GUEST POST: Fixing The Essential Air Service Program

15 Jul

Editor’s note: It’s my las day of vacation, so we have reached the last guest post from my aviation/airline/travel geek friends.  Nathan Vallier has worked for a who’s who in small air service providers, including Mesa Air, RegionsAir and Hawaii’s go! Mokulele, where among other things, he helped operate the Essential Air Service program. Small community air service is an issue near and dear to my heart. You can check out my Feb. 9 post on the topic here.  Vallier has also consulted on EAS, which gives him a unique view on the ins and outs of the program, and how it can be fixed.  Enjoy! 

For as long as I can remember, the Essential Air Service (EAS) program has been a “love and hate” program in Washington D.C.   Uneducated congressmen love to make it the poster child for “bad government,” while those protecting it fail to get their message across.   While there are some bad politicians out there, some bad airlines also exist that are taking this program for all its worth, and unfortunately it costs you, the consumer, in the end.

EAS initially started out as a small program to guarantee flights to itty bitty communities like Parsons, Kansas, and Mattoon, Illinois.  Now we’re seeing larger markets like Decatur, Illinois getting $3 million a year for subsidies.  In 2000, there were 80 subsidized cities with a total cost of $45 million.  In 2010, there were 109 subsidized cities with a total cost of $170 million.  Ouch.  But still, this is just a tiny little program compared to other government spending.   

Yet congressional leaders in districts not affected by EAS (or those whose markets became ineligible) love to say how this is a government pork program, it only helps the rich, etc.  They get in some really good sound bites, and the opposition rarely gets as good coverage.

What you don’t hear are ways we can make this program work, rather than let it keep going at its current pace.   I think there’s room to make this program work, but its going to require some changes.

  1. Stop paying airlines full subsidy when an airport closes, for whatever reason.  We should not be providing a full subsidy to an air carrier when they can’t operate.   Many airlines have fixed costs and variable costs, so why not have a formula so that the basic costs are met?  So if a runway has to be closed for repairs and it requires closure of the airport for 2 weeks, then the carrier would receive 50% to 66% of their subsidy so they can maintain their station, keep paying personnel, and pay for the planes.  But that’s IF these costs are still incurred. 
  2. Get rid of the 15-seat guarantee.  Major carriers are forcing their partners to drop turboprop planes, so there’s going to be a huge vacuum for service between 9 seats and 50 seats.  We may see some new operators, but what we are getting are a lot of smaller 9-seat operators who are loving this business and it will help them grow.   This block is costing the Dept. of Transportation millions a year as it has to pick an operator with a 30- to 50- seat turboprop/jet to fly in a market where a 9-seat operation can do it cheaper & better.
  3. Match capacity with demand.  Right now, the minimum service is 2 flights a day with 19-seat planes.  But what if you only board 2 passengers a day? This is where EAS gets expensive – as you, the American traveler, picks up the tab.  So why not follow #2 and allow a 9-seat operator to come in and offer 2 or 3 flights a day, and actually give these communities a chance?  Most of these markets are losing passengers because they are less competitive – being price and schedule drivers.  That’s why Decatur is on the EAS list.  The city used to board over 50,000 people a year when it had shuttle service to St. Louis, 3 flights to Indianapolis, and 4 to Chicago.  But area airports like Bloomington and Champaign were able to lure new carriers – and now you have multiple carriers & frequencies out of Bloomington.  So as a traveler, do you really want to sit in O’Hare for 5 hours waiting for your flight to Decatur, or wait an hour and hop to Bloomington and Champaign, then drive 45 minutes home?  (Note: Bloomington was also an original Air Tran & Frontier (new one) market, which significantly dropped fares).
  4. Penalize airlines for not following through with their bid.  EAS has become a salesman’s dream.  You can go in, promise communities everything they want, win the award, then offer sub-par service.  This is happening too often and its costing communities.  One airline has gone as far as to drop their subsidy as retaliation to airports that seek other carriers or complain to the DOT (Once you drop your subsidy, the airport is then removed from the subsidized program and rules).  Aggressive bidding also hurt airlines, which is one reason why RegionsAir, Lone Star, and Big Sky are no longer in business.  Airline planners would try to “out bid” incumbent airlines. DOT would regularly replace an airline that’s been in a market for 20 years if it would allow them to save money – sometimes as low as $100,000 a year.   ‘when this happens, it can leave holes in the other airlines network, resulting in “orphaned” routes which can increase costs greatly.
  5. Drop seasonal subsidies.  Gustavus, Alaska is in my back yard… and it’s a fun place to visit.  It’s a 15-minute flight on Alaska Airlines, or 25 minutes on a commuter airline from Juneau.  Alaska gets more than $1.4 million a year to fly 60 flights from June to September, with an average of 40 passengers on board.   Yet Air Excursions and Wings of Alaska may operate up to 15 flights a day on 5- to 9-seat Cessnas and  turboprops.  Almost every local in Gustavus flies on one of these two airlines, and neither gets a subsidy (they do,however, get money for carrying mail).  Both airlines have their own terminals in Gustavus, and both most definitely have the ability to pick up any capacity should Gustavus get cut.  The other cost you don’t hear about is the daily charters to fly TSA screeners back and forth everyday.  That adds another $150,000 to the tab.
  6. Promote growth of the market and stop rewarding airlines for being vapid in a market.  The idea of EAS is to get the airlines off subsidy.   Airlines should be required to increase boardings, except for force majeur or economical events.  Right now the airlines have zero motivation for doing anything outside of offering their flights – no real push to do public relations, marketing, etc.  Cape Air is one of the exceptions to the rule, and SeaPort Airlines has been known to run fun events.

In the end, EAS can very easily be an efficient program, but the airports need to step up to the plate and do more to protect their subsidies or make them work.  Otherwise, the new age of extreme fiscal conservatives may finally be able to have their way and get rid of this “pork” program.

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17 Responses to “GUEST POST: Fixing The Essential Air Service Program”

  1. highdefhusband July 15, 2011 at 9:13 am #

    Wow, amazing post, Nathan. Really eye popping info here. Thanks for the post, Benet – this was awesome. Hope you enjoyed your vacation!

    • Aviation Queen July 15, 2011 at 11:27 am #

      Thank you, Hubby! I try and bring in folks that have a unique view of this industry we all love. And vacation is great!!

  2. Nate July 15, 2011 at 2:06 pm #

    As Delta announces the termination of 24 markets today… wow.

  3. Bryan July 15, 2011 at 3:13 pm #

    A lot of this is completely wrong. The DOT can and routinely does pick 9-seat operators, and this leads to lots of problems. First, these operators have no interline agreements, resulting in a situation where flying to Jackson, TN, for instance, first requires me to buy a ticket to Nashville, then a separate ticket for my connecting flight. Second, these 9-seat operators are the ones you criticize for over-promising and under-delivering. Pacific Wings’ proposal for its EAS routes out of Nashville included running a sterile operation, but they’ve yet to obtain gate space in the Nashville terminal, and as a result they operate non-sterile out of an FBO. Sure, it would be easy to propose we penalize them for it, but it’s as much MNAA’s fault as the airline’s. They’re simply too small to be able to afford a gate lease, so would we rather sink more money into the program so they can, accept the situation as is, or force the airport to give them a discount?

    This is just one example of how the program consistently attracts service which under-delivers, and is used in too many cases to provide air service to a town which is only an hour’s drive from a much larger airport anyway. With the exception of the state of Alaska and possibly some isolated towns in the northern intermountain region, the program is 100% pork, and these “uneducated politicians” you speak of are the ones who have it right.

    • Aviation Queen July 15, 2011 at 5:44 pm #

      My question to you-do you at least agree that EAS in its present form needs to be fixed?

      • Bryan July 15, 2011 at 7:13 pm #

        No. It needs to be done away with as soon as possible with 2 exceptions- 1. The entire state of Alaska (as its cheaper than building and maintaining a road network) and 2. Towns in the lower 48, evaluated on a case-by-case basis, where there is evidence that an EAS subsidy will eventually (as in, within 2-3 years) lead to maintaining subsidy-free service.

      • Aviation Queen July 15, 2011 at 7:36 pm #

        You get no argument from me. I understand folks wanting to be connected to the global air transport system. But it’s not a God-given right to have air service.

    • Nate July 15, 2011 at 6:42 pm #

      Hi Bryan,

      Lets also not forget the Athens/Macon bid – same thing. I was able to obtain gate space prior to the bids going public and it took “the other airline” forever to come up with a solution. Even Wings Air had a sterile ground handler at Hartsfield and used the T Gates.

      Same in Nashville… I had a signed LOI from American Eagle to handle ramp-boarding regional aircraft at BNA as recent as 2 years ago. Its just that this particular airline doesn’t want to pay the fees warranted by the airports, so they use it as a bargaining chip with the public & hope they get their way.

      As for Pacific Wings, they do in fact have interline agreements. They are a member of MITA (IATA’s interline clearinghouse). Its just that Pacific Wings *CHOSE* not to operate in a sterile (inside TSA) environment, so there is no way to transfer bags. You could do interline e-ticketing with a handful of airlines and Pacific Wings, however they charge astronomically more in the GDS (airline booking systems) than thru their website or call center.

      And regarding the 9 seat operators, you are correct in that the DOT has selected them, but the city has to *waive* it. I don’t feel it should be a right of the community anymore, especially if the boardings do not justify larger aircraft.

      I know there are lots of emotions about EAS, and I wanted to write from the perspective of the airline & offer solutions to make this program work.

      • Bryan July 15, 2011 at 7:27 pm #

        Well it doesn’t do any good to technically have interline agreements if I can’t go to my normal online booking engine and buy a ticket from O’Hare to Jackson.

        Now as for the gate mess in Nashville… you said it yourself. They’re unwilling or unable to pay to have American Eagle ground handling and use a proper gate. And now they’ve used this as an excuse to issue Jackson and Owensboro 90 day notice-to-terminate. These are the kinds of shenanigans that these small operators are going to pull, so attracting more of them is a questionable idea.

        On the other hand, if a community can’t come close to filling a 30-seater, then, no, they shouldn’t have the right to insist upon having it, and have the public pay for it. My point is that 9-seaters aren’t the answer either, at least not in all cases, due to the aforementioned problems.

    • Perry Smith July 29, 2011 at 2:57 pm #

      As usual…EAS is not only about you Brian, The service is important to every Chamber of Commerce in every EAS city. Look at what Joplin MO has done in the last 5 years,You pointed out Jackson, TN. There are 5 fortune 500 companies located in Jackson. Jackson had DC-9 service in the 1960’s. Ask anyone at who has worked in the Industrial Recruiting in West Tennessee during the last 25 years and everyone will tell you the ability to fly into a community plays an important part in the companies decision to locate there.
      The current carrier has no customer service…horror stories abound about ticket holders who were left on the curb at BNA. This carrier could have made the best of a bad situation, just by listening to it’s customers. You seem to know a great deal about the gate problems Kentucky Skies and Tennessee Skies have faced in Nashville. Do you know that a gate was available any time this carrier wanted it. All the carrier had to do was agree to the terms and conditions of the published Airport Rules and Regulations .
      I agree that the lowest of the food change become EAS carriers, but sometimes you find a good one. Cape Air who operates out of several cities in the North East and the Central Plains, or Air Choice One, one of the new guys out there.
      There is such a push for new jobs coming from Washington, has anyone looked to see what 200 million is buying in the job market in America. My guess is that EAS is currently responsible for more jobs that the 8 billion dollar boon doggle pushed and passed by Washington 2 years ago.
      EAS is important to state in the union, lets not lose site of what America’s about.

  4. Mike July 19, 2011 at 9:26 am #

    Hi,
    interesting article, could you please specify what you mean by “Major carriers are forcing their partners to drop turboprop planes”.?
    what size turboprobs are you referring to, just the saabs?

    my understanding so far was that majors may replace their 50seat jets by Q400 or ATRs for shorter flights? (at least in medium run)

    • Aviation Queen July 20, 2011 at 9:19 am #

      Mike-I can pass your question to Nate.

    • Nate July 20, 2011 at 2:04 pm #

      Hi Mike… most of the larger carriers are phasing out the smaller aircraft. United is one example where they no longer have any 19 seat aircraft under the “United Express” program, and they’ve reduced SkyWest’s Embraer Brasilia fleet from a strong 90 something to barely 25. As Benet mentioned, we both worked at Mesa which once had over 180 prop planes, and that now numbers only *8* today. Alaska/Horizon parked their 19 seat Metroliners and 32-37 seat turboprops, leaving a massive hole in their network.

      Delta’s announcement of the retirement of the 34 seat Saabs shows that the new airline doesn’t want to deal with smaller communities anymore, and they also told Gulfstream International (a 19 seat operator) no to even a basic interline agreement as Gulfstream was replacing Mesaba Saabs in the Memphis markets.

      USAirways and Continental seem to be the only majors still using props (at large), however you are correct in that CO is getting more Dash 8 Q400s – but these are amazingly replacing 50 seat jets, not 19 & 37 seat planes.

      Part 135/9 seat planes aren’t optimal, but unfortunately its the only thing out there right now (that seems to be making money).

  5. Jim July 20, 2011 at 12:47 am #

    I would also suggest that the minimum distance from other airports be increased. Many communities have subsidized service with low load factors simply because people are driving to the next closest airport to get a nonstop flight. I think 150 miles is a good requirement. In a rural area, this is not that far.

    • Aviation Queen July 20, 2011 at 9:22 am #

      I agree, Jim. When I worked at Mesa Air, we were bidding for the Alamogordo, NM EAS service. What did we do? What everyone else did — fly into El Paso on Southwest Airlines and drive the rest of the way.

Trackbacks/Pingbacks

  1. Delta Cuts Flights, Can Small Cities Survive? - >> The Cranky Flier - July 19, 2011

    [...] it worthwhile for airlines, there’s clearly a huge problem. Nate Vallier wrote a column on fixing the Essential Air Service program over at AviationQueen.com. (Nate, by the way, is one of our concierges and will likely be doing [...]

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