I am not an airline industry expert, but I am an air traveler and a taxpayer. I ran across this article many months ago when I started following the developments surrounding the airport here in Plattsburgh. While I believe there is potential here, I firmly also hold to the idea that trying to remediate our terrible New York business environment through taxpayer-funded subsidies will never work. In a recent interview with our de-facto Clinton County economic development head, ANN’s Paul Plack gets the official story about how we went from SAC base with nuclear bombers to Plattsburgh International Airport with flights to Florida:

Special Feature: Gary Douglas, Plattsburgh International Airport
(I had to use IE to get this page to work, Gads…)

If a product or service is to succeed, it can’t be based on artificially created market conditions. If those artifices disappear, a return to the prior state seem highly likely. I’m not saying proper capital investment can’t produce sustainable benefits, rather it is the hidden price support of taxpayer subsidies, grants, and taxpayer funded exemptions which create the illusion of demand.

Consider these facts:

• Free Property – The entire former Air Force base was turned over to the county, this included both real property and the much of the other physical property associated with the base. A real gift – sort of like someone giving you the deed to an entire city/estate. Much has already been chopped up in various ways for industrial and residential development. Some of the last remaining lake frontage sold for townhouses. (Local real estate persons and the “redevelopment corporation” were the subject of some attention related to sales, appraisals, property tax payments, and conflict of interest.)
• Free Transition – Federal govt paid for planning, administration, and marketing during the “redevelopment” phase.
• Free Capital – Military Airport Program gave us a 100% funded brand-new terminal and more. Of course, renewal for another round of funding is highly desired.
• Political Support – Clinton/Schumer are “betting” (your dollars) on this as the key to success for the North Country. Not to mention, other more local politicians with EAS airports in their backyard. In many cases, this support means tax dollars diverted to the North Country.
• Free Gifts – Almost every business that is credited for job expansion and relocating to our area is given some form of tax exemption to offset the negatives of doing business in New York. The Empire Zone program is a good example which I don’t have time to get into right now. (For the record, I don’t see why my house can’t be in an Empire Zone, I can promise to create jobs like the next person.)

For those of you that think this is all great, when April 15th rolls around, I want you to consider how we have a “debt-free” brand-new airport here.

“It makes the cost of an airline coming here very low. We don’t have to amortize the cost of the facility over a long term and charge that to the passengers or the airlines.”

Sure, they just shifted the cost to you and me. Whenever I hear someone offering “competitive deals”, I have this instinctual desire to look for my wallet.

The whole thing is fairly complex, but let’s get back to the original purpose of this post – Essential Air Service.

The Essential Air Service program is one of the dirty little secrets of a spendthrift Congress — a wide-open spigot that burns millions of taxpayer dollars, decade after decade.

The program was begun as a temporary measure in 1978 to help remote communities adjust to deregulation of the airline industry, but members of Congress made the program permanent in 1998. Since then, it has grown astronomically.

In April, the bean counters of the Government Accountability Office, whose task it is to swim against the tide of wasteful spending, gently confronted members of the House with the results of their handiwork:

A program that covered 95 communities and cost $25.9 million in 1997 covered 145 communities at a cost $109.4 million by 2007.

The average number of people on subsidized flights is about three. The median subsidy per passenger is $98, but in one case is $677 per passenger. Excluding Alaska because of its extreme remoteness, the average subsidy per community is $754,000.

Said the agency delicately: “Concerns exist about the costs of the program, particularly given the federal government’s long-term structural fiscal imbalance.” (link)

“Essential Air Service subsidies are mainly money wasted to pander to civic hubris, supporting service that consumers have shown that they don’t want and won’t use.” Don’t remember where that came from, but it about sums things up. What will happen if Plattsburgh loses its EAS designation? Well, the answer is in the question – Is this kind of service “essential” and is it really “air service” Some would say no to both. Efforts to reform have traditionally been blocked.

I don’t know who the Boyd Group is, but a cursory examination of their credentials seems to indicate that they are respected in both in and out of the industry. Their analysis of aviation issues in general and EAS in particular are well reasoned. Normally I wouldn’t quote an article in total, but this is really too good, it’s right on target, and hard to find on the original site:

Originally published Feb 12 by The Boyd Group/ASRC, Inc. (Scroll down to find the original article.) I’ve added some links to the article:

The DOT’s EAS Program

A Guarantee For Rural Economic Decline

Rural air service is a hot topic in Congress. At the recent hearings on airline mergers, the proceedings degenerated into senators trying eagerly to outdo each other, whining about how “deregulation” has killed off air service to smaller communities, and something, yes, something must be done about it.

They could start by looking into the mirror.

It’s the clumsy, half-baked, and obsolete DOT Essential Air Service program – which they all support – that’s nearly guaranteeing that some regions of the nation will be cut off from the national and global economies. EAS generally supports airplanes nobody wants to fly, sometimes at airports nobody wants to use, with service levels so low that it’s a joke. But it does provide a wonderful soapbox for self-righteous politicians who wouldn’t use EAS-subsidized service themselves on a bet. The fact is that all too often, EAS dollars are being wasted to maintain flights (not air service) entirely for political reasons.

Designed nearly 30 years ago, it’s a program that is in dire need of being brought into the 21st century, because as it is structured today, it’s relegating rural areas to a guaranteed future of being cut off from real economic growth. In general, it assumes that “air service” is defined as a couple of turboprops departing each day to a larger airport, including some that the DOT still classifies as “hubs” but which haven’t seen a connecting passenger since the Ed Sullivan Show went off the air.

That, for the record, is not air service. All it does in too many cases is simply waste fuel and, in the long run, deter real air service from developing for a given region.

But that’s totally ignored. Since it’s budget season, we have the expected grandstanding from elected officials.

Problem: Focus On Dollars, Not Economic Need. The Bush Administration wants to reduce EAS funding and have communities pony up for some of the costs, with the reasoning that the nation’s taxpayers shouldn’t be soaked to support air service that even the people in the communities involved won’t use. This, leaving open a huge political opportunity to paint the Administration as heartless and cruel, has prompted the likes of Hillary Clinton to propose legislation, such as the “Essential Air Service Preservation Act of 2007,” to assure that the program is not financially molested by those knee-jerk right wingers.

Note that Bush just wants to slash the program. Hillary and her colleagues want to use it to show voters that they really, really care about smaller communities.

Both sides are not only wrong, but they represent the core reason that we have a rural air service crisis in the first place: neither side has the guts to admit the program’s a failure, and hard decisions need to be made regarding a replacement.

Air Service Is The Wrong Approach. Regional Connectivity Is What’s Needed. It’s not that the concept of supporting service to truly rural airports isn’t a good one. In fact, it is absolutely necessary. But the EAS program today has no resemblance to any mechanism that accomplishes this. It simply buys airline time based on a totally outdated set of criteria, aimed at keeping scheduled flights at airports that historically had scheduled flights, with the blind assumptions that, a) the community can still support such service, and, b) we’re still in the 1970s where interline connections were the norm.

One cannot blame the Bush Administration from wanting to do a slash-and-burn on this part of the national budget. One can blame them, however, for not recognizing that a new program is critically needed. On the other side, one can universally take shots at cheap politicians like Hillary, who want to protect the very program that assures the North Country of New York State of continuing inadequate and Balkanized air service. The point is that a regionalized approach is needed, but that means telling some communities that the two 1900 departures at the local airport that nobody uses have got to go. Hillary doesn’t have the integrity to do this. She’s pandering.

Tale of Two EAS Cities. The problem, which is likely what the Bush Administration, in its signature bumbling manner, is trying to point out, is that what the EAS program supports in many cases is neither “essential” nor can it be defined as “air service.”   “Essential” means that there is a pressing need. “Air service” presupposes that people would use it.

We can take Pueblo, Colorado as one example of this. Hundreds of thousands of dollars are being spent to keep two independently-branded 19-seaters flying to Denver each weekday. Such a convenience, too, as it’s an alternative to that 45-minute (or less) drive to Colorado Springs, where there’s service via six major airline systems, accessing these carriers’ one-dozen (count ’em – 12) various connecting hubsites.

Waste? You betcha. But try to point out that tens of thousands of consumers in Nassau and Suffolk Counties have at least that much of a drive time to get to LGA or JFK, and Senator Salazar (D-CO) will condescendingly ignore you. The people of Pueblo “deserve” that air service, even though they don’t use it because there’s much better access just to the north. Like, to hear the politicians, if those two B-1900s didn’t operate, the economic underpinnings of Pueblo might collapse. Why, the new super-security penitentiary in nearby Canon City might have to close for lack of inmates.

That’s probably why the EAS carrier at PUB is doing a rip-snortin’ 28% load factor. On 19-seaters, too. Waste of money.

Now, let’s take a look at Presque Isle, Maine. It’s the airport gateway to a huge region of Northern Maine represented by Aroostook County. It’s almost 50 miles from the nearest Interstate highway, and it’s a good-weather two-and-a-half to three hours’ drive time to the nearest alternative airport, Bangor. While the region has a strong economy, nobody can accuse it of not being isolated from other airport gateways. Nor can anybody accuse it’s EAS-supported air service as being frivolous or “non-essential.” With three daily 34-seat S-340 nonstops to Boston (with the US Airways code) the flights hover around a 50% load factor.

These two examples illuminate the challenges facing the EAS program. In the case of Pueblo, it’s a political sacred cow that should be barbecued as quickly as possible, but if Hillary and others have their way, it won’t. At the other end of the spectrum is PQI, where the program truly supports meaningful air access (and economic growth) where there is no reasonable alternative, and Bush wants to reduce its funding.

There is no need for middle ground. What’s needed is a move to entirely new ground – like, someplace in the 21st century.

The EAS program, truth be known, needs to be totally re-structured. For rural air service, the planets are not aligning well – the cost of flying smaller airliners is going up – on a per-seat basis, a B-1900 isn’t an economy ride. Consumer preferences (“don’t put me on that little turboprop”) are shifting. The number of operators interested in messing with EAS is declining. Finally, the need for true access to the air transportation network has too often been ignored by the DOT’s Eisenhower-era thinking that places like Omaha are still “hubs.”

In deference to the Administration, squandering money at communities where the consumer won’t use the service should be stopped, the protestations of the local politicians notwithstanding. But the prudent path would be to design an alternative program that keeps all regions of the nation (not all communities, note) connected to the air transportation system. The other side of the current argument – just keep funding this EAS pig – is just as irresponsible.

Solutions? They’re There, But That’ll Take Political Backbone. Unlike most consultants, The Boyd Group has been at the forefront of this issue for most of a decade. We’ve outlined new options at our Annual Conferences, to the media, in our consulting work, and in one-on-one interactions with members of Congress (including, proudly, being essentially asked to leave at least one Senator’s office, simply because we dared to not agree with him that all was just fine in his state, which is today one of the most air-service challenged in the nation. (The Senator’s name isn’t relevant – neither is he, for that matter – but it sounds just like a major city in South Africa.)

Triage must be performed on the EAS program. First and foremost, cost considerations must be replaced by economic considerations – the real-world economic impact and economic need for the service must be established before subsidies are awarded. Just because North Central had three DC-3s a day through the town back in 1970 is not adequate criteria. The Pueblos have got to go, while in other cases, hard decisions based on consumer preferences and the hard magnetic pull of larger airports need to be considered. Regionalization is critical, too – depending on the area of the country, concentrating meaningful levels of service at one, instead of a number of airports, is a potential solution.

But more than anything else, the concept of essential “air service” must be discarded. That’s what we have today in too many places – just airplanes coming and going on a scheduled basis, with almost no concern for whether those flights connect to anything but the baggage claim area at the other end. We need to have Essential Connectivity to the rest of the nation and the globe. And in some cases, that may mean a drive to an airport other than the local one. Even if it’s an hour or more.

The Bangor Daily News last week put it succinctly. In a February 9 editorial, it noted, “Supporting small airports that demonstratively serve a need makes sense. Financing those that unnecessarily undercut regional airports, which play an increasingly important economic and transportation role, does not.”  The nation needs more communities and civic groups, not to mention politicians, to tumble to this.

The point is this: the reason rural areas are experiencing declining air service is directly because of people like Bush and Clinton, and a host of mis-informed civic types, who want to keep the current program as-is and where is, regardless of the funding level. Instead of having the ethical integrity to suggest fixing it, one side simply wants to cut it back on fiscal grounds, and the other side wants to use it to suck up to voters, including those who couldn’t find the local airport and it’s EAS flights with a map and a tour guide.

In both cases rural America loses.

I feel relatively alone with my position about this whole issue and would welcome further discussion.
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Update: Over at The American, Evan Sparks has penned a scathing piece about EAS.

A program that subsidizes rural airline routes deserves to be grounded.

Picking on outrageous federal entitlements, pork-barrel programs, and regulatory regimes trims the national budget about as much as plucking a straw from a haystack. But one program deserves special commendation for achieving the trifecta of bad governance: regressive transfers, inefficiency, and inhibited innovation. I refer to the Essential Air Service (EAS) program of the Department of Transportation, which subsidizes scheduled air service to rural communities far from major airline hubs. (more)

Note the connection between B-1900 ownership, Raytheon, big Washington DC lobbying, and those elected officials that continue to support this program. And this money quote:

The other powerful backer for keeping the subsidies—besides Raytheon and the regional airlines—is a network of small-town chambers of commerce, remote airport agencies, and rural congressmen. They argue that ending the subsidies would disrupt commerce and tourism and hamper the ability to travel in emergencies.

And finally this disheartening truth:

The program’s benefits are concentrated and its costs are diffuse—a classic recipe for public indifference. Such indifference perpetuates government waste, inefficiency, and stifled innovation.

Update 2: The Cranky Flier now chimes in with his analysis of EAS – check it out, he’s Google Mapped the airports. Now you can see how close you are to your nearest taxpayer funded transportation. Oh, he modded the official EAS spreadsheet with more realistic airport proximity numbers. If you live in one of these cities, no doubt the nearest airport he lists is the one you actually use. “Essential” reading. Heh.

Update 3: Heh, they subsidize buses too!