Essential Air Service Funding Challenged

With the political dialogue in Washington dominated by issues relating to the US government’s growing debt, policy makers are debating what and how much—not whether—to cut from the federal budget.

On the chopping block for many lawmakers, including a House of Representatives’ majority, is the Essential Air Service program established when the US airline industry was deregulated in 1978 to subsidize flights to rural communities.

According to the US Dept. of Transportation, EAS “currently subsidizes commuter airlines to serve approximately 140 rural communities across the country that otherwise would not receive any scheduled air service.” The price tag for the program is set to rise to $200 million annually (up from $123 million in 2009 and $50 million in 1996) under the Senate’s version of FAA reauthorization legislation passed earlier this year, a cost the US government simply can’t afford, contends House Transportation and Infrastructure Committee Chairman John Mica (R-Fla.).

The House in April passed a four-year, $59.7 billion FAA reauthorization bill championed by Mica that, among other provisions, would phase out EAS for all states except Alaska and Hawaii by 2013. The fate of EAS is part of ongoing negotiations between the House and Senate, which passed a two-year, $34.5 billion FAA reauthorization bill in February that strongly endorsed EAS’s continuance. The two chambers have struggled since 2007 to agree on a unified FAA bill; as a result, the agency has been operating via temporary funding extensions for nearly four years.

‘Difficult Choices’ 

The House FAA bill “recognized the financial strain facing the country,” T&I Committee spokesperson Justin Harclerode tells ATW. “We realized we had to make choices, difficult financial choices, and [phasing out] EAS was one of those choices.” He acknowledges that there are “concerns” about the consequences of slashing the program, but says “other concerns” trumped those about EAS.

Defenders of EAS, which include Senate Commerce, Science and Transportation Committee Chairman Jay Rockefeller (D-W.Va.), say the program is vital to the economies of rural communities across the US and enables crucial links in the country’s airline network to remain viable.

“There are a large number of communities across this country where EAS is an economic lifeline,” Airports Council International-North America VP-Government and Political Affairs Jane Calderwood tells this magazine. “It’s how they move their goods and services. It’s how they move people. It’s how they attract business. Members [of Congress] who have EAS airports [in their states or districts] are very supportive of them in general because it would be a huge economic blow to the communities [if the program were eliminated]. It would also be a blow to the entire aviation system because those passengers feed in [to the main hubs] . . .
To those states that have a number of [EAS airports, eliminating the program] would be devastating.”

In 1978, the US government deregulated the US airline industry, allowing carriers the freedom to determine which domestic routes they would operate. But lawmakers realized they had a problem: Airline service to a host of smaller destinations would likely never be profitable to operate, meaning the number of airports with commercial service would decline dramatically as deregulation took effect.

So they established EAS, initially authorizing it through 1988. “It was modified and extended by the Airport and Airway Safety and Capacity Expansion Act of 1987 and was later made permanent as part of the FAA Reauthorization Act of 1996,” according to the US Regional Airline Assn. “The EAS program has undergone numerous criteria adjustments since its inception, mainly limiting eligibility. At present, communities are no longer eligible for subsidized air service if they are located within 70 driving miles of an FAA-designated large or medium hub airport, or if their per passenger subsidies exceed $200.”

According to DOT, which administers the program, the “mandate is to provide the EAS communities with access to the national air transportation system. As a general matter, this is accomplished by subsidizing two to four round trips a day, with three being the norm, with 19-seat aircraft to a major hub airport.” 

But EAS has come under pressure over the last few years. “New highways and increased speed limits, for instance, have resulted in greater numbers of passengers driving to nearby airports [instead of taking advantage of EAS flights] in search of lower fares,” RAA noted. “The increased operational costs of 19-seat turboprop aircraft, coupled with skyrocketing fuel prices and passenger migration to nearby airports with scheduled air service, have also caused program costs associated with EAS to climb sharply.”

Tidal Wave 

Wyoming-based Great Lakes Aviation is the US’s largest EAS carrier, but it has been cutting back EAS routes, partly in anticipation of reductions to the program. “We didn’t want to be in the gun sights, so we started downsizing,” CEO Chuck Howell explained during the recent RAA Annual Convention in Nashville. “We’ve seen this [eliminate EAS] tidal wave coming.”

The carrier has reduced the number of EAS cities it serves using Beech 1900s from around 50 to 32, which still covers about 70% of its flight network. “We would lose a lot of sleep” if EAS were eliminated or significantly curtailed, Howell said.

Sen. Tom Coburn (R-Okla.) added an amendment to the Senate-passed FAA reauthorization bill that would extend the 70-miles-to-nearest-hub rule to 90 miles. “The 90-mile rule will [likely] be the first [alteration of EAS] to pass [Congress] and that would take about $30 million out of the program,” Howell commented, adding that he hoped those savings would “pacify Congress.”

Another Coburn proposal would mandate that EAS routes serve an average of at least 10 passengers daily. “That would take about 10 cities out of our network,” Howell said.

The Great Lakes CEO believes the savings from eliminating EAS would do little to alleviate the US government’s budget problems but could seriously alter the country’s air transport network. The $200 million saved annually from slashing EAS is equivalent to the “cost of about 10 Q400s,” he noted. “It’s not a significant number” in terms of the overall federal budget.

Calderwood agrees. EAS “is part of the [US government’s] non-defense discretionary spending, which [all together] is less than 12% of the whole [federal] budget,” she explains. “Yes, you could say every drop in the bucket helps, but [eliminating EAS] would have an economic impact that could be averse to tax revenues because there are companies that won’t go into, or will move out of, communities if they can’t have reliable air service. So there will be tax revenue losses . . .  There is always a cause and effect, and [eliminating] EAS would hit a lot of communities around the country.”

Tooth and Nail 

While the House voted to phase out EAS, an amendment proposed during the Senate FAA reauthorization debate by Sen. John McCain (R-Ariz.) to eliminate the subsidies was defeated by a 61-38 vote. With Rockefeller leading the Senate side in FAA reauthorization negotiations with the House, political observers in Washington believe EAS will ultimately survive, largely intact.

In June, Rockefeller called eliminating EAS “a non-starter,” adding, “It makes no sense to end a program that creates so much economic value. It makes no sense to choke off rural residents’ access to air travel—and their connection to jobs and family. I will fight tooth and nail against any proposal to eliminate or cut funding for this critical program.”

Though lawmakers such as McCain and Mica have cited savings that can be achieved through cutting EAS, they have not issued passionate critiques of the program to match the fevered defenses of EAS provided by Rockefeller and other lawmakers from both parties. In fact, a bi-partisan “EAS Caucus” has emerged in the Senate to fight to preserve the program.

EAS remains part of contentious, ongoing House/Senate negotiations over FAA reauthorization and close observers of the process suggest Mica will eventually concede EAS’s continuance but wants to hold onto its possible elimination as a bargaining chip for as long as possible.

ACI-NA, the American Assn. of Airport Executives, RAA and the National Assn. of State Aviation Officials jointly stated in a letter to Congress, “While the consequences of cutting this program will be borne most heavily by those passengers left without air service, reducing the volume of air travel from these communities will carry negative economic consequences for the entire air transportation industry. Of the 435 [US] commercial airports outside of Alaska and Hawaii, 106 of those airports receive air service only through the Essential Air Service program. Eliminating the program at those airports would shut down air travel to and from nearly one-quarter of our nation’s commercial airports. The economic impact on our nation’s air transportation network  . . . would be substantial.”

Conceding that there are “fiscal challenges facing our nation,” the organizations offer “to assist with meaningful reform and streamlining of the program to ensure its future success.”

Essential Alaska

Debate continues over the future of the Essential Air Service program that subsidizes airline flights to rural communities across the US, but proponents of the program from the state of Alaska have succeeded in narrowing the conversation to whether EAS should be cut in the continental US. EAS truly is “essential” in rural Alaska, they contend.

Sen. John McCain (R-Ariz.), the former presidential candidate, moved to eliminate EAS entirely during the Senate’s consideration of FAA reauthorization legislation earlier this year but was voted down. The House of Representatives has passed a bill to phase out EAS by 2013, but the legislation would allow the program to continue in Alaska and Hawaii.

While some fear there could be negative economic consequences to eliminating EAS in rural communities in the “Lower 48” states, there is a wide consensus that axing EAS in Alaska would dramatically impact transportation in the state. Currently, 45 Alaska airports are served under EAS, comprising about one-third of all US airports with EAS subsidized service.  

Alaska Air Carriers Assn. Executive Director Joy Journeay tells ATWby email, “82% of our communities are not accessible by road and rely on air transport for all life-sustaining goods and services. Alaska’s people travel by air eight times more often per capita than those in rural areas of the Lower 48, and ship 39 times more freight per capita—nearly one ton per person per year.”

US Sen. Lisa Murkowski (R-Alaska) pushed back hard against McCain’s effort to slash EAS in Alaska. “I can say without any reservation that this amendment [proposed by McCain] would create an economic and a transportation disaster for Alaska, including the loss of jobs, livelihoods and would potentially impact health and medical situations,” she said on the floor of the Senate. “The complete elimination of the EAS program could destabilize many of our rural communities, could negatively impact the integrity of Alaska’s interconnected aviation system and severely reduce air services to essential parts of the state. Given what we face with the limited road system, weather and terrain issues, we in the state treat an airplane or helicopters like most Americans would treat their minivans. Aircraft in Alaska are not just a nice thing to have. They are a lifeline for survival, for subsistence, for travel, for recreation.”