CQ TODAY – TRANSPORTATION & INFRASTRUCTURE
May 13, 2003 – 5:51 p.m.

Essential Air Service Program Under Attack Again

By <Peter> <Cohn>, CQ Staff

At the same time Congress deregulated the airline industry in 1978 in the name of competition, it sought to protect rural areas of the country from market forces that might cut off their unprofitable flights.

The result was the Essential Air Service program, a federal subsidy for airlines willing to serve out-of-the-way airports such as Show Low, Ariz., or Akutan, Alaska, that had scheduled service before deregulation and wanted to keep it.

Currently, 125 communities have subsidized service for which Congress has appropriated $113 million the past two years. More places would be eligible if there was more money.

The program has never been popular with fiscal conservatives nor with the White House — Presidents Ronald Reagan, George H.W. Bush and Bill Clinton have tried to kill it off. But Congress, and particularly members of Congress from rural states — such as Alaska, Maine, Kansas and Montana — have kept it going.

The Congressional Research Service wrote of the program in a 1998 report, "Given the numerous attempts to eliminate the program by fiscal conservatives as an unnecessary expense for a relatively small number of communities, its continued existence would be viewed by some as remarkable."

Rather than try again to eliminate the program — which is much like trying to persuade Congress to eliminate Amtrak or the National Guard — the Bush administration has a plan to shift the cost more to states and cities and broaden the program to other forms of commuter transportation. Instead of paying small airlines to serve their towns, for instance, local officials might want to use federal help to subsidize trains or buses.

When administration officials tried this idea out on Ted Stevens, the Alaska Republican who chairs the Senate Appropriations Committee, he was furious.

At a Senate Commerce Committee hearing March 11, Stevens told Read Van de Water, assistant Transportation secretary for aviation and international affairs, that Alaskans have no way to get around except by air.

"Would you like to build the roads out there? They cost about $2 million a mile," Stevens said. "These are small Native villages, you know. They have no tax base."

A beleaguered Van de Water could counter only that budget constraints had forced the Transportation Department's hand. "We're going to give you some [money], if I have my way," Stevens said.

Stevens was instrumental in creating the Essential Air Service program, and service to dozens of remote Alaska towns is subsidized by nearly $7 million a year for commuter carriers such as 40-Mile Air and Warbelow's Air Ventures, flying tiny three-seat Cessna 185s in some cases. Alaska Airlines, the nation's ninth-largest carrier, receives about $3.9 million of the $7 million, according to Transportation Department figures compiled in April.

But the region that benefits the most from the program is the upper Midwest with its vast farm states and sparse cities.

When Congress created the program in 1978, it left the criteria up to the Transportation Department. In general, a town can qualify if it formerly had scheduled service and is more than 70 miles from a jetport. There is a $200-per-passenger subsidy limit, unless the community is more than 210 miles from a large or medium-size airport.

Graduated Subsidies

The Bush plan would subsidize only rail or bus service for communities within 100 miles of a large or medium-sized hub airport, 75 miles from a small hub or 50 miles from a non-hub with jet service. Those communities would have to contribute half the cost in order to qualify.

Communities between 100 miles and 210 miles from a large or medium hub-airport would have to pay 25 percent of the subsidy cost; those farther out would pay 10 percent.

The local match requirements would "be absolutely devastating to our communities," said Maurice Parker, executive director of Regional Aviation Partners, a trade group representing regional airlines, manufacturers, airports and local governments.

"One thing I've noticed is that very few [Transportation Department] officials actually get out and ride the system. I think their opinions would change as to what's isolated and what's not isolated," said Parker, who sits on the board of directors of Mesa Air Group, the Phoenix, Ariz.-based firm which operates Mesa Airlines, a regional carrier.

The financial pressure on the program has increased in recent years — the cost of providing service has gone up while travel on subsidized routes was declining slightly even before Sept. 11.

In its budget documents for fiscal 2004 the White House Office of Management and Budget cited the example of Utica, N.Y.

Until June 2002, when the Transportation Department deemed Utica ineligible for Essential Air Service funding, an average of 3.7 passengers a day boarded planes there, yet carriers received an average annual subsidy of $1.1 million. That amounts to $495 per passenger.

"In contrast, one could rent a car for a week at $190 and drive 50 miles to Syracuse's Hancock airport, which is served by eight carriers," the budget document states. "Clearly, this was not the intent of the program." The administration wants to cut funding back to $50 million, the minimum Congress guaranteed in a 1996 law.

Currently, the Transportation Department can declare some communities ineligible for subsidies if funding is not available. According to figures compiled by Regional Aviation Partners, 52 small communities have been cut off from air service since fiscal 1988 due to lack of money.

Fiscal conservatives and budget watchdogs are pleased with the administration proposal. "This is a key budgetary reform the administration is proposing," said Keith Ashdown, vice president for policy at Taxpayers for Common Sense. "This is an area where you need to let private air services start to replace it. If this subsidization continues, the market never opens."

The Bush plan also would encourage connections between trains, buses and airports, said Hank Dittmar of Reconnecting America, a nonprofit advocacy group devoted to finding innovative ways to connect different modes of travel to ease congestion and solve other transportation problems.

Issue for Reauthorization

The future of Essential Air Services will be an issue when Congress reauthorizes federal aviation programs this year.

A bill drafted by Don Young, R-Alaska, chairman of the House Transportation and Infrastructure Committee, would require a local match of up to 10 per cent by fiscal 2008 by communities within 170 miles of a large or medium hub and 75 miles of a small hub. It also would create an alternate program in which grants are given to communities rather than air carriers and the communities could use them to buy their own planes or subsidize trains or buses. Alaska would not be subject to the local match requirement.

Young's staff worked closely on the proposal with fellow Republican Jerry Moran, who represents six of the seven Kansas communities that receive Essential Air Service funding — at a cost of $7.5 million a year.

Moran said the Transportation Department lacks the resources to adequately administer the program, and giving the money directly to communities would allow them to innovate and eliminate red tape.

The aviation reauthorization bill (824) approved by the Senate Commerce, Science and Transportation Committee, would keep funding at $113 million, but a pilot program for a 10 percent local match in 10 communities would be allowed.

The administration plan "would break our country's promise to a lot of small communities," said Sen. Byron L. Dorgan, D-N.D., whose state is one of the top 10 recipients of the subsidy. "We're not going to meet our obligations by substituting air travel for bus service or train travel."

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