Essential Air Service – Thirty Years of Wasting Your Money

Government Regulation

Essential Air Service (EAS) seems to be a hot topic these days. It was probably Big Sky’s announcement that they were getting out of the game that triggered it. At least, that announcement is what got me working on this. Little did I know that USA Today was also working on an article that has a lot of overlap with mine. But as an opinionated blogger, I’ll say what USA Today makes you infer: EAS is a huge waste of taxpayer dollars, and it should be reduced if not eliminated.

Ok, so its $100m annual budget isn’t going to even make a dent in the deficit, but hey, we have to start somewhere. Maybe I could have ignored it when it had a $25m budget 10 years ago, but it’s crept up past $100m, and that’s ridiculous. So what is EAS? It’s a subsidy program that is a spawn of deregulation, and it doubles as a huge funnel where the IRS pours your money every year.

Let me back away from the snarkiness and get into some facts. When the industry was deregulated in the 1970s, the government worried that smaller cities would lose service. So, any city that had service before deregulation became technically eligible for subsidies to maintain that service. This is called EAS. Over the years, the cities eligible for service have changed, but the idea remains the same.

Now, there are effectively two different programs here. One is for Alaska, and the other is for the rest of the US. I’m not going to talk about the Alaska program in this post. There are communities up there that do not have road access to anywhere else, so they rely on aviation for their livelihood. I can understand the need for a limited program like that, though I have no doubt that we’re wasting money there as well. Still, I think that’s a post for another time. Instead, let’s focus on the rest of the US.

As of the November 2007 EAS report, there were 102 cities in the program. For flying to those cities, airlines receive annual subsidies of $100,686,910. Which cities have been deemed so important that they need the government to guarantee service? I put them all into a handy Google map so you can see where they are.

One thing you might notice here is that there are a lot of cities on this map. Chances are they’re all in places you’ve never been and never plan to go. (I’ve actually only stayed the night in one of these, Jackson, Tennessee, but I didn’t fly there.) What are the rules for getting on the list? You can read the history of it here (pdf), but today, the rules are pretty simple.

  • The airport still must have had service prior to deregulation
  • The airport must be more than 70 miles away from a medium to large hub airport
  • The subsidy cannot amount to more than $200 per passenger unless the airport is 210 miles from a hub airport

So many problems. Where should we start? First of all, I’m not sure why the distinction was made that an airport needs to be more than 70 miles away from a hub airport. An easy way to reduce the budget here is to require an airport be more than 70 miles away from any airport with commercial service to a hub. That would drop 25 airports off our list of 102 right away.

But why stop at 70 miles? Seems somewhat arbitrary. I would say we should move it up to 100 miles. That’s still not a terrible drive for the handful of people who actually take those flights. That eliminates 56 cities and $55m from the budget.

Now, take a look at that map again. Notice how many of these cities are right near each other? There seem to be some real hotspots here. I’m guessing New York, West Virginia, Montana, Kansas, and Nebraska had some pretty powerful senators who made sure the airlines kept flying to every tiny town no matter how close they are to each other. Every vote counts, right?

How about Glasgow and Wolf Point, Montana? They’re only 54 miles apart, but they both get EAS subsidies. Grand Island and Kearney, Nebraska are about the same distance from each other. Dodge City, Kansas is a mere 45 miles from Garden City, and Liberal is only 75 miles away from there. Clarskburg, West Virginia is only 34 short miles away from Morgantown. And it looks like every small New York town on the Canadian border between Lake Ontario and Vermont gets its very own subsidy as well. You get the idea. We could eliminate subsidies to several of these towns and they would less than a hour’s drive away from the next one.

But do we even need to keep any of these services? I mean, how many people are we actually inconveniencing here? For the 12 months ending September 2007, the EAS program saw 528,853 people depart on EAS service from an EAS airport, and 300,000 of those people fly to airports within 100 miles of another airport with non-EAS service. To put that in context, all of those 500,000+ people add up to about 90% of the number of people who fly out of Fresno in a year. These aren’t big numbers.

On the flip side, there were 107,298 departures from those EAS airports and that’s about 6.5 times the number of flights out of Fresno. Of course, that’s partially because there’s an average of 21.7 seats per flight on these routes, but more importantly, each flight averages 4.9 passengers for a miserable 23% load factor.

With those kinds of numbers, can these airlines make money even with the subsidies? Not easily. We saw EAS carrier RegionsAir go under last year. It was for safety/regulatory reasons and not financial ones, but the two tend go hand in hand. Then at the end of the year, as I mentioned earlier, Big Sky announced they’d be getting out of the EAS business. The only thing keeping them in the game is that they need to find someone to fly their Montana routes before they can padlock the door. Great Lakes, one of the only EAS carriers left, has shown some interest, but those are some really ugly markets up there.

Lewistown, Montana takes the cake for having the lowest load factor last year. They had an unbelievable .6 passengers per flight. Yes, there’s a decimal point in front of that number. It’s impossible to succeed in a place like that unless the government wants to bump up its subsidy a LOT. I mean, that’s a 3% load factor on a 19 seat plane. And we’re paying to keep that going.

I know I’m pretty negative here, but is there any value at all? Sure there is. Some of these cities are truly remote, more than 200 miles away from an airport with commercial service. I think there’s probably value in the government encouraging service to remain in these cities to some extent. But if the airlines are having trouble making this work now (especially with $100 oil), then I’m not so sure that most of these routes can continue at a reasonable rate.

There may be some hope, however. 08_01_07 cessna402See, the 19 seaters used to be the gold standard for this kind of work. But back in 1997, the FAA reclassified those planes to operate under the same standards as large jets. Previously, large commercial operators flew under Part 121 and aircraft under 30 seats could fly under Part 135 operations for commuters/air taxis. That threshold was lowered to 10 seats in 1997. I don’t know much about the technical differences between 121 and 135, but I do understand that it costs more money to fly under Part 121. With that in mind, you’d think that flying an aircraft under 10 seats would be smart, especially considering the number of people taking these flights anyway.

And that’s exactly what’s happening. Cape Air has the EAS service within Puerto Rico from San Juan to both Ponce and Mayaguez. They’re using 9 seat Cessna 402C aircraft. Also, Hawaii’s Pacific Wings has branched out to the mainland and now flies EAS routes in New Mexico (under the New Mexico Airlines brand) with the same 9 seat Cessnas. Yes, this plane hasn’t been made in 20 years, but there are others like them.

For cities that are truly remote, this might be the best solution. I honestly can’t say that I know whether this will work on not, but it has to cost less than flying those empty 19 seaters around. Sadly, I won’t hold my breath that we’ll see anything dramatic happen in the near future, but I’ll certainly keep my fingers crossed.

If you’d like to dig in to the details, I’ve compiled route by route information in this spreadsheet.

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18 comments on “Essential Air Service – Thirty Years of Wasting Your Money

  1. Being from Fresno (thanks for the shout out in your post!), I have been reading in the news lately about another round of bids/talks/whatever to provide EAS to Visalia, CA. I find the whole issue to be a waste of time, considering Visalia is only about 44 miles away from my beloved FAT airport (ya ya, I know they changed the code to FYI=Fresno Yosemite International, but I find FAT to have so much more character :)

    Anyway, thanks for highlighting some of the other facts about this issue. It always struck me as a waste of resources to subsidize Visalia when those very few passengers could just make the 30 minute drive to Fresno. The subsidy, as subsidies usually do, keeps an irrelevant market going (Visalia) at the expense of strengthening the main airport for the region – FAT.

  2. interesting article, thank you for the in depth research and information. My in-laws live in Iowa, and have often used Mason and Fort Dodge as airports, not because they don’t live closer to Des Moines, but because they can sometimes find cheaper flights. Also, flying out of a smaller airport is less stressful, I imagine. Personally, I like to choose a non-stop without a transfer, so for our annual trip to Park Rapids, MN, I prefer to fly to Minneapolis and drive 3.5 hours, instead of switching flights in Denver.

    I had no idea before reading this about the subsidies, but I agree that something needs to be done. That is a heck of a lot of money to spend on something that effects a rather small amount of passengers….

  3. I wonder if they should move some of these EAS flights outside of the TSA secure area. If we’re really looking for cost savings those flights should arrive, then their passengers should be screened before going into the rest of the system. Sure its a bit logistically tricky, but you could set up some “unsecured” gates with not too much difficulty. More al la customs diversions.

  4. They used to have something like this in Hawai’i, but I believe it’s changed. A few years back I flew from West Maui to HNL and there was no security. You arrived at the old interisland terminal which was separate from the rest of the terminals. We had to be screened before entering the main terminal. I believe they’ve done away with this now, and I doubt the government would go for it, but it’s not a bad idea.

  5. Hmm.. Puddlehopping. I remember back in the day when I used to fly into BGM there would be three 19 seaters that would leave at the same time from PIT (or maybe it was PHL..) one would go directly PIT-BGM, one would go PIT-ELM-BGM, and a third would go PIT-ITH-BGM. 1/3 or 1/2 of the plane would get off at one of those stops and the rest would continue on. I was listening to the podcast about the situation in Montana and I wonder if this would be a good solution, especially since these flights are flying around mostly empty.. Do airlines still do routings like this? I know I’ve seen Alaska Airlines, and Southwest do it..

  6. Pacific Wings / New mexico Airlines operate factory new Grand Caravan 208’s configured for nine passengers. Roomy, excellent safety record and stillin production. Great little airline. Fly them weekly.

  7. Nick – They do still run some flights with tags like that in the EAS system, but it’s become less and less common. For example, I know they still run Phoenix-Prescott-Kingman. I think the biggest problem is that adding another stop can make it less compelling for someone to fly from there, so they’ll drive to the nearest airport instead. It might work out up on some Montana routes, but I don’t know.

  8. I see that the issue has reaching a tipping point when PNG’s (people not in govt) start talking about it and breaking things down. You are the second person in the world that has associated BTV with PBG and SLK. According to EAS eligibility rules, our nearest airport is in New Hampshire, plus they don’t even see Montreal which is right across the border.

    In my little microcosm, we lost Big Sky, but got smaller planes and a higher subsidy in return. Huh? Yup, that’s right, more money, less plane. We now get the thrill of riding the essential ride on Cessna 9-seaters. Not that there’s anything wrong with that.

    They are claiming to offer $65 rates to BOS, which is very competitive. But I have my doubts that they can sustain with increasing fuel and operational costs. Add the fact that our airport in Plattsburgh is now marketing nearly exclusively to Canadians going to Florida – a sudden currency fluctuation could turn that in to a loser quick.

  9. Consumer preferences…dont wanna fly a “tin can” While I can appreciate the comfort of a jet airplane and what ppl like…I think ppl lack the sense of using the right tool for the right job. Jet airplanes are not fuel efficient when used for flights under about an hour and fifteen minutes. The more fuel you use, the more it costs to operate the airplane. The larger and heavier the airplane the bigger the airport it needs. One day, fuel costs will rise to a point where if ppl REALLY want to fly somewhere, they will have to fly on a a turbo prop. Its a propellor driven by a jet engine. Its very safe, and very fuel efficient and is the proper tool for the short hops as being discussed. No they dont ride as well as the big airplanes. Does a Honda Civic ride as well a a Cadillac STS? No, do most of us reading these articles drive economy cars instead of luxury cars because owning a Caddy isnt cost effective, let alone realisitic?? If you wont pay to drive a Caddy because its unwise to spend so much on a car whats the difference with an airplane? Citing lack of safety isnt a choice either. The safety is proven. The biggest problem in the airline industry, aside from the obvious lack of management, is the consumer. Yes, the consumer. Because the consumer thinks that he/she “deserves” a cheap ticket price, and “deserves” to ride on a jet, they have helped force airline management to make bad decisions and use the wrong equipment for the wrong job. Therefore costing the business WAY too much money, and not charging the consumer enough. One day, and this day will be here sooner than anybody wants..air travel will revert back to the way it was in the early 1900’s. Only the rich will fly, because they will be the only ones able to pay for the service. honestly, it should be that way now. Not because I want to see the rich get something nobody else does, but because the consumer needs to pay appropriately for the service being rendered. Accordingly, the airline needs to provide the the service that is being paid for. When everybody begins to pay for air travel for what its truly worth, everybody will be happier…except those that cant afford it as often, or at all. That will just mean a lifestyle change, like not buying an SUV. Aviation is a capital intensive industry, with very thin profit margins, for reasons previously discussed. Most ppl would agree, whether you have a business degree or not, the less capital you invest, and the higher the profit margin, the smarter the business…aviation, in its current form is exactly backwards…a little common sense and logic will explain why so many companies are failing, service is deteriorating, and routes are being cut. The first person to blame for these problems is staring right back at you in the mirror.

  10. All flights operating within state lines are not subject to TSA. I fly in New Mexico often and the flights from ABQ to Carlsbad fly from TSA free gates. It very nice actually.

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