors didn’t change, and our leisure travelers opted to drive rather than pay a $100-per-person fare differential.”

Citing low load factors at RHI, Delta filed to suspend service in June 2011, one month before the airline announced it would suspend service at an additional 24 rural airports. In the meantime, Republic had taken steps to eliminate Midwest Express’s Milwaukee hub, shedding smaller Midwest markets, and returning its fleet of 37-seat ERJ-135s to lessors. Republic filed to suspend service at RHI in September 2011, threatening to leave an airport with consistent annual enplanements of more than 25,000 passengers (and as high as 39,000 enplanements in 2005) without air service.

After several DOT requests for proposal went unanswered and one airline failed to follow through with its award, St. George, Utah-based SkyWest Airlines won the new $1.7 million EAS contract at RHI in August last year and now provides twice-daily service on 50-seat CRJ200s. Brauer said the aircraft are flying at load factors of between 80- and 98 percent, and he expressed hope that SkyWest will add capacity next year.

“We are pleased with the enthusiasm we have seen from the Rhinelander airport and community,” said Mike Thompson, SkyWest Airlines vice president for market development. “Our focus in this first year has been to deliver great air service and evaluate the response from travelers. With a year to evaluate, we can begin to plan and predict how to best meet the needs of the community in the future.”