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Business North - Around The Region - Duluth & Superior Newspaper
Grounded? EAS program faces chopping block
This is a story that ultimately comes down to how one interprets the word “essential.”
In 1978, the federal government deregulated the airline industry. They passed the Federal Aviation Act, and it began a new era in American transportation. One of the unknowns was what would happen to air service at small and medium-sized communities.
If airlines could go anywhere, why would they stay in the smaller, less profitable markets? To help ease that transition, Congress authorized a program called Essential Air Service (EAS).
The Federal Department of Transportation (DOT) runs the program. To ensure smaller markets look attractive to airlines, the DOT subsidizes a number of seats on planes leaving airports in the program. They normally issue two-year contracts for two flights per day in a 15-passenger aircraft, six days per week to a larger hub.
The bidding is competitive and the short two-year contract is designed to curb subsidy costs and gives communities and the DOT flexibility if a carrier switch is needed. Essentially, the DOT pays airlines a set amount to fly airplanes out of smaller hubs.
One of the airports in the program is the Range Regional Airport, located in Hibbing. Shaun Germolus is the Chisholm-Hibbing Airport Authority executive director, and he’s not shy about his thoughts on the program and his ultimate goal.
“Our goal is get off the subsidy,” Germolus said. “Not many airports do, but we have 120,000 people in our service area. We think we have the population and the facility to do it.”
That’s not just director talk. Two years ago Germolus got serious about discovering why people in his service area were driving to Duluth or Minneapolis instead of flying locally, a term the industry calls “leakage.” He did a community survey to try to unearth the problems, and the answer was striking.
“People said it was a lack of flights,” Germolus said. “The times we were flying were not convenient. There were long layovers. We needed a major change.”
He got it. Germolus negotiated with DOT and the airport’s carrier, Delta, to add a third flight as an “experiment.” The experiment began at the end of 2009, and in 2010 passenger numbers were up over 24 percent. The airport also fired up its marketing, emphasizing that when you figure in driving time, fuel costs, parking costs and convenience that flying locally has real value. They added a trip calculator to their website that showed people in dollars and cents what they’d save.
“The other thing we learned is that marketing here is most effective face to face,” Germolus said. “We’d go shake hands at chamber golf outings and tell people about what we provide. That’s our best marketing. We cater to business people, and they understand the value of having a regional airport. It’s hard to attract businesses without having air service.”
Hibbing is one of approximately 140 communities in the lower 48 in EAS (Alaska and Hawaii are another story). Thief River Falls and International Falls are also currently in the program. Mankato, Fairmont and Worthington were dropped because they didn’t meet required passenger numbers.
Range Regional Airport receives roughly $3 million in subsidies from EAS, and it’s those types of dollars that lead to conflict.
Washington is in a budget-cutting mood. EAS is one of those programs cited as an example of pork. In fact, a House bill co-authored by the region’s own Representative, Chip Cravaack, sunsets the program in 2013. The Senate version adds more restrictions but keeps the program alive. As budgets battles heat up, no one is certain where the program will end up.
“I’m disappointed with any vote that will not support EAS,” Germolus said. “It would place a hardship on rural communities trying to retain businesses and attract new ones.”
This isn’t the first time EAS has been a target. Given its history as a political punching bag, it’s surprising that there isn’t more clarity about how the program is funded. Last year, EAS was a $200 million program in a $3.82 trillion federal budget. It barely moves a decimal point. The program is funded through FAA overflight fees, and fees such as taxes on aircraft sales, aircraft fuels and tickets. It has almost zero effect on the national deficit, nor is it a savings to the average taxpayer. If you’re not flying, you’re not paying for it.
But that doesn’t guarantee survival. Local supporters point out that airports encourage business growth and expansion and that ending EAS would devastate rural airports. Airline operations generate 32 percent of Range Regional’s revenue. Local air supporters also say that potential mining projects could increase the need for flights and potential passengers. The local airline operations also employs 25-30 people.
Yet change is coming. Even the American Association of Airport Executives is floating ideas for changing EAS. They argue lengthening contracts encourages airlines to understand and serve smaller markets more effectively. They’d also like to see airlines contribute more of a marketing effort.
More flexibility would also help. Smaller airports have higher passenger volumes at certain times of the year, so mandates like 10 people per day, which is an idea politicians have talked about, don’t always make sense.
All this potential change is happening at contract time. The DOT request for proposals to provide service to the Range Regional Airport is due August 1 for service starting in November. The DOT also will decide whether to continue the three-flight experiment or whether to cut back to the traditional two.
Despite everything, Germolus is optimistic. If he can reach 14,000 passengers per year, he could exit the program. Last year, they flew just under 11,000, so there’s plenty of work to do. He asserts people flying locally will ultimately decide the fate of small airports, not politicians in Washington.
“We provide a good service,” Germolus said. “The main message I have is that once you’ve lost this federal subsidy program it’s almost impossible to get back in. This is truly a case of use the airline service… or lose it.”Previous Around the Region Articles:
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