Essential Air Service

More than two decades have passed since Congress phased out the federal government's control over airfares and service. Concerned that air service to some small communities would suffer in a deregulated environment, Congress established the Essential Air Service (EAS) program in 1978 and made special provisions for providing this service in Alaska. The goal of the EAS program, administered by the Department of Transportation (DOT), is to ensure that small communities that had received scheduled passenger air service before deregulation continue to have access to air transportation. DOT does this by awarding subsidies to carriers willing to provide service to communities that would not otherwise receive it. Congress increased the program's annual funding to $50 million in fiscal year 1998 and directed that overflight fees not obligated on the EAS program be used to pay for rural air safety projects. This report reviews the program and determines whether all communities were receiving the subsidized service to which they were entitled and whether the increase in funding had been made available for rural air safety projects. GAO (1) determines how DOT applied criteria to decide which communities would receive subsidized air service, (2) describes changes in the level of subsidies provided to EAS-eligible communities in fiscal year 1999 relative to that provided in 1995, (3) identifies why the level of subsidies changed between 1995 and 1999, and (4) determines whether DOT applied any of the increase in program funding to rural air safety projects. This testimony summarizes the April 2000 report, GAO/RCED-00-34.

GAO noted that: (1) between 1995 and 1999, the overall number of communities receiving EAS-subsidized service decreased by 6, from 95 to 89; (2) in addition, the number of passengers served by the EAS program declined by 4 percent, from 617,000 to 590,000; (3) despite the decrease in number of communities and passengers served, the overall level of funding for EAS subsidies increased by 47 percent, from $31.4 to $46.3 million in constant dollars; (4) for communities within the continental United States, Hawaii, and Puerto Rico, the average subsidy per passenger increased by 47 percent, from about $56 to $82; (5) for communities in Alaska, the average subsidy per passenger increased by 23 percent, from about $25 to $30; (6) overall, the level of EAS subsidies increased because increases in air carriers' operating costs were not offset by a corresponding rise in passenger revenues; (7) the operating costs of air carriers increased as they complied with the Federal Aviation Administration's Commuter Safety Initiative, adapted to unique circumstances associated with particular markets, such as airport fees, and upgraded aging aircraft; (8) although operating costs increased, the demand for subsidized air service declined slightly, thus limiting the potential for additional revenues; and (9) in addition, some EAS carriers had difficulty competing for passengers because of the availability of low-fare jet air service at nearby airports.