THE SMALL COMMUNITY AIR SERVICE 

DEVELOPMENT PROGRAM 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

Report Number: CR-2008-051 

Date Issued: May 13, 2008 
 1 

Memorandum

U.S. Department of 

Transportation 

Office of the Secretary 

of Transportation 

Office of Inspector General

Subject: ACTION: Report on the Audit of the Small 

Community Air Service Development Program 

Office of Aviation Analysis 

Report No: CR-2008-051 

Date: May 13, 2008 

From: David Tornquist 

Assistant Inspector General for Rail and 

Maritime Program Audits and Economic 

Analysis 

Reply to 

Attn of: JA-50 

To: Acting Associate Director, Office of Aviation Analysis 

This report presents the results of our audit of the Small Community Air Service 

Development Program (SCASDP). Concerns have been raised by some 

stakeholders regarding the program’s effectiveness. In addition, Congress is 

considering possible reforms to this program as part of its larger reauthorization of 

aviation programs. We initiated this audit in response to a request from the 

Assistant Secretary for Aviation and International Affairs. The Office of Aviation 

Analysis (OAA) has administered the SCASDP since its inception in fiscal year 

(FY) 2001. 

The objective of this audit was to determine the effectiveness of SCASDP in 

helping small-hub1

 and non-hub2 communities in achieving sustainable air 

service. To achieve this objective, we reviewed SCASDP grants to determine: 

(1) which grants succeeded and which ones failed; and, (2) whether certain project 

characteristics or project types lead to a greater likelihood of grant success. 

Furthermore, we sought to identify “lessons learned” that could improve the 

probability of small-hub and non-hub communities achieving sustainable air 

service as a result of their SCASDP grants. 

 

1

 Small-hub airports enplane between 0.05% and 0.25% of total system-wide passengers enplaned. 2

 Non-hub airports enplane fewer than 0.05% of total system-wide passengers enplaned. 

 
 2 

We performed our audit in accordance with generally accepted government 

auditing standards prescribed by the Comptroller General of the United States. 

We reviewed all 40 grants issued between 2002 and 2006 (excluding feasibility 

studies) that had been closed for 12 months or more as of March 31, 2007. This 

criteria enabled us to determine if the projects could sustain themselves without 

continued Federal support. Exhibit A fully describes our scope and methodology 

and Exhibit B includes our evaluative criteria, which we used to determine the 

success or failure of the grants in our review, along with representative case 

studies. 

BACKGROUND 

The airline industry’s high fixed costs have traditionally made it more difficult to 

establish or sustain economically viable air service in smaller communities. 

Congress recognized this when it deregulated air service and created programs 

such as the Essential Air Service (EAS), to ensure certain small communities 

continued to receive air service. Few, if any, EAS communities are ever able to 

grow their air service so that it can be sustained without Federal subsidies. 

Congress subsequently created SCASDP in FY 2001 to provide temporary help to 

small communities to achieve sustainable air service; thereby avoiding the need 

for ongoing Federal subsidies. An additional goal of the program was to generate 

creative air service development proposals that could possibly be implemented in 

other similar small communities. 

The economic downturn of the early part of the decade, the events of 

September 11, 2001, rising fuel costs, and excess seat capacity led to airline 

bankruptcies and restructurings, which further exasperated small communities’ 

abilities to attract and sustain air service. Although industry economics have 

rebounded somewhat in recent quarters, fundamental changes in the industry 

combined with the general risk averseness of airlines has made it more challenging 

for small communities to retain and enhance their air service. 

Through FY 2007, the Department of Transportation (DOT) has issued slightly 

over 200 SCASDP grants totaling approximately $100 million to small and nonhub communities (see Exhibit C for a complete list of all SCASDP grants issued 

to date). SCASDP is authorized to fund a maximum of 40 air service development 

grants per year. Grant awards have ranged from $20,000 to $1.6 million and have 

funded a wide range of air service initiatives, designed to achieve sustainable air 

service to small community airports. 

In a review of the grants issued in the pilot years of the program, i.e. grants issued 

in FY 2002 and FY 2003, the Government Accountability Office found mixed 

 
 3 

results but stated that too few grants had been completed to allow them to draw 

conclusions. Although the Administration has requested no funding for this 

program since its inception, Congress has funded SCASDP at $20 million between 

FY 2002 and 2005 and at $10 million from FY 2006 through FY 2008. 

RESULTS IN BRIEF 

We found that half of the grants we reviewed failed to achieve their objectives or 

were unable to sustain the resulting benefits beyond their grant horizon. 

Communities that performed a market analysis prior to implementing their grants, 

followed through with substantive financial and non-financial support, and used a 

part of their SCASDP funding to implement an airport awareness marketing 

campaign enjoyed significantly better success in obtaining sustainable air service. 

Giving priority to those communities whose SCASDP grant proposals incorporate 

these attributes will improve the overall success rate of the program. 

 

While Most Projects Failed to Fully Achieve Their Objectives, Certain 

Grant Types Were More Successful Than Others 

We found that 70 percent of the grants in our review failed to fully achieve their 

objectives (see figure 1 below). Specifically, 50 percent of the grants in our 

review were unable to achieve any of their articulated grant objectives, 

12.5 percent were voluntarily terminated prior to any substantive progress being 

achieved and 7.5 percent were unable to obtain or achieve all their grant 

objectives. We found that 30 percent were successful in achieving their grant 

objectives and sustaining the resulting benefits for at least 12 months. Exhibit B 

presents a detailed description of the evaluation criteria of the Office of Inspector 

General (OIG) along with representative case studies. 

Figure 1. SCASDP Grant Outcomes 

12.5% 7.5%

50%

30%

Succes s Failed Partial Success Terminated

3 Grants 5 Grants 

12 Grants 20 Grants 

Source: OIG analysis. 

 
 4 

Certain grant objectives were more successful than others. We also found that 

44 percent of revenue guarantee grants succeeded, while only 19 percent of 

marketing grants succeeded. None of the four expense subsidy and start-up costs 

grants were successful (see figure 2 below). [Note: Four grants under our review 

had multiple grant objectives. The success or failure of each of these objectives 

was assessed independently of the others.] 

Figure 2. Outcome by Grant Objective 

0

2

4

6

8

10

12

14

16

18

Note: Percentages may not add to 100% due to rounding.

16

 

 12%

 12%

rants 

9 9

Number of G

 33%

 5

 63%

 56%

 4

Source: OIG analysis. 

In addition, we found that grants targeting the introduction of new service rather 

than the expansion of existing service were more successful (50 percent vs. 

20 percent). This was true within grant categories as well. Revenue guarantees 

for new service were more successful than for existing service (56 percent vs. 

33 percent) and marketing grants for new service were more successful than for 

existing service (40 percent vs. 12 percent). 

Grants targeting existing service may be less likely to succeed because these 

mature markets may provide less of a growth opportunity than well-selected new 

markets or may reflect attempts by communities to resuscitate a failing service. 

 13%

 40%

 22%

 

 22% 20%

 

 20%

 20%

 56%

 1

 100%

 12%

 100%

 11%

 11%

 22%

Revenue Guarantee

 (New Service) 

Cost Subsidy and StartUp Cost Support 

Revenue Guarantee

Ma

(Existing Service) 

rketing (Existing

Service) 

Marketing (New Service)

Other

Terminated Failed Partial Success

 
 5 

Community Participation and the Process That Communities Follow 

Increases the Likelihood of Success 

Community financial and non-financial participation increased the likelihood 

of grant success. Eleven out of the 33 grants with greater than 10 percent 

community financial participation succeeded, compared to only one out of the 

seven grants (14 percent) with 10 percent or less participation. However, the 

likelihood of success did not increase as the level of community financial 

participation increased beyond 10 percent. 

A community’s non-financial participation plays a key role in influencing an 

airline’s decision making. For example, community leaders and organizations, 

such as local chambers of commerce and economic development corporations, can 

play a critical role in compiling market data as well as developing and delivering a 

sound proposal to the airlines. 

The process communities follow can increase the potential success of their 

grant. The process certain communities followed rather than the nature of their 

SCASDP grants was a greater determinant of grant outcome. The key elements of 

a successful grant process are outlined below:

• Conduct Market Analysis – Reliable market data was the most significant 

determinant of grant success. 

• Articulate SCASDP Strategy – SCASDP strategy should be based on market 

analysis. 

• Present Air Service Proposal to Airlines and Negotiate Air Service 

Improvements - Community leaders and local organizations, such as the local 

chamber of commerce, play a key role in proposing air service initiatives and 

negotiating with target airlines. 

• Implement Grant - SCASDP grants usually carry significant implementation 

risk, which is offset significantly with the quality and depth of the management 

teams at small community airports. Small communities offset any potential 

disadvantage by augmenting their management expertise through the judicious 

use of aviation consultants. 

• Market and Brand – Spending some SCASDP funds on marketing programs 

in support of non-marketing grants (such as revenue guarantees, cost subsidies, 

 
 6 

etc.) can stimulate demand for air services by increasing awareness of airport 

services and reversing the leakage3

 of passengers to surrounding airports. 

Lessons Learned 

The same project limitation prevents potentially successful grant proposals 

from being considered. Communities may not be able to fully utilize the 

program due to the same project limitation. The same project limitation precludes 

a community from pursuing follow-on grants using grant strategies that have 

worked for them in the past. As a result, many communities, (especially in the 

pilot years of the program, 2002 and 2003), are precluded from seeking virtually 

any new grants due to the same project limitation. 

The lack of funding flexibility may negatively impact the effectiveness of the 

program. Airlines typically have all of the leverage in their negotiations with 

small communities. As a result, airlines expect communities to react very quickly 

when they are in a position to implement a community’s air service proposals. As 

such, access to SCASDP funding is key to a small community’s air service 

proposal. Some small communities must forego certain air service possibilities 

because SCASDP is between funding cycles. 

Summary of Recommendations 

Our review found that communities which conduct in-depth market analysis and 

support their grants through substantive financial and non-financial support are 

more likely to succeed. Accordingly, we are recommending that OAA give 

priority to participate in the program to those communities that include an in-depth 

market analysis (except where inapplicable, such as feasibility studies) with their 

grant application; and, involve substantive levels of financial and non-financial 

community participation. Additionally, OAA should require communities 

requesting non-marketing grants (e.g. revenue guarantee grants, cost subsidy 

grants, etc.) to use a part of the funding awarded to them to implement a marketing 

program that complements their overall grant strategy. 

Furthermore, we found that the same project limitation may limit the overall 

success of the program by excluding communities that have successfully 

implemented grants in the past from reapplying. Therefore, we are recommending 

that OAA evaluate the impact of the same project limitation on the overall success 

of the program, and seek legislative changes if necessary. A list of our 

 

3

 Passenger leakage is an approximate measure of the number of passengers that do not use the local 

airport for their air travel, choosing instead to travel to or from a competing airport in search of lower 

airfares and scheduling conveniences. 

 
 7 

recommendations can be found on page 14. Management’s response is included 

in its entirety in the Appendix. 

FINDINGS 

Most Grants Were Not Successful, but Some Grant Types Were More 

Successful Than Others 

We found that 70 percent of the grants in our review failed to fully achieve their 

objectives (see figure 1 on page 3). Specifically, 50 percent of the grants were 

unable to achieve any of their articulated grant objectives or were unable to sustain 

grant benefits beyond the grant horizon; 7.5 percent were deemed to be partially 

successful suggesting that these communities were either unable to achieve all of 

their articulated grant objectives or unable to sustain the grant benefits through the 

end of June 2007; and, 12.5 percent were terminated prior to any substantive 

progress being achieved towards implementing their SCASDP grants. The 

remaining 30 percent of the grants were successful in achieving their grant 

objectives and sustaining the resulting benefits for at least 12 months. Exhibit B 

presents a detailed description of the OIG’s evaluation criteria along with 

representative case studies. 

Revenue guarantee grants had the highest success rate, 44 percent (or eight out of 

18 grants). Comparatively, only 19 percent (or four out of 21 grants) of marketing 

grants succeeded. None of the four expense subsidy and start-up costs grants were 

successful (see figure 2 on page 4). 

Overall we found that grants targeting the introduction of a new service rather than 

the expansion of an existing service were more successful (50 percent vs. 

20 percent). This was true within grant categories as well. Revenue guarantees 

for a new service were more successful than for an existing service (56 percent vs. 

33 percent) and marketing grants for a new service were more successful than for 

an existing service (40 percent vs. 12 percent). 

Grants targeting existing service may be less likely to succeed because these 

mature markets4

 may provide less of a growth opportunity than well-selected new 

markets or may reflect attempts by communities to resuscitate a failing service. 

For instance, a community in our review had requested SCASDP funding to 

implement a marketing campaign to increase passenger enplanement in support of 

its existing air service. At the time of their grant request, the community operated 

 

4

 Most grants (11 out of 12) targeting the expansion of existing service by either introducing additional 

frequencies or by upgauging existing aircraft, had operated in those markets before or since January 

2000. 

 
 8 

air service in one market, a major west coast hub airport, and this market by our 

definition (see footnote 4) was a mature market. The main impetus behind the 

grant was to retain and in a best case scenario bolster flying to the aforementioned 

hub airport. However, based on our review we determined that the traffic in this 

market declined by 12 percent during the grant period and an additional 16 percent 

in the post-grant period. Eventually, this decrease in enplanements led to the 

community losing its service to this market. 

Furthermore, we found that most 5

 of the communities requesting grants to 

enhance existing service had not performed any form of market analysis. We 

noted a strong correlation between communities that had performed a market 

study and those who had successfully enhanced their existing air service. We 

found that three out of the four successful grants had performed a market study. 

In contrast, none of the unsuccessful grants had performed a market study. Thus 

we conclude that communities targeting existing service are more likely to 

succeed when they perform a market analysis as this allows them to ascertain if 

their proposed air service enhancements are sustainable in the long run. 

Community Financial and Non-Financial Participation Increased the 

Likelihood of Grant Success 

Eleven out of the 33 grants with greater than 10 percent community financial 

participation succeeded, compared to only one out of the seven grants (14 percent) 

with 10 percent or less participation. Figure 3 on the following page highlights 

the success rate of grants, based on community participation. 

 

5

 We conducted teleconferences or site visits with each of the 12 communities targeting existing service 

enhancements and found that only three of them had performed a market study. A list of the 

communities where we conducted site visits or teleconferences can be found in Exhibit D. 

 
 9 

Figure 3. Grant Success Rate by Level of Community Participation 

5

9

16

7

3

0% thru 10% 11% thru 25% 26% thru 50%

51% thru 75% 76% thru 100%

Note: Percentages may not add to 100% due to rounding.

Partial 1 

Terminated 2 

Success 1 

Partial 1 

Failed 5 

Success 2 

Failed 2 

Terminated 1 

Success 7 

Partial 1 

Failed 8

Success 2 

Failed 5 

Terminated 2 

Source: OIG analysis. 

Although we found that community financial participation did influence grant 

outcome, the likelihood of success did not increase as the level of community 

financial participation increased beyond 10 percent.

A community’s non-financial participation plays a key role in influencing an 

airline’s decision making. For example, community leaders and organizations, 

such as local chambers of commerce and economic development corporations, can 

play a critical role in compiling market data as well as developing and delivering a 

sound proposal to the airlines. We are recommending that OAA give priority to 

grant proposals with substantive levels of financial and non-financial community 

participation. 

The Process Communities Follow can Increase Their Ability to 

Successfully Implement Their SCASDP Grant 

The SCASDP strategies (i.e. revenue guarantees vs. marketing, etc.) that 

communities choose to pursue allows them to compete for air service against other 

small communities. However, the process they follow in implementing their 

SCASDP grants determines grant outcome. The key elements of a successful 

grant process are outlined in figure 4 on the following page. 

 
 10 

Figure 4. Key Elements of a Successful SCASDP Grant Process 

Implement 

Grant

Conduct 

Market 

Analysis

Articulate 

SCASDP 

Strategy

Present Air Service 

Proposal to Airlines 

& Negotiate 

Market & 

Brand

Market and 

Brand

Present Air Service 

Proposal to Airlines 

& Negotiate 

Articulate 

SCASDP 

Strategy

Conduct

Market 

Analysis

Implement 

Grant

Source: OIG analysis. 

• Conduct Market Analysis – Reliable market data was the most significant 

determinant of grant success. Good market data enables a community to 

identify their air service gaps and market opportunities, which allows them to 

identify air service development opportunities that have the highest probability 

of being sustainable in the long run. Without market analysis, airport and 

community leaders have unsupported notions about the air service needs of 

their community and the type of service that would be sustainable. For 

example, a community in New England used its SCASDP funding to 

implement a revenue guarantee in support of new air service to a medium-hub 

airport in the vicinity. This decision was made on the basis of anecdotal 

evidence they had received from various members of their community. Shortly 

after introducing this air service, the community and the airline in question 

determined that the demand for this service would not materialize and they 

decided to discontinue the air service. 

Through our conference calls and site visits, we found a strong correlation 

between communities that had successfully implemented their SCASDP grants 

and those that had performed some form of a market study (either prior to 

requesting their grant or as a first step in the implementation of their grant). 

Community support and the use of aviation consultants contribute significantly 

to the execution of a market analysis, a time-consuming and intricate process. 

• Articulate SCASDP Strategy – Articulating a SCASDP strategy, based on 

market analysis, allows a community to formulate an air service plan that makes 

a compelling business case to target airlines. This allows the community to 

pursue air service initiatives that have the highest probability of attracting 

sustainable air service improvement to their communities. For example, a 

community in the Northeast engaged aviation consultants to conduct a market 

study. Based on the results of the market study, the consultants recommended 

that the community should target three daily flights to a specific major hub 

airport in the Northeast. Additionally, the consultant recommended using a 

 
 11 

revenue guarantee to support these flights as this would be very attractive to the 

dominant air carrier at the target airport. The community successfully 

introduced the new service and then sustained this service beyond their grant 

horizon. During the grant period, the airline was so pleased with the overall 

performance of the new service that they added additional frequencies (not 

supported by the revenue guarantee) in this market. The additional frequencies, 

however, were not feasible and service was scaled back to the three flights 

suggested by the consultants. 

 

Market studies also provide data on other significant factors such as the impact 

of passenger leakage. Market studies not only quantify the number of 

passengers that leak from small community airport, but they also provide data 

on the impact of factors such as ticket pricing and scheduling convenience on 

the amount of leakage from a community. Access to this data allows a 

community to adapt its SCASDP strategy to address such factors, which may 

enhance a small community’s ability to sustain its air service enhancement in 

the long run. 

• Present Air Service Proposal to Airlines and Negotiate – Community support 

plays a key role in articulating a small community’s business case in favor of its 

proposed air service and its ensuing negotiations with target airlines. Local 

leadership, organizations such as the local chamber of commerce, and local 

businesses collectively play a key role in attracting and sustaining air services to 

small communities. 

Local businesses and local organizations play a critical role in convincing target 

airlines of the economic viability of the proposed air service by establishing the 

size and quality of the high-yielding business traffic6

 generated from a small 

community. Since very intense competition among small communities for the 

limited airline resources exists, most air service development proposals require 

small communities to provide some form of financial incentives to the target 

airline to attract them to their community. Participation by community 

leadership in air service development initiatives establishes the credibility of the 

financial incentives offered to target airlines, and reassures them of accessible 

financial assistance, when needed. 

For instance, one of the communities we reviewed requested SCASDP funding 

to implement a revenue guarantee in hopes of upgrading their existing service 

from propeller-based to regional jet aircraft. The community’s decision to 

 

6

 Business passengers, who generally tend to pay more for air services than leisure passengers, are critical 

to convincing target airlines of the short-term and long-term economic viability of small community air 

service. 

 
 12 

upgauge to regional jets was grounded in a market study, which suggested that 

a significant proportion of their air travelers were high-yielding business 

passengers who leaked to surrounding airports (a non-hub airport within 

60 miles, a small-hub airport within 120 miles, or a major hub airport within 

180 miles) rather than use the daily air service from the community to three east 

coast hub airports. The study identified two main reasons for the passenger 

leakage: 1) business passengers were unwilling to fly on propeller aircraft that 

had operated in this market prior to their grant and 2) the scheduling of flights 

from the local airport resulted in significant layovers at the hub airports. In 

response to the market study, the community formed an air service development 

committee, comprised of the airport director as well as representatives from the 

local chamber of commerce and local businesses. The committee collectively 

negotiated the upgauging of the aircraft in this market to regional jets, 

modifying flight scheduling to reduce layovers at the hub airports connected to 

their airport. This resulted in a significant decline in passenger leakage from 

the community, which played a key role in the community’s ability to 

successfully sustain regional jet service beyond the grant horizon. 

• Implement Grant – SCASDP grants usually carry significant implementation 

risk, which is offset significantly with the quality and depth of the management 

teams at small community airports. Small communities can offset any potential 

disadvantage by augmenting their management expertise through the judicious 

use of aviation consultants. 

• Market and Brand – Airlines operating in small communities typically have 

limited resources at their disposal to invest in marketing programs designed to 

stimulate the demand for their services from small communities. Therefore, we 

found that spending some SCASDP funds on marketing programs in support of 

non-marketing grants (such as revenue guarantees, cost subsidies, etc.) can 

stimulate demand for air services by increasing awareness of airport services 

and reversing the leakage of passengers to surrounding airports. 

For instance, airport authorities, the largest resort community, and the chamber 

of commerce at a year-round leisure community in the Rocky Mountains 

collectively raised funds to fund a marketing campaign in support of a SCASDP 

sponsored revenue guarantee to a major west coast hub airport. The marketing 

campaign not only sought to stimulate demand from the local market and curb 

passenger leakage, but it also collaborated with the airlines operating from the 

community to design promotional campaigns, stimulating tourist traffic to the 

community. The community also takes advantage of e-mail distributions and 

other internet advertising tools that stimulate traffic to and from the community. 

Based on our review, we concluded that the community not only achieved its 

 
 13 

SCASDP objective, it was also successful in stimulating traffic and attracting 

air service to an alternate west coast hub airport. The community in question 

believed that the traffic stimulated through its marketing campaign was critical 

in both of its successful air service initiatives outlined above. 

Based upon these results, we recommend that OAA give priority to communities 

who include an in-depth market analysis (except where inapplicable, such as 

feasibility studies) in their grant application. Additionally, OAA should require 

communities requesting non-marketing grants (e.g. revenue guarantee grants, cost 

subsidy grants, etc.) to use a part of the funding awarded to them to implement a 

marketing program that complements their overall grant strategy. 

The Same Project Limitation Prevents Potentially Successful Grant 

Proposals From Being Considered 

We found that communities may not be able to fully utilize the program due to the 

same project limitation. The same project limitation precludes a community from 

pursuing follow-on grants using grant strategies that have worked for them in the 

past. As a result, many communities (especially those that received grants in the 

pilot years of the program, i.e. 2002 and 2003), are precluded from seeking 

virtually any new grants. This problem is particularly significant for those 

communities in the initial years of the program that had received grants with fairly 

broad objectives. 

For example, a Midwestern community was awarded a grant in the pilot years of 

the program to implement, among other things, a cost subsidy and start-up cost 

relief program, a market study, and a marketing campaign. This grant enabled 

them to secure service with a low-cost carrier. However, this service ceased after 

being in service for less than a year due to the financial distress and subsequent 

restructuring of the airline operating this service. Following the closing of their 

initial SCASDP grant, the community applied for a follow-on grant that sought to 

encourage airlines to target leisure traffic as a means to curb passenger leakage to 

surrounding airports. The community offered to offset an airline’s start-up and 

operating costs associated with introducing flights at off-peak times such as 

weekends or to leisure destinations. The community’s application, however, was 

denied under the “same project limitation” as both the current proposal as well the 

community’s initial proposal had sought to provide cost relief to the airlines 

operating from their airport. 

Encouraging innovative solutions to the problems confronting small communities 

was one of the key impetuses behind the program. As discussed above, the same 

project limitation may be restricting small communities from developing creative 

 
 14 

solutions to address their air service deficiencies, which may limit the overall 

effectiveness of the program. We recommend that OAA evaluate the impact of 

the same project limitation on the effectiveness of the program and seek legislative 

changes, if necessary. 

The Lack of Funding Flexibility May Negatively Impact the 

Effectiveness of the Program 

OAA presently conducts one grant cycle per fiscal year. This involves soliciting 

grant proposals through a request for proposal, reviewing and deliberating on 

grant applications, and formalizing grant agreements with successful communities 

and obligating requisite funds. This process is usually completed in the fourth 

quarter of the fiscal year, typically around the second to third week of September. 

Airlines typically have all of the leverage in their negotiations with small 

communities. As a result, airlines expect communities to react very quickly when 

they are in a position to implement communities’ air service proposals. As such, 

access to SCASDP funding is key to a small community’s air service proposal. 

Some small communities must forego certain air service possibilities because the 

SCASDP is between funding cycles. 

RECOMMENDATIONS 

We recommend that the Office of Aviation Analysis: 

1. Give priority to participate in the program to those communities whose grant 

applications: 

a. include an in-depth market analysis (except where inapplicable, such as 

feasibility studies), and 

b. involve substantive levels of financial and non-financial community 

participation. 

2. Require communities requesting non-marketing grants to use a part of the 

funding awarded to them to implement a marketing program that 

complements their overall grant strategy. 

3. Evaluate the impact of the same project limitation on the effectiveness of the 

program and seek legislative changes, if necessary. 

 
 15 

AGENCY COMMENTS AND OFFICE OF INSPECTOR 

GENERAL RESPONSE 

We provided the Office of Secretary of Transportation (OST) with our draft report 

on March 13, 2008, and we received their response on May 9, 2008. OST’s full 

response is included in the appendix to this report. OST concurred with each of 

our recommendations and has taken action to implement them. 

Recommendation 1: OST concurred with our recommendation to give priority to 

those grant applications which include in-depth market analysis (except where 

inapplicable, such as feasibility studies) and involve substantive levels of financial 

and non-financial community participation. In its order soliciting SCASDP grant 

proposals for 2008, OST has emphasized that a thorough understanding of the 

target market is essential for grant success and encourages communities requesting 

funds for certain types of grants to include in-depth market analysis with their 

proposals. 

Regarding community financial and non-financial participation, OST stated that 

they have historically made an effort to treat locally based participation as a factor 

to be considered when evaluating the merits of competing proposals. The order 

soliciting grant proposals for 2008 also included a statement that communities that 

contribute from local sources (other than airport revenues) are accorded priority 

consideration during the grant selection process. 

Recommendation 2: OST also concurred with our recommendation to require 

communities requesting non-marketing grants to use a portion of their funding to 

implement a marketing program which complements their overall grant strategy. 

OST stated that they agree that grant projects which incorporate marketing have a 

greater likelihood of success. Accordingly, they have incorporated language in the 

order soliciting grant proposals for 2008 that encourages communities to designate 

in their grant proposals, a portion of the funds for the development of a marketing 

plan in support of the service they are seeking to obtain. 

Recommendation 3: Regarding our recommendation to evaluate the impact of 

the same project limitation and seek legislative changes if necessary, OST also 

concurred. According to OST, Congress amended the SCASDP in 2003 and 

added the provision excluding communities from receiving additional funds for 

the same project. As currently written, OST believes that the statute provides 

latitude in determining what represents a “same project” and they do not foresee a 

need to seek any legislative changes. In their 2008 order, OST provided guidance 

to applicants on how they determine whether a proposed project is sufficiently 

different to constitute a new project. They stated that they would look particularly 

 
 16 

 

at the goals and objectives of the previous grant as well as the key components of 

the means by which those goals and objectives are to be achieved when 

considering a new proposal from a prior grantee. 

ACTIONS REQUIRED 

OST’s response and actions taken address the intent of our recommendations. 

Therefore, we consider these recommendations resolved. 

We appreciate the courtesies and cooperation of OST representatives during this 

audit. If you have any questions regarding this report, please contact me at 

(202) 366-1981 or Mitch Behm, Program Director, at (202) 366-1995. 

# 

cc: Acting Under Secretary for Policy, S-3 

 Acting Assistant Secretary for Aviation and International Affairs, OST, X-1 

 Audit Liaison, OST, M-1
 17 

EXHIBIT A. SCOPE AND METHODOLOGY 

Scope 

This performance audit was conducted in accordance with generally accepted 

government auditing standards prescribed by the Comptroller General of the 

United States. The scope of our audit included all 187 SCASDP grants issued 

between fiscal years 2002 and 2006. From this, we selected all 40 grants7

 issued 

between 2002 and 2006 (excluding feasibility studies) that had been closed for 

12 months or more as of March 31, 2007. These grants enabled us to determine if 

the projects were at least minimally self-sustaining. Please refer to Exhibit C for a 

list of all grants issued under the program and the 40 grants included in our audit. 

Figure 5 below graphically presents the grants we reviewed by year of issue. 

Figure 5. Grants Reviewed by Year of Issue 

2002

67%

2003

25%

2004

8%

We reviewed background information on each of the 40 grants including the grant 

application, grant agreement (including any subsequent grant amendments), and 

final “closeout reports” submitted by communities upon completion of their 

SCASDP grants. This enabled us to assess the objective(s) of each grant and 

allowed us to identify the strategies that communities deployed in order to achieve 

their desired goal. Furthermore, this information provided us with a baseline to 

assess if a community was successful in achieving its stated grant objective(s) and 

if the grant strategy proposed by a community was effective in achieving 

 

7

 OIG review included five grants that had been voluntarily terminated by the communities receiving those 

grants. 

Exhibit A. Scope and Methodology 
 18 

sustainable air service improvements to a community. Figure 6 provides a 

breakout of grants by grant objective.8

Figure 6. Grants Reviewed by Objective 

2%

36%

11%

20%

9%

22%

Expense Subsidy and Start-Up Cost Other

Revenue Guarantee (Existing Service) Revenue Guarantee (New Service)

Marketing (Existing Service) Marketing (New Service)

Methodology 

We used a variety of quantitative and qualitative data in an effort to evaluate 

whether the communities in our review were successful in achieving their stated 

grant objectives and whether they were able to sustain the resulting grant benefits 

beyond the grant horizon. We collected flight activity data from FAA’s Flight 

Schedule and Delay Statistics (FSDS) database and passenger enplanement data 

from the Bureau of Transportation Statistics’ (BTS) 298C Schedule T1 Passenger 

Database and T-100 Passenger Enplanement Database. We conducted trend 

analyses and checks of the data to assess reasonableness and comprehensiveness. 

We also spoke with managers responsible for maintaining the databases to 

understand any noted inconsistencies and attempted to resolve them. Based on our 

understanding of the data through discussions with knowledgeable agency 

officials, as well as checks for obvious errors in accuracy and completeness, we 

determined that the data was sufficiently reliable for our purposes. 

The FSDS data was used to measure the changes in the flight activity from a small 

community airport and the passenger enplanement data was used to measure 

changes in passenger traffic. We conducted site visits or teleconferences with 

 

8

 Four grants in our review had two major grant objectives. As a result, each of these grants had been 

counted in two grant categories. The success or failure of each grant objective has been assessed 

independently of the other. 

Exhibit A. Scope and Methodology 
 19 

Exhibit A. Scope and Methodology 

 

airport and community representatives from each of the communities in our 

review9

 (except for the five communities in our review that had voluntarily 

terminated their grants) in an effort to measure the impact of their SCASDP grants 

on their ability to attract sustainable air service improvements. In addition, we 

also talked to aviation consultants in an effort to develop a deeper appreciation for 

the challenges confronting small community airports and to identify some “lessons 

learned” that could improve the probability of small-hub and non-hub 

communities achieving sustainable air service. 

As referenced earlier, five of the communities in our review had terminated their 

grants prior to making any substantive progress towards implementing their 

SCASDP funded projects. In each case, the community in question spent less than 

15 percent of the funds awarded to them under this program. Based on this, we 

concluded that these communities had not made substantive progress towards 

implementing their SCASDP grants and therefore decided to waive further review 

on these grants to determine their success or failure. 

9

 We were successful in conducting teleconferences with 20 communities and conducted site visits with an 

additional four communities. 
 20 

EXHIBIT B. EVALUATION CRITERIA AND CORRESPONDING 

CASE STUDIES 

OIG developed evaluation criteria that were applied uniformly to the grants in our 

review and provided us with the platform to equitably evaluate the success or 

failure of the grants under our review. The OIG’s evaluation criteria were as 

follows: 

Success – A community was deemed to have successfully implemented its 

SCASDP grant, if it was able to achieve its articulated grant objective(s) and then 

sustain the resulting benefit for at least 12 months. 

Case Study: One of the communities in our review spent most of its SCASDP 

funding to hire a business development manager whose primary objective was to 

execute a market study and use the data collected from the market study to 

develop a marketing plan that would (1) lead to an increase in passenger 

enplanements, and (2) put the community in a position to attract new air service to 

complement and compete with their existing air service. Based on our analysis we 

determined that this community increased passenger enplanements by 80 percent 

(see figure 7 below) during the grant period and then sustained passenger 

enplanements at a higher level in the post-grant period. Furthermore, this 

community parlayed the increased passenger enplanements to attract air service to 

a competing hub airport on a new airline and increased flight activity from the 

community as portrayed in figure 8 below. We concluded that this community 

successfully achieved its grant objective and sustained resulting grant benefits.

Successful Case Study 

Figure 7. Pass. Enplanement Data Figure 8. Flight Activity Data 

0

50

100

150

200

250

300

350

400

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Pre-Grant Period Grant Period

Post-Grant 

Period

Source: BTS data. Source: FAA data. 

Failed – A community was deemed to have failed in implementing its SCASDP 

grant if it was unable to achieve any of its articulated grant objective(s) or unable 

-

5,000

10,000

15,000

20,000

25,000

30,000

Q1 00

Q3 00Q1 01

Q3 01

Q102

Q3 02Q1 03

Q3 03Q1 04

Q3 04Q1 05Q3 05

 07

P

Q1 06Q3 06Q1

re-Grant Grant PostGrant

Passenger Enplanements 

Flights 

PostGrant 

Period 

Pre-Grant 

Period 

Grant 

Period 

Exhibit B. Evaluation Criteria and Corresponding Case Studies 
 21 

to sustain the resulting benefits beyond its grant horizon. 

Case Study: A community in our review spent the funding awarded to it under the 

program to execute a revenue guarantee to attract new air service to the 

community. Based on our analysis, we concluded that the community was 

successful in attracting new air service (see figure 9 below). However, it was 

unable to sustain this service beyond their grant horizon. Thus, we concluded that 

this grant had failed. 

Failed Case Study

Figure 9. New Air Service Flight Activity Data 

Source: FAA data. 

Partial Success – A community was deemed to be partially successful in 

implementing its SCASDP grant, if it was able to achieve some of its articulated 

grant objectives and/or sustain the resulting benefits at levels that were 

significantly lower then had been anticipated in its grant proposal. 

Case Study: One of the communities in our review used its SCASDP funding to 

implement a marketing program to stimulate air traffic from the community in 

hopes of attracting new service to one of two Midwestern hub airports. Based on 

our analysis (see figure 10 on the following page), we concluded the community 

was able to: (1) achieve a sustained increase in passenger enplanements, (2) use 

the increased enplanement to upgauge its existing air service to regional jets, and 

(3) introduce new air service to one of the hub airports outlined in its proposal. 

However, this service ceased operations during the grant period due to the 

50

45

40

New Air 

Service 

Commences 

New Air 

Service 

Terminates 

35

30

Flights 25

20

15

10

5

0

Sep- Oct- Nov-03 Dec- Jan- Feb- Mar-04

Exhibit B. Evaluation Criteria and Corresponding Case Studies 
 22 

Exhibit B. Evaluation Criteria and Corresponding Case Studies 

financial restructuring undertaken by the airline operating this service. We 

concluded that although this community was unable to achieve all of its articulated 

grant objectives, it did benefit from its participation in this program. Furthermore, 

it was able to sustain these benefits for at least 12 months. Therefore, we 

considered this grant to be a partial success. 

Partial Success Case Study 

Figure 10. Passenger Enplanement Data 

-

5,000

10,000

15,000

20,000

25,000

30,000

Q1 00

Q3 00

Q1 01

Q3 01

Q1 02

Q3 02

Q1 03

Q3 03

Q1 04

Q3 04

Q1 05

Q3 05

Q1 06

Q3 06

Q1 07

 Enplaned 

 Source: FAA and BTS data. 

Terminated – The community in question voluntarily terminated its grant prior to 

making any substantive progress towards implementing their grants. In each case, 

the community spent less that 15 percent of the funds that were awarded to it. 

Case Study: One of the communities in our review successfully received a grant 

to implement a revenue guarantee and marketing campaign in support of 

expanding its existing air service to a major Midwestern hub airport. Although the 

community wanted to add additional flights to the hub airport, it was unable to 

convince the airline that the enhanced flying would be feasible. The community 

in question decided to terminate its grant rather than amend the scope of its grant. 

Prior to terminating its grant, the community had spent less than 3% of the funding 

that had been awarded to it under the program. 

Upgauged all air 

service to primarily 

Passengers

regional jet service 

Lost 

new air 

service 

Introduced 

new air 

service 

Pre-Grant 

Period 

Grant Period Post-Grant 

Period 
 23 

EXHIBIT C. SCASDP GRANTS ISSUED BETWEEN 2002 AND 

2007 

 Grant Year 

(FY)

Community/Consortium of

Communities

State Amount

1 2002 King Cove, Sand Point, Akutan, Cold Bay, 

False Pass, Nelson Lagoon

AK $240,000

2 2002 Mobile AL $456,137

3 2002 Fort Smith AR $108,520

4 2002 Lake Havasu City AZ $403,478

5 2002 Santa Maria CA $217,530

6 2002 Lamar CO $250,000

7 2002 Daytona Beach FL $743,333

8 2002 Augusta/Aiken GA/SC $759,004

9 2002 Mason City IA $600,000

10 2002 Hailey ID $600,000

11 2002 Marion IL $212,694

12 2002 Fort Wayne IN $398,000

13 2002 Manhattan KS $388,350

14 2002 Paducah KY $304,000

15 2002 Somerset KY $95,000

16 2002 Lake Charles LA $500,000

17 2002 Presque Isle ME $500,000

18 2002 Houghton & Pellston MI $120,000

19 2002 Brainerd, St Cloud MN $1,000,000

20 2002 Cape Girardeau MO $500,000

21 2002 Meridian MS $500,000

22 2002 Asheville NC $500,000

23 2002 Bismarck ND $1,557,500

24 2002 Scottsbluff NE $950,000

25 2002 Taos/Ruidoso NM $500,000

26 2002 Binghamton NY $500,000

27 2002 Akron/Canton OH $950,000

28 2002 Baker City OR $300,000

29 2002 Reading PA $470,000

30 2002 Rapid City SD $1,400,000

31 2002 Bristol/Kingsport/Johnson City TN $615,000

32 2002 Abilene TX $85,010

33 2002 Beaumont/Port Arthur TX $510,000

34 2002 Moab UT $250,000

35 2002 Lynchburg VA $500,000

36 2002 Bellingham WA $301,500

37 2002 Pasco WA $200,000

38 2002 Rhinelander WI $500,000

39 2002 Charleston WV $500,000

40 2002 Casper, Gillette WY $500,000

 Represents Communities in the OIG Sample

 Source: OAA 

Exhibit C. SCASDP Grants Issued Between 2002 and 2007 
 24 

 Grant Year 

(FY)

Community/Consortium of

Communities

State Amount

2002 - Replacement and Reallocated Grants

41 2002 Chico CA $44,000

42 2002 Visalia CA $200,000

43 2002 Telluride CO $300,000

44 2002 Syracuse NY $480,000

45 2002 Rutland VT $280,000

46 2002 Bridgeport/Clarkesburg WV $372,286

FY 2002 Total $21,661,342

47 2003 King Cove, Sand Point, Akutan, Cold Bay, 

False Pass, Nelson Lagoon

AK $70,000

48 2003 Dothan AL $200,000

49 2003 Baxter County/West Plains/Gainesville AR/MO $574,875

50 2003 Arizona Rural Consortium AZ $1,500,000

51 2003 Bakersfield CA $982,513

52 2003 Fresno CA $1,000,000

53 2003 Gunnison/Crested Butte CO $200,000

54 2003 Gainesville FL $660,000

55 2003 Savannah/Hilton Head GA/SC $523,495

56 2003 Dubuque/East Dubuque/Platteville IA/IL/WI $610,000

57 2003 Lewiston ID $675,000

58 2003 Owensboro KY $500,000

59 2003 Shreveport LA $500,000

60 2003 Bangor ME $310,000

61 2003 Muskegon MI $500,000

62 2003 Duluth MN $1,000,000

63 2003 Cut Bank MT $90,000

64 2003 Joplin MO $500,000

65 2003 Greenville MS $400,000

66 2003 Tupelo MS $475,000

67 2003 North Carolina Consortium NC $1,200,000

68 2003 Dickinson/Williston ND $750,000

69 2003 Grand Island NE $380,000

70 2003 Taos Consortium NM $1,400,000

71 2003 Athens/Morgantown OH/WV $587,224

72 2003 Marietta/Parkesburg OH/WV $500,000

73 2003 Redmond OR $515,000

74 2003 Erie PA $500,000

75 2003 Aguadilla PR $626,700

76 2003 Charleston SC $1,000,000

77 2003 Pierre SD $150,000

78 2003 Knoxville TN $500,000

79 2003 Victoria TX $20,000

80 2003 Staunton VA $100,000

81 2003 Friday Harbor WA $350,000

 Represents Communities in the OIG Sample

 24 

Exhibit C. SCASDP Grants Issued Between 2002 and 2007 

 Grant Year 

(FY)

Community/Consortium of

Communities

State Amount

2002 - Replacement and Reallocated Grants

41 2002 Chico CA $44,000

42 2002 Visalia CA $200,000

43 2002 Telluride CO $300,000

44 2002 Syracuse NY $480,000

45 2002 Rutland VT $280,000

46 2002 Bridgeport/Clarkesburg WV $372,286

FY 2002 Total $21,661,342

47 2003 King Cove, Sand Point, Akutan, Cold Bay, 

False Pass, Nelson Lagoon

AK $70,000

48 2003 Dothan AL $200,000

49 2003 Baxter County/West Plains/Gainesville AR/MO $574,875

50 2003 Arizona Rural Consortium AZ $1,500,000

51 2003 Bakersfield CA $982,513

52 2003 Fresno CA $1,000,000

53 2003 Gunnison/Crested Butte CO $200,000

54 2003 Gainesville FL $660,000

55 2003 Savannah/Hilton Head GA/SC $523,495

56 2003 Dubuque/East Dubuque/Platteville IA/IL/WI $610,000

57 2003 Lewiston ID $675,000

58 2003 Owensboro KY $500,000

59 2003 Shreveport LA $500,000

60 2003 Bangor ME $310,000

61 2003 Muskegon MI $500,000

62 2003 Duluth MN $1,000,000

63 2003 Cut Bank MT $90,000

64 2003 Joplin MO $500,000

65 2003 Greenville MS $400,000

66 2003 Tupelo MS $475,000

67 2003 North Carolina Consortium NC $1,200,000

68 2003 Dickinson/Williston ND $750,000

69 2003 Grand Island NE $380,000

70 2003 Taos Consortium NM $1,400,000

71 2003 Athens/Morgantown OH/WV $587,224

72 2003 Marietta/Parkesburg OH/WV $500,000

73 2003 Redmond OR $515,000

74 2003 Erie PA $500,000

75 2003 Aguadilla PR $626,700

76 2003 Charleston SC $1,000,000

77 2003 Pierre SD $150,000

78 2003 Knoxville TN $500,000

79 2003 Victoria TX $20,000

80 2003 Staunton VA $100,000

81 2003 Friday Harbor WA $350,000

 Represents Communities in the OIG Sample

Exhibit C. SCASDP Grants Issued Between 2002 and 2007 
 25 

 Grant Year 

(FY)

Community/Consortium of

Communities

State Amount

2003 - Replacement and Reallocated Grants

82 2003 Hot Spings AR $195,000

83 2003 Elmira NY $200,000

84 2003 Worcester MA $442,615

85 2003 Laredo TX $400,000

Total $21,087,422

86 2004 Huntsville AL $479,950

87 2004 Redding/Arcata CA $500,000

88 2004 Santa Rosa CA $635,000

89 2004 Steamboat Springs CO $500,000

90 2004 New Haven CT $250,000

91 2004 Sarasota FL $1,500,000

92 2004 Albany GA $500,000

93 2004 Sioux City IA $609,800

94 2004 Waterloo IA $550,000

95 2004 Pocatello ID $75,000

96 2004 Champaign/Urbana IL $200,000

97 2004 Bloomington IL $850,000

98 2004 Evansville/South Bend IN $1,000,000

99 2004 Lafayette LA $240,000

100 2004 Alpena MI $583,046

101 2004 Kalamazoo MI $500,000

102 2004 Marquette MI $700,000

103 2004 Columbus MS $260,000

104 2004 Butte MT $360,000

105 2004 Lincoln NE $1,200,000

106 2004 McCook/North Platte NE $275,000

107 2004 Lebanon NH $500,000

108 2004 Farmington NM $650,000

109 2004 Elko NV $222,000

110 2004 Youngstown OH $250,000

111 2004 Salem OR $500,000

112 2004 Dubois PA $400,000

113 2004 Latrobe PA $600,000

114 2004 Wilkes-Barre/Scranton PA $625,000

115 2004 Sumter SC $50,000

116 2004 Sioux Falls SD $350,000

117 2004 Chattanooga TN $750,000

118 2004 Del Rio TX $318,750

119 2004 Tyler TX $90,000

120 2004 Logan UT $530,000

121 2004 Charlottesville VA $250,000

122 2004 Richmond VA $950,000

123 2004 Walla Walla WA $250,000

124 2004 Eau Claire WI $500,000

125 2004 Beckley/Lewisburg WV $300,000

Total $19,853,546

 Represents Communities in the OIG Sample

 25 

Exhibit C. SCASDP Grants Issued Between 2002 and 2007 

 Grant Year 

(FY)

Community/Consortium of

Communities

State Amount

2003 - Replacement and Reallocated Grants

82 2003 Hot Spings AR $195,000

83 2003 Elmira NY $200,000

84 2003 Worcester MA $442,615

85 2003 Laredo TX $400,000

Total $21,087,422

86 2004 Huntsville AL $479,950

87 2004 Redding/Arcata CA $500,000

88 2004 Santa Rosa CA $635,000

89 2004 Steamboat Springs CO $500,000

90 2004 New Haven CT $250,000

91 2004 Sarasota FL $1,500,000

92 2004 Albany GA $500,000

93 2004 Sioux City IA $609,800

94 2004 Waterloo IA $550,000

95 2004 Pocatello ID $75,000

96 2004 Champaign/Urbana IL $200,000

97 2004 Bloomington IL $850,000

98 2004 Evansville/South Bend IN $1,000,000

99 2004 Lafayette LA $240,000

100 2004 Alpena MI $583,046

101 2004 Kalamazoo MI $500,000

102 2004 Marquette MI $700,000

103 2004 Columbus MS $260,000

104 2004 Butte MT $360,000

105 2004 Lincoln NE $1,200,000

106 2004 McCook/North Platte NE $275,000

107 2004 Lebanon NH $500,000

108 2004 Farmington NM $650,000

109 2004 Elko NV $222,000

110 2004 Youngstown OH $250,000

111 2004 Salem OR $500,000

112 2004 Dubois PA $400,000

113 2004 Latrobe PA $600,000

114 2004 Wilkes-Barre/Scranton PA $625,000

115 2004 Sumter SC $50,000

116 2004 Sioux Falls SD $350,000

117 2004 Chattanooga TN $750,000

118 2004 Del Rio TX $318,750

119 2004 Tyler TX $90,000

120 2004 Logan UT $530,000

121 2004 Charlottesville VA $250,000

122 2004 Richmond VA $950,000

123 2004 Walla Walla WA $250,000

124 2004 Eau Claire WI $500,000

125 2004 Beckley/Lewisburg WV $300,000

Total $19,853,546

 Represents Communities in the OIG Sample

Exhibit C. SCASDP Grants Issued Between 2002 and 2007 
 26 

Exhibit C. SCASDP Grants Issued Between 2002 and 2007 

 Grant Year 

(FY)

Community/Consortium of

Communities

State Amount

126 2005 Montgomery AL $600,000

127 2005 Modesto CA $550,000

128 2005 Monterey CA $500,000

129 2005 California Consortium CA $245,020

130 2005 Durango CO $750,000

131 2005 Marathon FL $750,000

132 2005 Macon GA $507,691

133 2005 Idaho Falls ID $500,000

134 2005 Rockford IL $1,000,000

135 2005 Somerset KY $950,000

136 2005 Alexandria LA $500,000

137 2005 Knox County ME $555,000

138 2005 Hancock/Houghton MI $516,000

139 2005 Sault Sainte Marie MI $587,000

140 2005 Hibbing MN $485,000

141 2005 Marshall MN $480,000

142 2005 Farmington/Poplar Bluff MI $936,404

143 2005 Gulfport/Biloxi MS $750,000

144 2005 Great Falls MT $220,000

145 2005 Greenville NC $450,000

146 2005 Jacksonville NC $500,000

147 2005 Fargo ND $675,000

148 2005 Ruidoso NM $600,000

149 2005 Ithaca NY $500,000

150 2005 Stewart (Newburgh) NY $250,000

151 2005 Massena NY $400,000

152 2005 Lawton/Ft. Sill OK $570,000

153 2005 Oregon/Washington Consortium OR/WA $180,570

154 2005 Bradford PA $220,000

155 2005 Williamsport PA $500,000

156 2005 Florence SC $500,000

157 2005 Aberdeen SD $450,000

158 2005 Killeen TX $280,000

159 2005 Cedar City UT $155,000

160 2005 Vernal UT $40,000

161 2005 Huntington WV $500,000

162 2005 Wyoming Consortium WY $800,000

Total $18,952,685

163 2006 Fairbanks AK $500,000

164 2006 Tuscaloosa AL $400,000

165 2006 Chico CA $472,500

166 2006 Palmdale CA $900,000

167 2006 Montrose CO $450,000

168 2006 Melbourne FL $800,000

169 2006 Burnswick GA $500,000

170 2006 Cedar Rapids IA $200,000

171 2006 Springfield IL $390,000

172 2006 Gary IN $600,000

173 2006 Garden City/Dodge City/Liberal KS $150,000

174 2006 Big Sandy Redion KY $90,000
 27 

Exhibit C. SCASDP Grants Issued Between 2002 and 2007 

 Grant Year 

(FY)

Community/Consortium of

Communities

State Amount

175 2006 Monroe LA $50,000

176 2006 Jackson MS $400,000

177 2006 Kalispell MT $450,000

178 2006 Grand Forks ND $350,000

179 2006 Jamestown/Devil's Lake ND $100,000

180 2006 Gallup NM $600,000

181 2006 Jamestown/Devil's Lake NY $150,000

182 2006 Toledo OH $400,000

183 2006 North Bend OR $400,000

184 2006 Harrisburg PA $400,000

185 2006 Abilene TX $465,100

186 2006 Longview TX $225,000

187 2006 Lynchburg VA $250,000

Total $9,692,600

188 2007 Yuma AZ $200,000

189 2007 Stockton CA $400,000

190 2007 New Haven CT $300,000

191 2007 Panama City FL $575,000

192 2007 Burlington IA $140,000

193 2007 Terre Haute IN $350,000

194 2007 Bowling Green KY $150,000

195 2007 Lexington KY $600,000

196 2007 Ironwood MI $135,000

197 2007 Saginaw MI $500,000

198 2007 Kirksville MO $30,000

199 2007 Golden Triangle MS $500,000

200 2007 Greenville MS $450,000

201 2007 Helena MT $450,000

202 2007 North Carolina DOT (11 non-hub airports) NC $573,278

203 2007 Minot ND $500,000

204 2007 Southeast New Mexico Air Service 

Coalition, Roswell

NM $400,000

205 2007 Athens OH $50,000

206 2007 Youngstown OH $575,000

207 2007 Astoria/Newport OR $842,400

208 2007 Klamath Falls OR $400,000

209 2007 Pennsylvania DOT (4 airports excluding 

Latrobe)

PA $400,000

210 2007 Mid-Continent EAS (only Jackson) TN $50,000

211 2007 St. Croix VI $150,000

212 2007 Oak Harbor WA $180,000

213 2007 Rhinelander WI $75,000

Total $8,975,678

Grand Total $100,223,273
28 

EXHIBIT D. LIST OF TELECONFERENCES AND SITE VISITS 

Site visits: 

1. Bristol, TN 

2. Fort Wayne, IN 

3. Hailey, ID 

4. Lynchburg, VA 

Teleconferences: 

1. Abilene, TX 

2. Akron/Canton, OH 

3. Binghamton, NY 

4. Charleston, WV 

5. Daytona Beach, FL 

6. Dothan, AL 

7. Dickinson/Williston, ND 

8. Erie, PA 

9. Fort Smith, AR 

10. Gainesville, FL 

11. Gunnison/Crested Butte, CO 

12. Huntsville, AL 

13. Lake Havasu City, AZ 

14. Manhattan. KS 

15. Moab, UT 

16. Muskegon, MI 

17. Presque Isle, ME 

18. Rhinelander, WI 

19. Scottsbluff, NE 

20. Victoria, TX 

Exhibit D. List of Teleconferences and Site Visits 
29

 

EXHIBIT E. MAJOR CONTRIBUTORS TO THIS REPORT 

Name Title 

David Tornquist Assistant Inspector General for Rail and Maritime 

Program Audits and Economic Analysis 

Mitchell Behm Program Director 

Marshall Jackson Project Manager 

Jay Borwankar Senior Financial Analyst 

Meredith McDaniel Analyst 

Michael Broadus Analyst 

Darlisa Crawford Writer - Editor 

Exhibit E. Major Contributors to This Report 
30

 

APPENDIX. AGENCY COMMENTS 

U.S. Department of 

Memorandum

Transportation 

Office of the Secretary 

of Transportation 

Subject: OIG Draft Report: Audit of the Small Community Air 

Service Development Program 

Date: May 9, 2008 

From: Michael W. Reynolds, Acting Assistant Secretary for 

Aviation and International Affairs, X1 Reply to 

Attn. of: 

Aloha Ley, X-55 

Ext. 62347 

 

To: David Tornquist, Assistant Inspector General for Rail and 

Maritime Program Audits and Economic Analysis 

Thank you for providing us with the opportunity to review and comment on the 

subject draft report concerning the Small Community Air Service Development 

Program (Small Community Program). We appreciate your responsiveness to our 

request for the Office of the Inspector General (OIG) to review the Small 

Community Program and recommend actions to strengthen its operation. 

While the report of necessity focuses on a limited number of community projects, 

primarily from the pilot years of the program, its findings generally comport with 

our experience in administrating the Small Community Program. The discussion 

(pp. 9-12) on the process communities can follow to increase the likelihood of 

project success is especially helpful. 

As explained below, we concur with all of the OIG recommendations and have 

acted to implement each of them. These actions stem in large measure from 

discussions with your staff during the course of the review. 

 

OIG Recommendation 1: Give priority to participate in the program to those 

communities whose grant applications: (a) include an in-depth market analysis 

(except when inapplicable, such as feasibility studies), and (b) involve substantive 

levels of financial and non-financial community participation. 

OST Response: Concur. With respect to market analysis, our recently issued 

order soliciting Small Community Program proposals for 2008, Order 2008-3-8, 

Appendix. Agency Comments 
31

 

(1) emphasizes that a thorough understanding of the target market is essential for 

the ultimate success of new or expanded air service and (2) specifically 

encourages communities requesting funds for a revenue guarantee or other type of 

financial incentive to include in their proposals an in-depth analysis evidencing 

close familiarity with their target markets. These provisions were included based 

on the OIG review. 

With respect to local funding and non-financial community participation, we 

recognize that the report findings suggest a positive relationship between the level 

of community support and the success of local projects. This supports our efforts 

to treat locally based financial and non-financial participation as a key component 

of a community’s commitment to the success of its proposal, and as a factor to be 

considered when evaluating the merits of competing proposals. In fact, the statute 

treats as priority considerations both community contribution toward the project 

and public-private partnership in project implementation. Our long-standing 

emphasis on local participation is continued in our 2008 Order, which clearly 

states that communities that contribute from local sources (other than airport 

revenues) are accorded priority consideration during the grant selection process. 

OIG Recommendation 2: Require communities requesting non-marketing grants 

to use a part of the funding awarded to them to implement a marketing program 

that complements their overall grant strategy. 

OST Response: Concur. We agree that grant projects that incorporate marketing 

have a greater likelihood of success. For this reason, our 2008 Order (1) states 

that the chances that a new or expanded air service will become self-sustaining are 

enhanced when its implementation is supported by a well-designed marketing 

campaign, and (2) encourages communities to designate in their grant proposals a 

portion of the funds for the development and implementation of a marketing plan 

in support of the service sought. These provisions were incorporated into the 2008 

Order based on the OIG review.

OIG Recommendation 3: Evaluate the impact of the same project limitation on 

the effectiveness of the program and seek legislative changes, if necessary. 

OST Response: Concur. Congress amended the Small Community Program in 

2003 and added the provision excluding communities from receiving additional 

funds for the same project. Congress took this action to exclude follow-on grants 

and prevent the Small Community Program from becoming another Essential Air 

Service program. As currently written, the statute gives the Small Community 

Program latitude in determining what is a “same project” and we presently foresee 

no need to seek a legislative change. In our 2008 Order, we provided further 

Appendix. Agency Comments 
32

 

Appendix. Agency Comments 

guidance to grant applicants regarding how we determine whether a project 

proposed by a former grantee is sufficiently different to constitute a new project. 

Specifically, we stated that in assessing whether a previous grantee’s current 

proposal represents a new project, we would look particularly at the goals and 

objectives of the earlier grant, as well as the key components of the means by 

which those goals and objectives are to be achieved, in comparison to the current 

proposal. 
33

 

The following pages contain textual versions of the charts and graphs found in this 

document. These pages were not in the original document, but have been added 

here to accommodate assistive technology. 
34

 

Audit of the Small Community Air Service Development Program 

Section 508 Compliant Presentation 

Figure 1. SCASDP Grant Outcomes

Grant Outcomes Number of 

Grants 

Percent of 

Grants 

Reviewed 

Success 12 30.0% 

Failed 20 50.0% 

Partial Success 3 7.5% 

Terminated 5 12.5% 

Total 40 100.0% 

Figure 2. Outcome by Grant Objective

Grant Objective Success Partial Failed Terminate

d 

Total 

Marketing 

(Existing Service) 

12% 12% 63% 12% 16 

Marketing (New 

Service) 

40% 20% 20% 20% 5 

Revenue 

Guarantee 

(Existing Service) 

33% 0% 56% 11% 9 

Revenue 

Guarantee (New 

Service) 

56% 0% 22% 22% 9 

Cost Subsidy and 

Start-Up Cost 

Support 

0% 0% 100% 0% 4 

Other 0% 0% 100% 0% 1 

Total 44 

Note 1: Four grants under review had multiple grant objectives. The success or 

failure was assessed independently of the others. 

Note 2: Percentages may not add up to 100% due to rounding. 
35

 

Figure 3. Grant Success Rate by Level of Community Participation

Level of 

Community 

Participation 

Success Partial Failed Terminate

d 

Total 

0% thru 10% 1 1 5 0 7 

11% thru 25% 7 1 8 0 16 

26% thru 50% 2 0 5 2 9 

51% thru 75% 2 0 2 1 5 

76% thru 100% 0 1 0 2 3 

Total 12 20 3 5 40 

Figure 5. Grant Reviewed by Year of Issue 

Year of Grant 

Issue 

Percent of 

Grants 

Reviewed 

2002 67% 

2003 25% 

2004 8% 

Total 100.0% 

Figure 6. Grants Reviewed by Objective 

Grant Objectives Percent of Grants 

Reviewed 

Marketing (Existing 

Service) 

 36% 

Marketing (New 

Service) 

 11% 

Revenue Guarantee 

(Existing Service) 

 20% 

Revenue Guarantee 

(New Service) 

 22% 

Expense Subsidy and 

Start-Up Cost Support 

 9% 

Other 2% 

Total 100.0% 
36

 

Figure 7. Successful Case Study – Passenger Enplanement Data 

Quarter Passengers 

Enplaned 

1st Quarter 2000 11,799 

2nd Quarter 2000 15,732 

3rd Quarter 2000 14,793 

4th Quarter 2000 16,109 

1st Quarter 2001 13,553 

2nd Quarter 2001 14,882 

3rd Quarter 2001 13,071 

4th Quarter 2001 12,085 

1st Quarter 2002 10,414 

2nd Quarter 2002 11,760 

3rd Quarter 2002 11,187 

4th Quarter 2002 12,670 

1st Quarter 2003 10,197 

2nd Quarter 2003 10,351 

3rd Quarter 2003 12,948 

4th Quarter 2003 18,516 

1st Quarter 2004 14,850 

2nd Quarter 2004 17,498 

3rd Quarter 2004 16,966 

4th Quarter 2004 18,440 

1st Quarter 2005 16,312 

2nd Quarter 2005 20,816 

3rd Quarter 2005 19,846 

4th Quarter 2005 20,834 

1st Quarter 2006 18,955 

2nd Quarter 2006 23,237 

3rd Quarter 2006 23,710 

4th Quarter 2006 24,378 

1st Quarter 2007 20,417 

2nd Quarter 2007 22,898 

• Enplanements from the airport increased by approximately 77% during the 

grant period, i.e. between the 3rd Quarter 2002 and the 3rd Quarter 2005. 

• Enplanements continued to increase by approximately 16% between the 3rd

Quarter of 2005 and the 2nd Quarter of 2007 suggesting that grants benefits 

were sustained. 
37

 

Figure 8. Successful Case Study – Flight Activity Data 

Quarter Flights 

1st Quarter 2000 803 

2nd Quarter 2000 979 

3rd Quarter 2000 979 

4th Quarter 2000 968 

1st Quarter 2001 941 

2nd Quarter 2001 902 

3rd Quarter 2001 838 

4th Quarter 2001 675 

1st Quarter 2002 604 

2nd Quarter 2002 611 

3rd Quarter 2002 616 

4th Quarter 2002 617 

1st Quarter 2003 595 

2nd Quarter 2003 576 

3rd Quarter 2003 615 

4th Quarter 2003 775 

1st Quarter 2004 780 

2nd Quarter 2004 777 

3rd Quarter 2004 768 

4th Quarter 2004 765 

1st Quarter 2005 781 

2nd Quarter 2005 869 

3rd Quarter 2005 899 

4th Quarter 2005 948 

1st Quarter 2006 970 

2nd Quarter 2006 953 

3rd Quarter 2006 956 

4th Quarter 2006 932 

1st Quarter 2007 963 

2nd Quarter 2007 935 

• Flight activity from the airport increased by approximately 50% during the 

grant period, i.e. between the September 2002 and September 2006. 

• Flight activity continued to increase by approximately 8% between the 

September 2005 and July 2007 suggesting that grants benefits were 

sustained. 
38

 

Figure 9. Failed Case Study – Flight Activity Data 

Month Flights 

September 2003 0 

October 2003 40 

November 2003 36 

December 2003 44 

January 2004 42 

February 2004 40 

March 2004 0 

• Community was successful in using its grants to commence new air service 

in October 2003, however, this service was not sustainable resulting in flight 

activity having to be suspended at the beginning of March 2004. 

Figure 10. Partial Success Case Study – Passenger Enplanement Data 

Quarter Passengers 

Enplaned 

1st Quarter 2000 21,849 

2nd Quarter 2000 26,903 

3rd Quarter 2000 26,236 

4th Quarter 2000 24,458 

1st Quarter 2001 21,111 

2nd Quarter 2001 26,848 

3rd Quarter 2001 23,044 

4th Quarter 2001 19,270 

1st Quarter 2002 17,582 

2nd Quarter 2002 22,777 

3rd Quarter 2002 22,197 

4th Quarter 2002 22,676 

1st Quarter 2003 18,803 

2nd Quarter 2003 23,608 

3rd Quarter 2003 24,344 

4th Quarter 2003 23,093 

1st Quarter 2004 19,311 

2nd Quarter 2004 23,429 

3rd Quarter 2004 23,848 

4th Quarter 2004 23,993 

1st Quarter 2005 21,946 

2nd Quarter 2005 27,520 
39

 

3rd Quarter 2005 26,084 

4th Quarter 2005 24,676 

1st Quarter 2006 21,591 

2nd Quarter 2006 25,230 

3rd Quarter 2006 23,962 

4th Quarter 2006 22,994 

1st Quarter 2007 19,499 

2nd Quarter 2007 25,497 

• Enplanements from the airport increased by approximately 5% during the 

grant period, i.e. between the 3rd Quarter 2002 and the 3rd Quarter 2004. 

• Enplanements continued to increase by approximately 8% between the 3rd

Quarter of 2005 and the 3rd Quarter of 2006 suggesting that grants benefits 

were sustained. 

• Community introduced new are service in the 2nd Quarter of 2003, this flight 

was discontinued in the 1st Quarter of 2005. 

• Community upgauged its existing air service to regional jet service in the 3rd

Quarter of 2003.