a

GAO

United States Government Accountability Office

Report to Congressional Addressees

November 2005 COMMERCIAL 

AVIATION

Initial Small 

Community Air 

Service Development 

Projects Have 

Achieved Mixed 

Results

GAO-06-21
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

November 2005

COMMERCIAL AVIATION 

Initial Small Community Air Service 

Development Projects Have Achieved 

Mixed Results 

Highlights of GAO-06-21, a report to 

congressional addressees

Over the last decade significant

changes have occurred in the 

airline industry. Many legacy 

carriers are facing challenging

financial conditions and low cost 

carriers are attracting passengers 

away from some small community

airports. These changes, and 

others, have challenged small 

communities to attract adequate

commercial air service. 

To help small communities

improve air service, Congress 

established the Small Community

Air Service Development Program 

in 2000. This study reports on (1) 

how the Department of

Transportation (DOT) has 

implemented the program; and (2) 

what goals and strategies have

been used and what results have 

been obtained by the grants

provided under the program.

What GAO Recommends

GAO recommends that DOT 

evaluate the Small Community Air 

Service Development Program in

advance of the program’s 

reauthorization in 2008. Also, to 

improve the effectiveness of the Air 

Service Development Zones, GAO 

is recommending that DOT clarify 

what support and services it will 

provide to the designated

communities.

DOT, in commenting on a draft of 

this report, said it generally agreed 

with the report and would consider

the recommendations as they go 

forward with the program.

The Small Community Air Service Development Program grants are awarded 

at the discretion of the Secretary of Transportation. GAO found that DOT 

considered the statutory eligibility criteria and priority factors as well as 

other factors in evaluating proposals and in making awards. The number of 

grant applications has declined since 2002. DOT officials see this as a 

consequence of the large number of ongoing grants and the impact of 2003

legislative changes. In surveying airport directors we found that grantee 

airports generally responded positively to DOT’s process for awarding 

grants, about two-thirds were satisfied with the clarity of the selection 

criteria, while about one-third of directors at airports not receiving grants 

were satisfied with the clarity. DOT oversight is based on reviews of grantee 

reports and reimbursement requests, and DOT has terminated some projects 

and reallocated the unexpended funds to others. 

Individual grant projects had goals including adding flights, airlines and 

destinations, lowering fares, obtaining better planning data, increasing 

enplanements, and curbing the loss of passengers to other airports. 

Grantees used a number of strategies to achieve their goals, including 

subsidies and revenue guarantees to the airlines, marketing to the public and 

to the airlines, hiring personnel and consultants, and establishing travel 

banks. Results for the 23 projects completed by September 30, 2005 were 

mixed: about half of the airports reported air service improvements that 

were self-sustaining after the grant was over. Some projects were not 

successful due to factors beyond the project, such as an airline decision to 

reduce flights at a hub. However, it is too soon to assess the overall 

effectiveness of the program, because most funded projects are not 

complete—127 of the 157 awarded grants are ongoing. DOT designates one 

airport each year as an Air Service Development Zone. The communities 

selected in 2002, 2003, and 2004 expressed similar concerns about the 

usefulness of this designation. None of the communities could cite any 

effect the Air Service Development Zone had for them. Instead, 

communities expressed confusion as to what DOT’s designation was 

supposed to provide. 

Small Community Air Service Development Program Awards

0

50

100

150

200

2004 2005

179

40

4

20

170

36

3 2

108

40

6 1

84

35

2002 2003

Year

Number of grants

Source: GAO analysis of DOT data.

Completed 

grants

Terminated 

grants

Reallocated 

awards

Grant awards

Number 

of proposals

www.gao.gov/cgi-bin/getrpt?GAO-06-21.

www.gao.gov/cgi-bin/getrpt?GAO-06-

101SP. 

To view the full product, including the 

scope and methodology, click on the link 

above. For more information, contact 

Gerald Dillingham, (202) 512-2834, 

dillinghamg@gao.gov. 
Page i GAO-06-21 Small Community Air Service Program

Contents

Letter 1

Results In Brief 2

Background 4

DOT’s Implementation of the Small Community Air Service 

Development Program Includes Awarding Grants by Using 

Legislatively Established Priority and Other Factors and 

Providing Grant Oversight 12

Variety of Goals and Strategies to Improve Air Service are Used, but 

the Results to Date of Completed Projects are Mixed 22

Conclusions 36

Recommendations for Executive Action 37

Agency Comments and Our Evaluation 37

Appendixes

Appendix I: Objectives, Scope, and Methodology 40

Appendix II: Factors Affecting Air Service to Small Communities 45

Appendix III: DOT Additional Selection Factors 50

Appendix IV: Status of Grants Awarded, 2002 through 2005 52

Appendix V: Summary of 10 Completed Small Community Air Service 

Development Program Grants 59

Appendix VI: GAO Contact and Staff Acknowledgments 84

Tables Table 1: Fiscal Year 2004 Grant Applications Meeting Priority 

Factors and Award Results 16

Table 2: Reimbursed to Grantees, as of September 30, 2005 20

Table 3: Airport Directors Assessments of Grant Progress 21

Table 4: Airport Directors’ Views on Success of Grant Projects 35

Table 5: Charleston, WV Passenger Enplanement Report for 

October 2002 through October 2004, and Overall Yearly 

Totals for 2002-2004 61

Table 6: Quarterly Passenger Totals between Daytona Beach and 

Newark 63

Table 7: American Connection’s Quarterly Enplanement Numbers 

Fort Smith to St. Louis 65

Table 8: Quarterly Enplanements for Fort Smith, Arkansas 

2002-2004 66

Table 9: Horizon Air’s Hailey to Los Angeles Passenger Totals with 

Revenue Guarantee 68
Contents

Page ii GAO-06-21 Small Community Air Service Program

Table 10: Quarterly Enplaned Passengers for Lynchburg, Virginia for 

2002-2004 72

Table 11: Scottsbluff Total Enplanements June 2004-April 2005 77

Table 12: Rio Grande Airways Total Passengers (Arrivals and 

Departures) from Taos from 2002 Grant Application to 

2004 Termination of Service 83

Figures Figure 1: Great Lakes Aviation Twin Engine 19-Seat Turboprop 5

Figure 2: Change in Scheduled Departures at Nonhub, Small Hub, 

Medium Hub and Large Hub Airports since July 2000 7

Figure 3: Small Community Air Service Development Program 

Grants, 2002 - 2005 11

Figure 4: Small Community Air Service Development Program 

Grant Applications, Awards, Completions, and 

Terminations, 2002 through 2005 13

Figure 5: Project Goals as Identified by Airport Directors for 

Grants Awarded 2002 through 2004 24

Figure 6: Example of a Billboard Advertisement Resulting from a 

Grant Project 25

Figure 7: Strategies Included in Grant Projects 27

Figure 8: Horizon Airlines Turboprop Serving Hailey, ID 32

Figure 9: Westward Airways Pilatus PC-12 Aircraft 78

Abbreviations

DOT Department of Transportation

FAA Federal Aviation Administration

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Page 1 GAO-06-21 Small Community Air Service Program

United States Government Accountability Office

Washington, D.C. 20548

A

November 30, 2005 Letr

Congressional addressees

Over the last decade significant changes have occurred in the airline 

industry that have impacted service to small communities. Today many of 

the legacy carriers are facing challenging financial conditions.1

Competition from low-cost carriers has contributed to passengers driving 

long distances to obtain low fares rather than use their small community 

airport. Since 2000, there has been a decrease in the use of small turboprop 

aircraft that serve small community airports, with many operators opting 

for larger regional jets holding 50 or more passengers. These changes, and 

others, have challenged small communities to attract adequate commercial 

air service at reasonable prices. 

By establishing the Small Community Air Service Development Pilot 

Program in 2000, Congress created a new source of funds to help small, 

underserved airports improve their air service. The Congress has 

appropriated $20 million annually since 2002 for the Department of 

Transportation (DOT) to award up to 40 grants each year to communities 

that have demonstrated insufficient air carrier service or unreasonably high 

air fares. We reviewed (1) DOT’s implementation of the Small Community 

Air Service Development Program and (2) the strategies communities 

receiving grants have used and the results obtained by the grants provided 

under the program. In addition, this report provides information on factors 

affecting air service to small communities, which is included in appendix II.

To determine how DOT has implemented the Small Community Air Service 

Development Program, we reviewed legislation authorizing and funding the 

program as well as related orders and guidelines. We interviewed DOT 

officials about their grant selection process and criteria. We reviewed grant 

award information and examined how DOT used its grant criteria to select 

grantees. We also reviewed program controls, receipts, quarterly reports, 

and the final reports that grantees submitted. We obtained and reviewed 

budget and finance data from DOT’s Office of the Secretary as well as 

reimbursement data from the Federal Aviation Administration (FAA), 

which reimburses the grantees.To determine what strategies have been 

used and what results have been obtained, we reviewed the grant 

1

The U.S. legacy carriers are Alaska Airlines, American Airlines, Continental Airlines, Delta 

Air Lines, Northwest Airlines, United Airlines, and US Airways.
Page 2 GAO-06-21 Small Community Air Service Program

applications and agreements for all 157 grants awarded through September 

1, 2005. In addition, we reviewed the grants awarded, classified the types of 

strategies carried out within the grants, and summarized the types of 

activities funded. We also visited each of the 10 grantees that had 

completed their grants by December 31, 2004, and interviewed airlines and 

aviation consultants associated with these completed grants. We also 

contacted 13 additional grantees who completed their projects between 

January 1 and September 30, 2005. Further, we conducted two Web-based 

surveys. We used self-administered electronic questionnaires posted to the 

World Wide Web to survey the 146 airport directors involved in the 122 

grants DOT awarded from 2002 through 2004, as well as 116 airport 

directors representing airports that applied for, but did not receive a grant 

during that period. We received response rates of 83 percent and 72 

percent, respectively. To view our surveys and airport directors’ responses, 

go to www.gao.gov/cgi-bin/getrpt?GAO-06-101SP. We performed our work 

from September 2004 through October 2005 in accordance with generally 

accepted government auditing standards. Appendix I provides more details 

on our scope and methodology. 

Results In Brief DOT considers numerous factors affecting the quality and feasibility of 

proposed projects before making Small Community Air Service 

Development grant awards. The law establishing the Small Community Air 

Service Development Program allows DOT considerable flexibility in 

implementing the program and selecting projects to be funded. We found 

that DOT considered the statutory eligibility criteria and priority factors in 

selecting grant projects. In addition, DOT considers other relevant factors 

in making decisions on projects, and the final selection is at the discretion 

of the Secretary of Transportation. As of September 30, 2005, there have 

been 157 grant awards made in the 4 years of the program. The number of 

applications has declined each year. In 2002, the first year of the program, 

DOT received 179 applications for grants, and by 2005 the number of 

applications had declined to 84. DOT officials said that this decline was in 

part a natural consequence of the large number airports implementing 

projects at the time, and the effect of legislative changes made in 2003 that 

limited a community to one grant award for the same project. I In our 

survey of airport directors, we found that grantee airports generally 

responded positively when asked about DOT’s process for awarding grants. 

Two-thirds of grantee airports were satisfied with the clarity of selection 

criteria, while only about one-third of the nongrantee airports responding 

to the survey were satisfied. For program oversight, DOT relies on 

responding to grantee inquiries or requests, reviewing documents 
Page 3 GAO-06-21 Small Community Air Service Program

associated with reimbursable expenses, and reviewing quarterly and final 

reports that the grantees are required to prepare. DOT oversight has 

identified cases where grant funds have not been used and it has 

subsequently reallocated about $4.5 million to other applicants. Finally, as 

of September 30, 2005, 23 grants were completed—20 from 2002, 2 from 

2003, and 1 from 2004.2

 DOT officials said that, particularly for the first year 

of the grant program, projects were slow to complete, in part, due to the 

airlines’ retrenchment after the September 11 attacks.

Grantees have identified a variety of goals for their projects and employed 

many strategies to improve air service and the results of the completed 

projects to date have been mixed: some have succeeded in meeting the 

program’s goal of improving air service, for example, by adding carriers or 

destinations, and some have not. Grantee project goals have included 

adding flights, airlines and destinations, lowering fares, upgrading the 

aircraft serving the community, obtaining better data for planning and 

marketing air service, increasing enplanements, and curbing the loss of 

passengers to other airports. To achieve these goals, grantees have used a 

number of strategies, including subsidies and revenue guarantees to the 

airlines, marketing, hiring personnel and consultants, and establishing 

travel banks in which a community guarantees to buy a certain number of 

tickets. In addition, grantees have subsidized the start-up of an airline, 

taken over ground station operations to reduce costs for an airline, and 

subsidized a bus company to transport passengers from their airport to a 

hub airport. Incorporating marketing as part of the project was the most 

common strategy used by airports. Some airline officials also said that 

marketing efforts were important to the success of projects. Airline 

officials told us that projects that provide direct benefits to an airline, such 

as revenue guarantees and financial subsidies, have the greatest chance of 

success. These officials noted that these types of projects allow the airline 

to test the real market for air service in a community without enduring the 

typical financial losses that occur when new air service is introduced. The 

outcomes of the grants may be affected by broader industry factors that are 

independent of the grant itself, such as a decision on the part of an airline 

to reduce the number of flights at a hub. Our review of the 23 projects 

completed by September 30, 2005, found that although 19 reported service 

or fare improvements during the life of the grant, only about half reported 

that the improvements were self-sustaining after the grant was complete. A 

2

We considered a grant complete when the activities associated with the grant were finished 

and FAA had made final reimbursements of allowable costs.
Page 4 GAO-06-21 Small Community Air Service Program

more detailed review of the 10 grants completed by January 1, 2005, also 

showed a mixed record of meeting the program’s goals, ranging from 

improved service that exceeded projected passenger loads, to a complete 

loss of air service to the airport. However, we were not able to determine 

the overall effectiveness of the program in achieving the act’s goal of 

improving air service to small communities because a large majority of 

funded projects are still under way (127 of the 157 projects were ongoing as 

of September 30, 2005) and it will take more time to determine if any air 

service improvements achieved with the grants are sustainable after 

projects are complete. Finally, as part of meeting its requirements under 

the act, DOT has designated one airport each year as an Air Service 

Development Zone. Each of the three Air Service Development Zone 

communities that DOT selected through 2004 expressed similar concerns 

about the usefulness of this designation. None cited any effect or change 

that the designation had made and expressed confusion as to what the 

designation was supposed to achieve. All stated that anything that had 

happened at the airport would have happened without the designation.

We are recommending that in preparation for reauthorization of the 

program in 2008, DOT evaluate completed projects funded by the Small 

Community Air Service Development Program to determine the 

effectiveness of this program in improving air service to small 

communities. We are also recommending that DOT clarify what the support 

and services it will provide to communities that are designated as Air 

Service Development Zones. In commenting on a draft of this report, 

Department of Transportation officials said it generally concurred with the 

report and agreed to consider the recommendations as they go forward 

with the program.

Background In 1978, the Congress deregulated the airline industry, phasing out the 

federal government’s control over domestic fares and routes served and 

allowing market forces to determine the price, quantity, and quality of 

service. Most legacy carriers, free to determine their own routes, developed 

“hub-and-spoke” networks.3

 These carriers provide nonstop service to 

many spoke cities from their hubs. The airports in the small spoke 

communities include the smallest airports in the nation’s commercial air 

3

Under the hub-and-spoke system, airlines bring passengers from a large number of spoke 

cities to one central location (the hub) and redistribute them to connecting flights for their 

final destinations.
Page 5 GAO-06-21 Small Community Air Service Program

system. Depending on the size of those markets (i.e., the number of 

passengers flying nonstop between the hub and the spoke community), the 

legacy airlines may operate their own large jets or use regional affiliate 

carriers to provide service, usually with regional jet or turboprop aircraft. 

(See fig. 1 for an example of a turboprop aircraft.) However, low-cost 

carriers, such as Southwest Airlines and JetBlue Airways, use a different 

model, flying point-to-point generally to and from secondary airports in or 

near major metropolitan areas, such as Ontario International near Los 

Angeles and Chicago Midway.

Figure 1: Great Lakes Aviation Twin Engine 19-Seat Turboprop

The nation’s commercial airports are categorized into four main groups 

based on the annual number of passenger enplanements—large hubs,

Source: GAO.
Page 6 GAO-06-21 Small Community Air Service Program

medium hubs, small hubs, and nonhubs.4 The 30 large hubs and 37 medium 

hub airports together enplaned the vast majority—89 percent—of the 

almost 703 million U.S. passengers in 2004, the most recent data available. 

In contrast, the 69 small hubs enplaned about 8 percent, and the 374 

nonhub airports enplaned only 3 percent of U.S. passengers.

Air service to nonhub airports has generally declined in recent years, as 

measured by the number of departure flights. As shown in figure 2, 

nonhubs have had an overall decrease in departures since July 2000. While 

all airports showed a decrease in service from July 2001 to July 2003, 

scheduled departures at small, medium, and large hub airports have 

increased since 2003. By July 2005, scheduled departures at small, medium, 

and large hub airports largely rebounded, with departures from large and 

small hubs exceeding the July 2000 number. However, the decline of 

service at nonhub airports continued, with 17 percent fewer departure 

flights serving these airports in July 2005 compared with July 2000. While 

small hubs and nonhubs are eligible to apply for Small Community Air 

Service Development grants, the nonhub airports have been the main 

beneficiaries of the program. As of fiscal year 2005, only 6 percent of the 

airports receiving grants have been small hubs.

4

The categories are based on the number of passengers boarding an aircraft (enplaning) for 

all operations of U.S. carriers in the United States. A large hub enplanes at least 1 percent of 

all passengers, a medium hub 0.25 to 0.99 percent, a small hub 0.05 to 0.249 percent, and a 

nonhub less than 0.05 percent. Nonhubs and small hubs are defined in 49 U.S.C. 41731; 

medium hubs are defined in 49 U.S.C. 41714; and large hubs are defined in U.S.C. 47134.
Page 7 GAO-06-21 Small Community Air Service Program

Figure 2: Change in Scheduled Departures at Nonhub, Small Hub, Medium Hub and 

Large Hub Airports since July 2000

Note: The comparison baseline is the number of scheduled departures for July 2000.

This decline in air service to small communities is particularly prevalent at 

small community airports that are near larger airports. Passengers 

sometimes drive or take other modes of transportation to neighboring 

larger airports to take advantage of more frequent flights and lower fares, a 

phenomenon called leakage. Appendix II provides more information on the 

factors that have influenced the reduction of passenger traffic and air 

service at the nation’s small community airports. 

We have previously reported on the decline of air service to small 

communities noting the challenges these communities face in obtaining or

-25

-20

-15

-10

-5

0

5

Large hub

Medium hub

Small hub

Nonhub

July 2001 July 2002 July 2003 July 2004 July 2005

Year

Percent change from July 2000

Source: GAO analysis of DOT data.
Page 8 GAO-06-21 Small Community Air Service Program

retaining commercial passenger air service.5 These challenges include the 

lack of demand, inability to operate profitable air service, and competition 

from neighboring larger hub airports. Also, according to an aviation 

consultant, these factors, plus network carrier financial difficulties and 

changes in aircraft usage, have negatively affected nonhubs. 

Two programs have been established to help address air service to small 

communities—the Essential Air Service program and the Small Community 

Air Service Development Pilot Program. The Congress established the 

Essential Air Service program as part of the Airline Deregulation Act of 

1978. In general, the program guarantees that communities that received air 

service prior to deregulation will continue to receive air service.6

 If an air 

carrier could not continue service to a community without incurring a loss, 

DOT (and before its sunset, the Civil Aeronautics Board) could then use 

Essential Air Service program funds to award a subsidy to that carrier or 

another carrier willing to provide service. These subsidies are intended to 

cover the difference between a carrier’s projected revenues and expenses, 

and include a 5 percent profit margin. Our prior work on the Essential Air 

Service program found, in part, that financial incentives may offer the best 

opportunity for communities to attract the new or additional service but 

that it may be difficult to bring about service that can be sustained after the 

incentives end.

More recently, the Congress authorized the Small Community Air Service 

Development Pilot Program as part of the Wendell H. Ford Aviation 

Investment and Reform Act for the 21st Century, P.L. 106-181 (AIR-21), to 

help small communities enhance their air service. AIR-21 authorized the 

program for fiscal years 2002 and 2003. The Vision 100-Century of Aviation 

Reauthorization Act, P.L. 108-176 (Vision 100), reauthorized the program 

for an additional 5 years, through fiscal year 2008, and eliminated the 

“pilot” status of the program. While Vision 100 increased the annual 

authorization amount to $35 million, the Congress has appropriated $20 

5

GAO, Commercial Aviation: Factors Affecting Efforts to Improve Service at Small 

Community Airports, GAO-03-330 (Washington, D.C.: Jan.17, 2003).

6

To be eligible for subsidized service, communities must meet three general requirements. 

They must have been listed on a carrier’s Civil Aeronautics Board issued service certificate 

and received scheduled commercial passenger service as of October 24, 1978, may be no 

closer than 70 highway miles to the nearest medium or large hub airport, and must require a 

subsidy of less than $200 per person (unless the community is more than 210 highway miles 

from the nearest medium or large hub airport, in which case no average per passenger dollar 

limit applies).
Page 9 GAO-06-21 Small Community Air Service Program

million for the program each year from 2002 through 2005, for a total of $80 

million.7

 No funds were appropriated for the first year of the program, 2001.

Under this program, DOT is authorized to award grants to up to 40 

communities served by small hub or nonhub airports (as classified in 1997) 

that have demonstrated air service deficiencies or higher-than-average 

airfares. The Office of Aviation Analysis in DOT’s Office of the Secretary is 

responsible for administering the program. The grants may be made to a 

single community or to a consortium of communities, although no more 

than four grants each year may be in the same state. Consortiums are 

considered one applicant for the purpose of this program.8

 Some relatively 

large airports qualify for this program. For example, Buffalo Niagara 

International Airport in Buffalo, NY, and Norfolk International Airport in 

Norfolk, VA, are eligible for the program, enplaning over 2.2 million and 

over 1.8 million passengers in 2004, respectively. In contrast, small nonhub 

airports such as the airports in Kake, AK, with about 2,500 enplanements, 

or Owensboro, KY, with about 2,800 enplanements, are also eligible. The 

program is available in the 50 states, District of Columbia, Puerto Rico, and 

U.S. territories and possessions. 

The statute also directs DOT to designate one of the grant recipients each 

year as an Air Service Development Zone and work closely with the 

designated community on ways to attract business to the areas surrounding 

the airport and to develop land use options for the area. There are no 

additional funds associated with this designation, and no special benefit or 

preference is to be given to communities seeking this designation in 

receiving a grant under the program. Communities apply for this 

designation through the regular grant application process.

DOT has not issued separate regulations for the Small Community Air 

Service Development Program. Instead, DOT issues an order every year 

that requests applications and provides guidance for the proper format and 

content of the applications. The authorizing legislation provides that if 

7

For fiscal year 2005, DOT transferred $5 million from the Small Community Air Service 

Development Program to the Essential Air Service Program, under authority granted by The 

Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and 

Tsunami Relief, 2005, P.L. 109-13.

8

Communities that do not currently have commercial air service are also eligible, but when 

they seek grant funds to secure air service under the grant program they must have met or 

be able to meet in a reasonable period all necessary requirements of the Federal Aviation 

Administration for the type of service involved in their grant applications. 
Page 10 GAO-06-21 Small Community Air Service Program

funds are used to subsidize air service, the subsidy cannot last more than 3 

years. However, the time needed to obtain the service is not included in the 

subsidy time limit. While the legislation does not limit the period for 

expenditure of funds on non-subsidy projects, DOT’s fiscal year 2005 order 

indicates that in general, grant funds should be expended within 3 years of 

the award.

As shown in figure 3, DOT’s awards have been geographically spread 

covering all states except Delaware, Hawaii, Maryland, New Jersey, and 

Rhode Island. To date, no communities in Delaware or Rhode Island have 

applied for a grant. Appendix IV contains information on all grants awarded 

as of September 30, 2005.
Page 11 GAO-06-21 Small Community Air Service Program

Figure 3: Small Community Air Service Development Program Grants, 2002 - 2005

Note: The graphic represents all grants awarded under the program, including terminated grants. 

Consortium

Multiple

Single

Source: GAO analysis of DOT data.
Page 12 GAO-06-21 Small Community Air Service Program

DOT’s Implementation 

of the Small 

Community Air Service 

Development Program 

Includes Awarding 

Grants by Using 

Legislatively 

Established Priority 

and Other Factors and 

Providing Grant 

Oversight

In the first 4 years of the Small Community Air Service Development 

Program, DOT awarded a total of 157 grants.9

 In 2002, the first year the 

program was funded, DOT received 179 grant applications, but this number 

has been declining and was at a low of 84 applications by 2005. DOT 

officials believe this decline is natural as the program matures; many 

airports are currently implementing grants and others now understand 

DOT’s expectation of local matching funds. DOT evaluates the applications 

according to legislatively established priority factors and other criteria. 

DOT first considers five priority factors specified in the laws and then 

considers numerous other factors in a second tier review of the projects. 

Certain legislative factors, such as whether a local community can 

demonstrate support by contributing some local matching funds, or DOT 

factors such as whether an airport has received a grant in the past, were 

major considerations in award decisions. In our survey of airport directors, 

we found that airports that received grants generally were positive about 

DOT’s process for awarding grants. However, only about one-third of the 

airports we surveyed that applied for but did not receive a grant expressed 

satisfaction over the clarity of selection criteria. DOT’s oversight of 

projects relies largely on reviews of reimbursement documents and 

required grantee quarterly reports; it does not perform on-site monitoring 

visits. DOT monitoring has been sufficient to identify cases where grant 

funds have not been utilized and reallocated the funds to other applicants. 

As of September 30, 2005, 23 of the grants awarded were completed—20 for 

2002, 2 for 2003, and 1 for 2004. About $12.5 million, or 62 percent of the 

$20 million total funds for 2002 had been expended by grantees as of 

September 30, 2005. DOT officials said that the newness of the program in 

2002, and the need to negotiate agreements with airlines, help explain why 

many early grants are still ongoing.

DOT Has Awarded 157 

Grants Since 2002, but Grant 

Applications are Declining

To be considered for a Small Community Air Service Development Program 

grant, airport communities prepare a grant proposal in response to a notice 

in the Federal Register. The applications should discuss, among other 

things, the need for additional or improved air service, the available fares at 

the airport, and how the grant will help communities address these 

situations. From 2002 through 2005, DOT has awarded 157 grants. In the 

first year of the program, demand was the highest, with 179 applications 

9

Two of the 157 grants DOT awarded were later terminated by DOT before grantees 

expended any federal funds.
Page 13 GAO-06-21 Small Community Air Service Program

requesting a total of about $142.5 million in federal funding. However, from 

2002 through 2005 the program has experienced about a 50 percent decline 

in the number of applications. (See fig. 4 for details on the number of 

applications, awards, and completed and terminated grants each year.)

Figure 4: Small Community Air Service Development Program Grant Applications, 

Awards, Completions, and Terminations, 2002 through 2005

Note: In 2004, DOT awarded six grants with prior year funds that were reallocated from four grants that 

were originally awarded in 2002 and 2003 but were later terminated.

According to officials at DOT’s Office of Aviation Analysis, the downward 

trend in the number of applications was a natural consequence of the 

implementation of the program. First, many eligible airport communities 

have already received a grant and are still implementing their projects—as 

of September 30, 2005, 127 of the 157 grants were ongoing. Current 

grantees are not likely to reapply soon because many of the projects that 

0

50

100

150

200

2004 2005

179

40

4

20

170

36

3 2

108

40

6 1

84

35

2002 2003

Year

Number of grants

Source: GAO analysis of DOT data.

Completed grants

Terminated grants

Reallocated awards

Grant awards

Number of proposals
Page 14 GAO-06-21 Small Community Air Service Program

were funded take time to implement, with some taking over 3 years to 

complete. Second, Office of Aviation Analysis officials told us that the 

airport community has learned that DOT expects that a local cash match 

should be part of the proposal and that communities must honor their 

committed local contribution for the proposed projects. The officials told 

us that some applicants did not fully appreciate this expectation during the 

pilot phase of the program. Finally, according to DOT officials, legislative 

changes in 2003 prohibited communities or consortiums from receiving 

more than one grant for the same project and established the timely use of 

funds as a priority factor for DOT to consider in awarding grants.

Based on our survey, for airports that had applied for but never received a 

grant at the time of the survey, 58 of 81 airport directors, or about 72 

percent, said that they would reapply. The remaining 23 airport directors 

indicated that they would not, or were unsure whether they would apply. 

These airport directors cited two primary reasons for not applying—the 

cost and effort of applying, or a belief that DOT would not fund their 

desired project.

Finally, some eligible airports have never applied for a grant. To understand 

why, we contacted airport directors from a group of 20 randomly selected 

airports that had never applied under the program but were eligible to do 

so. Although this does not constitute a generalizable sample, it provides 

some useful information on the reasons why some communities did not 

apply. Among the more common reasons cited by the directors for not 

applying were that they did not know about the program, or they felt that 

the cost and effort of applying were too burdensome. Among the other 

reasons given by more than one airport director were the airport already 

had sufficient air service, officials thought the airport was not eligible, their 

grant application would not be competitive, or DOT would not fund the 

kind of project the airport would like to do. 

In our survey of 2002 though 2004 grantees and discussions with officials of 

the 10 completed projects, we found that the grantees were generally 

satisfied with the application process and paperwork requirements. Of the 

121 grantee airport directors responding, 103 were satisfied or very 

satisfied with the application process. In addition, in our discussions with 

the directors of the 10 community airports that had completed grant 

projects, most were satisfied with the application process, although three 

expressed concern about the limited amount of time they had to complete 

their applications after the 2002 announcement. In our survey of grantees, 

this issue did not appear to be significant, especially in years subsequent to 
Page 15 GAO-06-21 Small Community Air Service Program

2002. DOT has made minor modifications in the application process as it 

has gained experience with the program, such as allowing 90 days instead 

of 60 days to complete the application, and has continued to allow for 

flexibility in application format, according to Office of Aviation Analysis 

officials.

DOT Evaluates Grant 

Applications According to 

Legislatively Established 

Priority Factors and DOT 

Criteria

The Small Community Air Service Development Program is a discretionary 

program that allows DOT considerable flexibility in selecting projects for 

financial assistance, within the basic eligibility criteria. To be eligible, the 

airport cannot be larger than a small hub airport based on 1997 FAA 

boarding data and must have insufficient air service or unreasonably high 

air fares. In addition to the basic eligibility criteria, DOT must give priority 

to projects according to five factors established in the law. These factors 

constitute DOT’s Office of Aviation Analysis’ first tier of project evaluation. 

DOT must give priority consideration to communities that (1) have air fares 

higher than average for all communities, (2) provide a portion of the cost of 

the project from local sources other than airport revenues, (3) have or will 

establish a public-private partnership to facilitate air carrier service to the 

public, (4) will provide material benefits to a broad segment of the public 

that has limited access to the national air transportation system, and (5) 

will use the assistance in a timely manner. Although a local community 

match from nonairport revenues enhances a community’s chance of 

receiving a grant, it is not required under the act. However, DOT has funded 

only two projects that did not contain a local cash match.

In addition to the priority factors, DOT has, as part of a second tier 

evaluation, other “service-related” and “project-related” factors that it takes 

into consideration in evaluating competing proposals. (See app. III for a list 

of the factors used in DOT selections.) DOT uses this second tier 

evaluation to ensure that a project has a strong justification, and the factors 

themselves have changed and evolved over time, according to DOT 

officials. For example, as part of this second tier evaluation, DOT looked at 

15 air service factors to identify whether a carrier served the airport and 

reviewed the airport’s existing service frequencies, destinations, aircraft 

size, and passenger boardings. It also examined air service in the broader 

geographic area, including the applicant community’s proximity to larger 

airports and the quality of the roads providing access to those airports. 

DOT also considered 26 project-related factors, which include such items 

as whether the area’s demographics will support the project or whether the 

project actually addressed the community’s air service problem. Some 

project-related factors can make it less likely to be selected, including 
Page 16 GAO-06-21 Small Community Air Service Program

whether (1) the proposal simply shifted costs from the local to the federal 

level, (2) the air service was in proximity to other service that would 

detract from the proposal, and (3) the proposal potentially worked at cross 

purposes with another grant if the airport is located close to a past grant 

recipient. 

DOT has developed review procedures that detail how it processes the 

applications that it receives and how it applies this two-tier evaluation of 

projects. DOT moved to a more structured process when the Congress, in 

December 2003, changed the status of the program, dropping the pilot 

designation of the program. For 2004, DOT developed more formal 

documentation of its assessment of how well projects met the statutory 

eligibility criteria and priority factors for each grant application. 

The DOT application evaluation reports we reviewed have shown how DOT 

incorporates the priority factors in its 2004 deliberations and how those 

results then translate into the projects it recommends to the Secretary of 

Transportation. Generally, applications that meet fewer of the priority 

considerations are less likely to be selected for grant assistance. However, 

priority factors are not the sole criteria in the final selection. As shown in 

table 1, applications that met four or five of the priority factors were not 

guaranteed selection. Twelve of the 35 applications that met four out of five 

of the priority considerations did not make the final award list, and one 

proposal that met all five was not selected. In contrast 13 applications that 

met three priority considerations were funded.

Table 1: Fiscal Year 2004 Grant Applications Meeting Priority Factors and Award 

Results

Source: GAO analysis of DOT data.

Priority factors met

Number of applications 

meeting factors

Number receiving

awards

1 of 5 5 0

2 of 5 14 0

3 of 5 37 13

4 of 5 35 23

5 of 5 5 4

Disqualified 12 0

Total 108 40
Page 17 GAO-06-21 Small Community Air Service Program

Note: A fiscal year 2004 application may have been disqualified because it was incomplete, the airport 

community received a grant for the same project in prior years, the project concept was no longer 

feasible, or the service was obtained without a grant.

Projects that meet priority factors may not be funded for a number of 

reasons. According to a DOT official, a project may meet the priority 

factors yet not have any realistic possibility of implementation or success. 

DOT may also choose to award a grant to a community that has never 

received one before awarding a second grant to another community. DOT’s 

review of the priority factors involves determining a yes or no response for 

each factor. DOT does not use a weighting or point system or other scoring 

system to numerically rate the projects. However, DOT officials told us that 

they are aware that, although in some cases a proposal may technically 

meet the factor, it may do so very weakly. For example, a project satisfies a 

priority factor if it will use nonairport revenues as part of its local 

contribution, no matter how small that nonairport contribution may be. On 

the other hand, a large non-airport contribution can be viewed as a strong 

indicator of community support. The final decisions on which projects are 

selected are thus a result of the consideration of both the priority factors 

and other factors that affect the quality of the proposal and its perceived 

chances of success.

Once Office of Aviation Analysis staff have reviewed and analyzed the 

individual projects, the Assistant Secretary for Aviation and International 

Affairs reviews the staff assessments and finalizes a list of recommended 

projects for the Secretary of Transportation. According to Office of 

Aviation Analysis staff, through fiscal year 2004, the Secretary had agreed 

with the recommended list. In fiscal year 2005, subsequent to the meeting 

with the Secretary to review recommended awards, DOT made changes in 

the recommended grants. According to Office of Aviation Analysis staff, 

this was done to achieve a better balance of participating communities and 

a better balance in the distribution of funds.

Our survey of grantee airports showed that a large majority of the directors 

at these airports were satisfied with DOT’s selection criteria and process 

for the program, while fewer nongrantee airport directors thought the 

selection criteria were clear. Eighty of 121 grantees responding—or 66 

percent—were either satisfied or very satisfied with the clarity of the 

selection criteria, while only 26 of 82 nongrantee airport directors—or 32 

percent—were either satisfied or very satisfied with the clarity of the 

selection criteria. A possible explanation for this is that while DOT has 

flexibility in making awards and considers many criteria in addition to the 

five priority factors, the ultimate selection decision is discretionary. A few 
Page 18 GAO-06-21 Small Community Air Service Program

of the fiscal year 2002 airport grantees we visited observed that although 

they were pleased they were chosen, they were not sure how grantees are 

selected and what criteria were used.

DOT Oversees Projects 

Largely by Reviewing 

Reimbursement Documents 

and Reports from Grantees 

DOT’s Office of Aviation Analysis staff are responsible for oversight of the 

grants and serve as contact points with grantees. For the 2005 program 

cycle, six staff were assigned part-time to the program, an increase from 

four part-time staff during the program’s first 3 years. DOT uses a 

document review approach to oversight in which it requires grantees to 

submit quarterly reports that are used to assess a project’s progress and 

timeliness. The agency also requires that grantees submit a final report on 

the project, which is used as the basis for its overall evaluation of the 

project and holds back 10 percent of the grant funds until the receipt of a 

final report. DOT operates the program on a reimbursable basis—grantees 

must first expend funds from their own resources for project activities and 

then request reimbursement from DOT for allowable expenses. To ensure 

that government reimbursements are proper and allowable, DOT reviews 

expense receipts, invoices, and other evidence of expenditures grantees 

submit for reimbursement and, if satisfactory, will authorize FAA to make 

payment.10 DOT and FAA maintain and monitor reimbursement information 

on their financial databases. Office of Aviation Analysis officials told us 

that they use this approach because performing on-site visits is impractical 

given the small number of DOT staff who administer the over 100 active 

grantees currently in the program. They also noted that there is no 

provision for administrative expenses in the appropriation, thus DOT does 

not have funds available for site visits.

DOT monitoring has been sufficient to identify cases where grant 

recipients have been both successful and unsuccessful in implementing 

their grants. In those cases where sponsors have difficulty implementing 

their projects and are unable to utilize their grant awards, the grants are 

terminated and funds reverted back to DOT for reallocation to other 

applicants. From 2002 through 2004, DOT reallocated about $4.5 million to 

other projects. 

10Funds for this program come out of the Airport Improvement Program and are actually 

disbursed by FAA staff in Oklahoma who make payments to grantees based on information 

from the Office of Aviation Analysis.
Page 19 GAO-06-21 Small Community Air Service Program

The manner in which DOT administers oversight of grantee 

reimbursements and provides assistance generated a favorable response 

from grantees. Our survey found that grantees had high levels of 

satisfaction with the way DOT monitored the grants and provided 

assistance to grantees. Specifically, 108 of 121, or 89 percent, of grantee 

airport directors who responded to our survey said that they were satisfied 

or very satisfied with DOT’s assistance. Likewise, 96 of 121, or 79 percent, 

of responding airport directors were satisfied or very satisfied with DOT’s 

monitoring or oversight activities. 

In general, grantees did not see the amount of paperwork required by 

DOT’s quarterly reporting mandate as burdensome, with 86 of 121—71 

percent—of survey respondents being satisfied or very satisfied with this 

quarterly reporting requirement. A lower number, 58 of 119—or about half 

of airport respondents—said they were satisfied or very satisfied with the 

paperwork DOT required for reimbursement and only 5 respondents were 

dissatisfied or very dissatisfied. However, one airport consultant noted that 

for very small airports with very few full-time staff, the reimbursement 

requirements can be more difficult to complete. 

Grantees Have Been Slow to 

Implement Some Projects 

The Vision 100—Century of Aviation Reauthorization Act added a provision 

that DOT grant assistance will be used in a timely fashion as an additional 

priority consideration for selection to participate in the program as of 2004. 

The only limitation the authorizing legislation places on the timely 

expenditure of funds is that air service subsidies cannot last more than 3 

years. DOT’s 2004 and 2005 grant announcements set an expectation that 

the funds should be used within 3 years. Although this criterion was not 

part of the 2002 grant process, it does provide a benchmark for 

performance, and 2002 grants are at the 3-year point. As of September 30, 

2005, 16 of 40 fiscal year 2002 grants were still active, 20 were completed, 

and 4 had been terminated by DOT. About 62 percent of the $20 million 

total 2002 program grant allocation had been reimbursed to 2002 grantees. 

In addition, 58 grants are scheduled to expire in fiscal year 2006. Table 2 

shows the amounts DOT reimbursed each year through September 30, 

2005. (See app. IV for more detailed information about the status of specific 

grants.)
Page 20 GAO-06-21 Small Community Air Service Program

Table 2: Reimbursed to Grantees, as of September 30, 2005 

Source: GAO analysis of DOT data.

Notes: (1) The percentages shown were determined by comparing the amount of reimbursements 

made in that year with total awards for that grant year. (2) Calendar Year 2005 reimbursement are 

through September 30, 2005. (3) DOT recovered about $2.6 million unused from fiscal year 2002 

grants and about $1.9 million unused from fiscal year 2003 grants and transferred these funds to other 

grants. It also transferred $5 million in fiscal year 2005 funds to the Essential Air Service program. 

Office of Aviation Analysis officials told us that the 2002 grants are not an 

indication of what has happened with the grants awarded in following 

years. According to the officials, a number of factors contributed to the 

2002 projects being delayed. First year grants were not awarded until late 

fall of 2002. In addition, the airlines were at that time still recovering 

following September 11, which made it difficult for communities to attract 

new service. Many projects included revenue guarantees, which can take 

some time to finalize. Finally, communities may wait to ask for 

reimbursements after several months of expenditures, which slows the 

payout of federal funds. The reimbursement data indicate that the 2003 

grants also experienced low reimbursements the first year. Only about 11 

percent of the 2003 grant funds were reimbursed by the end of calendar 

2004.

Finally, it should be noted that when a project includes a revenue 

guarantee, the slow expenditure of funds does not always indicate a 

problem. Revenue guarantees are only paid out if the airline fails to meet a 

revenue target. If it meets the target, no funds are drawn down, which may 

actually be an indication of project success. For example, the $500,000 

grant award to Rhinelander, WI, included almost $492,000 for a revenue 

guarantee. However, upon project completion, Rhinelander had used about 

$254,000 for the revenue guarantee. According to the airport director, the 

new route initiated under the grant generated more revenue for the airline 

during the grant period than had been expected. Therefore, the airport did 

not have to reimburse the airline as much as it had anticipated.

Dollars in millions

Year of reimbursement

FY 2002 grants 

amount and (percent)

FY 2003 grants 

amount and (percent)

FY 2004 grants 

amount and (percent)

Total reimbursed 

amount

2002 $0 (0.0) $0 

2003 5.5 (27.3) $.01 (.05) 5.5 

2004 4.9 (24.7) 2.2 (10.9) $0 (0.0) 7.1 

2005 2.1 (10.5) 4.1 (20.5) 2.2 (11.1) 8.4 

Total $12.5 (62.4) $6.3 (31.5) $2.2 (11.1) $21.0 
Page 21 GAO-06-21 Small Community Air Service Program

As part of our survey of grantees, we asked whether their projects were 

proceeding on schedule, and, if not, why they were proceeding more slowly 

than expected. About 40 percent—42 of 106—of the grantee airport 

directors reported that their projects are behind schedule, including 11 of 

26 airport directors surveyed who were involved in implementing grants 

awarded in 2002. (See table 3.) Most of these respondents, 23 of the 42, 

cited difficulties in entering and finalizing agreements with the airlines as 

the main reason for the delay. Grantees we surveyed also cited other 

reasons for delays, including issues with airport personnel and among the 

grant consortium, operational changes at Chicago O’Hare airport, and the 

need to coordinate the grant with the Essential Air Service program.11

Table 3: Airport Directors Assessments of Grant Progress

Source: GAO analysis of survey results of airport managers involved in grants.

Note: Because not all airport directors responded to our survey, the number of respondents is smaller 

than the number of grants awarded.

On a case-by-case basis, DOT has approved a number of grant 

amendments, including extending the grant expiration date, to projects that 

have been slow to be implemented. As of July 26, 2005, DOT had amended a 

total of 47 grants, including 27 of the 2002 grants. For example, 

Binghamton, NY, wanted to obtain enhanced service to Washington, D.C., 

via United Express and Detroit, MI, via Northwest Airlink by providing the 

airlines with revenue guarantees. According to officials from the Office of 

Aviation Analysis, there was some delay because of difficulties in 

negotiating with the airlines. DOT agreed to extend the grant expiration 

date, allowing Binghamton extra time to work out agreements with United 

and Northwest. However, during these extended negotiations, the airlines 

told Binghamton that they would agree to provide the enhanced service 

11DOT officials said they will not award grants that involve obtaining air service that would 

compete with the air service provided by a subsidy under the Essential Air Service program.

Year grant 

awarded

Ahead of 

schedule

On

schedule

Behind 

schedule

No basis to 

judge/No 

response

Total 

responses

2002 0 9 11 6 26

2003 1 13 19 7 40

2004 3 22 12 3 40

Total 4 44 42 16 106
Page 22 GAO-06-21 Small Community Air Service Program

only if the community offered subsidies rather than revenue guarantees. As 

a result, DOT also allowed Binghamton to amend its grant to provide the 

airlines with subsidies rather than revenue guarantees to better 

accommodate the airlines’ requirements. Another example is the grant 

agreement amendment DOT provided Lamar, CO. Lamar did not have any 

commercial service prior to its grant award. The purpose of the grant was 

to obtain service from Rio Grande Airlines to access scheduled service to 

Denver International Airport. Lamar was not successful in obtaining 

service from Rio Grande Airlines and instead obtained service to Denver’s 

Front Range Airport from Lamar Flying Service, a charter carrier. The 

Office of Aviation Analysis agreed to amend Lamar’s grant to allow Lamar 

Flying Service the time to expand its base of operations and establish 

dependable air transportation. Lamar subsequently provided four 

scheduled trips a week to Denver International Airport and has since been 

able to upgrade its aircraft. 

Variety of Goals and 

Strategies to Improve 

Air Service are Used, 

but the Results to Date 

of Completed Projects 

are Mixed

The Small Community Air Service Development Program allows 

communities to set a variety of goals for projects, and individual projects 

have been directed at adding flights, airlines, and destinations; lowering 

fares; changing the aircraft serving the community; completing a study for 

planning and marketing air service; increasing enplanements; and curbing 

the leakage of passengers to other airports. To achieve these goals, grant 

sponsors have used a number of strategies, commonly including subsidies 

and revenue guarantees to the airlines, marketing to the public and to the 

airlines, hiring personnel and consultants, and establishing travel banks in 

which a community guarantees to buy a certain number of tickets. In 

addition, communities have employed a number of other strategies, 

including buying an aircraft, subsidizing the start-up of an airline, and 

taking over ground station operations to reduce the costs for an airline. The 

outcomes of the grants may be affected by broader industry factors that are 

independent of the grant itself, such as larger strategic decisions on the 

part of the airlines. Our evaluation of completed projects indicates mixed 

results, but only 23 of 157 projects were completed as of September 30, 

2005.12 While officials at 19 of the 23 airports reported improvements to air 

service or fares during the life of the grant, only about half said that the 

improvements appeared to be self-sustaining. With 127 of the 157 grants 

still ongoing, it is too soon to determine which specific types of strategies 

12DOT has also terminated seven grants.
Page 23 GAO-06-21 Small Community Air Service Program

work best or assess the overall effectiveness of the grant program to 

improve air service to small communities.

Most Common Project 

Goals Were Related to 

Increasing Service and 

Enplanements

According to our survey of 146 airport directors that received funds from 

the 122 grants DOT awarded from 2002 through 2004, the most common 

goals associated with Small Community Air Service Development Program 

grants were generally related to increasing service and enplanements (see 

fig. 5). Recapturing passenger traffic—that is, stopping leakage to other 

airports—was also a frequent objective that increased in importance each 

year of the program. In contrast, conducting a study of the local market or 

changing the type of aircraft serving the community were relatively 

infrequent goals. By 2004, relatively few airports cited these goals for their 

grants. Finally, although addressing high fares is an explicit goal of the 

program, lowering fares was cited as an objective by 62 airport directors of 

the 146 airport directors over the 3-year span. 
Page 24 GAO-06-21 Small Community Air Service Program

Figure 5: Project Goals as Identified by Airport Directors for Grants Awarded 2002 

through 2004

Note: Some airport directors identified more than one goal. In addition, because some grants cover 

multiple airports through a consortium, the number of airport directors responding may be greater than 

the number of grants DOT awarded in that year.

Grant Projects Use Many 

Different Strategies to Meet 

Their Goals

Grantees engaged in a number of strategies to meet their goals, including 

various financial incentives, marketing, studies, and other approaches. For 

example, a number of different financial incentives have been funded 

under the program, including:

• Start-up subsidies—these provide assistance for an airline to begin 

operations or pay for an aircraft.

Other

Using larger or small aircraft

Completing a study

Adding new carriers

Providing lower fares

Providing service to new destinations

Increasing the frequencies of flights

Recapturing passenger traffic

Increasing enplanements

Increasing service

Goals

0 5 10 15 20 25 30 35 40

2004

Number of airports

2003

2002

Source: GAO survey of grantee airport directors.
Page 25 GAO-06-21 Small Community Air Service Program

• Revenue guarantees—the community and air carrier agree on a revenue 

target and the community pays the carrier only if revenues from the 

service do not meet the target.

• Travel banks—businesses or individuals deposit or promise future 

travel funds to a carrier providing new or expanded service. A business 

entity may handle an account containing the travel funds, and 

contributing entities then draw down on this account.

• Airport station operations—the airport may assume the ground station 

operations for one or a number of carriers serving the airport. Ground 

personnel such as baggage handlers and ticket agents become airport 

employees and may be shared among the airlines. Airlines pay for these 

services, but their cost can be lower than if provided by the airline itself.

Marketing support generally took a variety of forms, including mass media 

such as television, radio, magazine and newspaper advertising, outdoor 

advertising such as billboards and banners, direct mail, internet advertising 

including using the airport web site, airport special events such as open 

houses, frequent flyer promotions, travel agent incentives, and other 

approaches. Figure 6 shows an example of the use of outdoor advertising in 

one of the marketing projects funded by the grants. 

Figure 6: Example of a Billboard Advertisement Resulting from a Grant Project

Source: Lynchburg Regional Airport.
Page 26 GAO-06-21 Small Community Air Service Program

The Small Community Air Service Development Program also has funded 

studies and various other approaches. For example, in 2002, DOT awarded 

the Aleutians East Borough in Alaska a $240,000 grant to study the air 

service market for some rural airports in the lower Alaskan peninsula and 

the eastern Aleutian Islands. DOT also subsequently awarded the Aleutians 

East Borough $70,000 in 2003 to expand the study. Finally, other 

approaches have included developing alternative ground services such as 

bus service to nearby hubs and funding personnel such as airport economic 

development staff positions or consultants. 

We reviewed the grant applications and agreements for all 157 grants 

awarded from 2002 through 2005. Projects commonly include more than 

one strategy, such as combining a revenue guarantee with marketing for the 

air service provided under the grant. Over time, a few trends can be seen in 

the strategies used by communities. First, while marketing activities have 

always been heavily used as a strategy, by 2004 marketing had virtually 

become a universal strategy. All 46 grants—the initial 40 DOT awarded plus 

the 6 additional grants awarded with reallocated prior year grant funds—

included marketing as a component. Second, the number of projects using 

direct subsidies and travel banks declined by 2004 and remained low in 

2005, while the number of projects using revenue guarantees increased 

after 2002. Revenue guarantees have been the most common form of 

financial assistance each year of the program. Figure 7 provides a summary 

of the types of strategies communities have used under the program.
Page 27 GAO-06-21 Small Community Air Service Program

Figure 7: Strategies Included in Grant Projects

Note: DOT awarded 40 grants in 2002, 36 grants in 2003, 46 grants in 2004 (including 6 grants 

awarded using funds reallocated from prior declined, terminated, or completed projects) and 35 grants 

in 2005. 

Because marketing was such a heavily used strategy, we contacted all 23 

airports that had completed their grants by September 30, 2005, to 

determine what types of marketing they actually did. We found that 22 of 

the 23 completed grants had included some kind of marketing component 

to encourage greater use of the airport or the airlines that fly there; the lone 

exception was a grant which funded a study only. All 22 grantees used 

newspaper advertising, 21 used radio advertising, and 21 used the 

Internet—for example, the airport Web site. Television and outdoor 

Personnel

Travel banks

Other subsidy

Studies

Reduced airport fees/start-up costs

Other

Revenue guarantee

Marketing

Projects

Source: GAO analysis of grantee proposals and grant agreements.

0 10 20 30 40 50

2005

2004

2003

2002

Number of grants
Page 28 GAO-06-21 Small Community Air Service Program

advertising were also common strategies, 17 grantees used television and 

18 used outdoor advertising.13 After these strategies, the most common 

forms of marketing were airport special events (14 projects), magazine ads 

(12 projects), and direct mail (11 projects). Other types of marketing, such 

as frequent flyer promotions, travel agent incentives, or trade show booths, 

were also used in a few cases.

Participating Airlines 

Generally Favored Revenue 

Guarantees

Officials from airlines participating in the Small Community Air Service 

Development Program said revenue guarantees or other forms of financial 

subsidies were generally their preferred type of strategy, but they also 

considered other types of strategies proposed by communities under the 

program. We contacted each of the airlines associated with the 10 projects 

completed by January 1, 2005, including Continental Airlines, Delta Air 

Lines, Horizon Airlines, Rio Grande Air, TransStates Airlines, US Airways, 

and Westward Airways. Although their comments do not constitute a 

comprehensive analysis of industry views of the grant program, they 

provide a useful perspective on how participating airlines view the 

program. Several airline officials noted that reducing financial risk has 

become a key factor for airline and airport officials and consultants we 

interviewed also made this observation. Finally, airline officials said they 

perform their own due diligence doing market analyses of the airports, the 

competitive situation, and route finances regardless of what a local study 

says. 

Airlines face challenges when initiating air service to a community. Start-up 

costs can be significant and include repositioning equipment, renting 

space, and hiring and training personnel. Also, even if a viable air travel 

market exists in a community, entering a new market involves changing 

passengers’ existing travel patterns and loyalties, which may take time. 

Airline officials noted that given the current financial condition of the 

industry, airlines cannot afford to take a year of losses to build a customer 

base in a market, as they had in the past. For this reason, airline officials 

stated that they often could not enter smaller markets without some kind of 

revenue guarantee, such as that provided by a Small Community Air 

Service Development Program grant, or other financial support from the 

community.

13Outdoor advertising includes such things as stationary and mobile billboards, and street 

banners.
Page 29 GAO-06-21 Small Community Air Service Program

Airline officials emphasized that for a project to be of interest to them, the 

market must be potentially self-sustaining without subsidy or revenue 

guarantee in the longer term. The grant will eventually end and airlines do 

not wish to start over in another market, with the accompanying costs and 

risks. Airline officials also emphasized the importance of local funding to 

provide marketing for the new service; for some airlines, this was a crucial 

factor in selecting the community. A related observation by airline officials 

was that the level of local support and commitment to air service was a key 

factor in their decision to work with a local community. The Small 

Community Air Service Development Program has this component of local 

commitment, which some airline officials saw as important. In addition, 

some airline officials said that the overall project (grant and local match) 

must be sufficiently large to gain their interest. Finally, most airline officials 

were unfavorably disposed toward travel banks citing the difficulty in 

administering them and their poor track record of success. However, one 

airline official said they had been involved with successful travel banks and 

was open to the prospect of trying that strategy again.

All airline officials we talked to had positive views of the Small Community 

Air Service Development Program. Several officials stated that the program 

was superior to the Essential Air Service program because it addressed 

markets that were potentially self-sustaining but were underserved. 

However, in one case, airline officials said they were concerned about 

communities using the program to attract low-cost carriers to compete 

with existing service they were already providing to the community. Office 

of Aviation Analysis officials noted that higher than average fares is a 

statutory criterion for priority consideration in the selection of grantees, so 

introducing a low-cost carrier into a community is an acceptable strategy 

for a community under the program.

Completed Grants Indicated 

Mixed Results

We contacted officials of the 23 Small Community Air Service Development 

Program grant projects that were complete by September 30, 2005, and 

compared them against the program’s goals of improved air service and 

found that there were mixed results. In general, we found that the airport 

officials reported almost all the completed projects had some positive 

effect on air service during the life of the grant, but in some cases the 

improvements did not remain after the initial grant period, or that the 

improvements were not self-sustaining. For most completed grants, 19 of 

the 23, airport officials reported some kind of improvement in service, 

either in terms of an added carrier, destination, flights, or change in the 

type of aircraft. Of the 23, 8 reported adding a new carrier, 13 a new 
Page 30 GAO-06-21 Small Community Air Service Program

destination, and 13 an increase in the number of flights. In addition, 13 

reported that some fares had lowered at the airport during the grant. These 

service and fare improvements may explain the positive effect on 

enplanements the airport officials reported—19 grantees reported 

enplanements rose during the course of the grant. However, the 

improvements seen during the grant did not always continue afterwards. 

Fourteen of the 23 grantees reported that the improvements were still in 

place as of October 1, 2005. Further, there is the question of whether the 

service or fare improvement is self-sustaining and will continue without 

additional funding. About half the grantees with completed grants—11 of 

the 23 grantees—reported that the improvements they experienced as a 

result of the program were self-sustaining thus far. It should be noted that 

these outcomes are preliminary. Thirteen of these grants were completed in 

2005, and determining whether a particular project is successful may 

depend on the timeframe used. For example, Westward Airways was able 

to initially provide service to Scottsbluff, NE, under the grant, but later 

went out of business.

We also visited 10 airports that had completed grants by January 1, 2005, in 

order to gain a more detailed understanding of the outcomes of their 

projects (app. V contains discussion of each of these). Of these, five 

projects—Charleston, WV; Daytona Beach, FL; Hailey, ID; Lynchburg, VA; 

and Mobile, AL, were generally successful in achieving their goals and had 

made self-sustaining improvements to air service at the time of our review. 

• Charleston was able to add a new air carrier (Continental) and 

destination (Houston). However, Continental subsequently reduced the 

number of daily flights from two to one. Charleston officials said this 

was a result of a larger strategic allocation of equipment by Continental, 

and the airline later restored this second flight to Charleston. 

• Daytona Beach’s objective was to add service to Newark, NJ, which has 

remained in place after the grant was completed. After the grant was 

completed, Continental extended its agreement with the airport. DOT 

officials said that Continental has also expanded its service at the 

community to additional destinations.

• Hailey successfully added air service to Los Angeles via Horizon Airlines 

(see fig. 8). Although the service continues, it does not operate all year 

long due to the seasonal nature of demand to this resort community. 

After the grant expired, a local resort funded the revenue guarantee to 

Horizon, indicating that the service was initially not self-sustaining. 
Page 31 GAO-06-21 Small Community Air Service Program

However, Horizon now offers the service without a grant guarantee. In 

addition, the grant helped convince Horizon to add another flight to a 

new destination, Oakland, CA.

• Lynchburg, VA, was able to upgrade service to Atlanta from 30-seat 

turboprops to 50-seat regional jets through a revenue guarantee. The 

new jet service resulted in higher load factors on the larger regional jets 

than on the smaller turboprops due to increased demand. This service 

also has continued after the completion of the grant. DOT officials said 

that the community has also succeeded in negotiating, with its carrier, 

relative fare parity with the carrier’s operations with a nearby airport.

• Mobile, AL, established an innovative program to assume the ground 

operations, including baggage handling and staffing ticket counters for 

US Airways, which was about to abandon service to the airport, 

according to an airline official. US Airways has maintained its 

operations in Mobile, and the airport has expanded this program, with 

American Airlines joining the ground operations service. 
Page 32 GAO-06-21 Small Community Air Service Program

Figure 8: Horizon Airlines Turboprop Serving Hailey, ID

The four projects that did not result in self-sustaining improvements in air 

service were Fort Smith, AR; Reading, PA; Scottsbluff, NE; and Taos, NM. 

• Ft. Smith provides an example of how larger events in the aviation 

industry can affect the outcome of the grant. Ft. Smith obtained the air 

service it sought under the grant, however, American Airlines’ strategic 

decision to reduce the number of flights at its St. Louis hub resulted in 

Ft. Smith losing the service. 

• In the case of Reading, PA, the grant may have had a negative effect on 

air service. The grant established a bus service from Reading Airport to 

the Philadelphia airport, with the goal of demonstrating that air travel 

demand existed in Reading and service could be added to the airport. 

However, the bus service provided competition to the existing air carrier 

at Reading, which subsequently withdrew its service. The bus service 

ultimately failed (although a private operator has re-established bus 

Source: GAO.
Page 33 GAO-06-21 Small Community Air Service Program

service without subsidy), and Reading was left for a time without any 

scheduled air service.

• Scottsbluff, NE, was initially successful in resuming an intrastate air 

service between Scottsbluff, North Platte, Lincoln, and Omaha via startup air carrier Westward Airways. This service did not reach the 

expected level of enplanements and Westward Airways, which was able 

to begin operations with the help of the grant, ceased operations in July 

2005. 

• Taos, NM, was not able to achieve sufficient enplanements to make its 

air service self-sufficient, and Rio Grande Air, the small carrier that 

provided the service to Taos, went bankrupt.14

Finally, it is too early to determine whether the $95,000 grant to Somerset, 

KY, may be considered a success. The purpose of the grant was to conduct 

a study, which has been successfully completed. However, the ultimate goal 

of the program and the grant is to improve or attract air service. Because 

the community received a second grant in 2005, it will be possible in the 

future to determine the ultimate outcome of the initial and subsequent 

grants. Until the results of Somerset’s efforts to attract service are known, 

it is too soon to evaluate this grant. 

Some of the 10 grantees we visited identified additional positive and 

negative indirect effects not anticipated at the time of the grant. For 

example, one airport cited increased community involvement as a positive 

outgrowth of the grant—it helped forge ties between the airport and 

business community that were not there before. In addition, the study 

performed with grant funding fostered better community understanding of 

the local airline market. In a few instances, services begun under the grant 

stimulated other air service not part of the grant such as attracting other 

new service or improved service by a competing carrier. Conversely, some 

airport officials were concerned that grants to nearby competing airports 

could dilute effects of the grant at their airports. An airport official and an 

industry consultant also expressed concern that the program was no longer 

producing innovative ideas. Instead, some airports were copying 

14Taos later regained air service from Westward Airways under a different Small Community 

Air Service Development Program grant as part of a consortium. However, as noted above, 

Westward Airways also later ceased operations.
Page 34 GAO-06-21 Small Community Air Service Program

approaches that had been funded in the past as a way to improve their 

chances of receiving a grant.

Because a large majority of Small Community Air Service Development 

Project grants are not complete (127 of the 157 grants were ongoing as of 

September 30, 2005), it is too soon to determine which strategies have 

performed the best or assess the overall effectiveness of this program to 

improve air service to small communities. However, in addition to the 

preliminary results from the projects we studied, comments from DOT 

officials, airport directors, and airline officials provide some indications of 

what strategies that had positive results. Airline officials saw projects that 

provide direct financial benefits to the airline, such as revenue guarantees, 

as having the greatest chance of success. These officials noted that these 

types of projects allow the airline to test the real market for air service in a 

community without enduring the typical financial losses that occur when 

new air service is introduced. Airline officials also said that marketing 

efforts were important for success. DOT and some airline officials doubted 

the effectiveness of travel banks, in part because of the difficulty with 

administering the program. Finally, one strategy that airport and airline 

officials found innovative was for airports to take over the airlines’ ground 

station operations, such as ticketing and baggage handling. Only two 

airports have used this strategy under the program, so it is too early to tell 

if this model will be more widely adopted.

Most Airport Directors 

Indicated That Their Grant 

Projects Were Effective or 

That It Was Too Soon to Tell

Most grantee airport directors we surveyed indicated that their projects 

were at least partially successful or that it is too early to make an 

assessment. As shown in table 4, 60 of 120 airport directors that responded 

said that their grant was effective or very effective in increasing passenger 

traffic. About 46 percent (54 of 118) of airport directors said that their grant 

was effective or very effective in improving service quality. However, in 

both instances, almost as many airport directors said that they had no basis 

to judge effectiveness or that the question was not applicable. In addition, 

38 of 118 airport directors answered that their grant had been effective or 

very effective in reducing high fares. A majority, 63 airport directors, said 

that this issue was not applicable or they had no basis to judge.
Page 35 GAO-06-21 Small Community Air Service Program

Table 4: Airport Directors’ Views on Success of Grant Projects 

Source: GAO survey of grantee airport directors.

Some of the airport directors responding to our survey also said that they 

thought the funds used for marketing had been effective. For example, one 

airport director said that the small airport he directs does not have a 

marketing budget and that the grant funds provided for marketing were 

more than the airport’s total annual operating budget. The marketing funds 

therefore, brought public awareness the airport would not otherwise have 

been able to obtain. Another airport director said that he believed the 

marketing program conducted as part of the airport’s grant resulted in an 

11 percent annual increase in enplanements.

Usefulness of Air Service 

Development Zone 

Designation Is Not Clear

AIR-21 requires that each year DOT designate an Air Service Development 

Zone as part of the Small Community Air Service Development Program. 

The act specifies that DOT shall work with the community or consortium 

on means to attract business to the area surrounding the airport, to develop 

land use options for the area, and provide data working with the 

Department of Commerce and other agencies. DOT sees this designation as 

providing an opportunity for the selected community to work with its grant 

award to stimulate economic development, increase use of the airport’s 

facilities, and create a productive relationship between the community and 

the federal government to achieve these goals. DOT has designated one 

airport each year of the program as an Air Service Development Zone—

Augusta, GA (2002); Dothan, AL (2003); Waterloo, IA (2004); and Hibbing, 

MN (2005). Airports may apply for the designation by indicating their 

interest and providing supporting information on their grant applications. 

Airport officials said there are no special reporting requirements nor any 

additional funding for airports designated Air Service Development Zones. 

Airport and local officials at the three locations designated in 2002 through 

2004 said they did not know the criteria for being selected as an Air Service 

Development Zone or they were unclear on why their airports were 

selected. Upon selection, all three airports met with DOT staff to further 

Very effective 

or effective

As effective as 

ineffective

Very effective 

or ineffective

NA or No basis to 

judge

Total 

responses

Increasing passenger traffic 60 7 1 52 120

Improving air service quality 54 11 2 51 118

Resolving fare issues 38 9 8 63 118
Page 36 GAO-06-21 Small Community Air Service Program

clarify what the program entails. Officials from one airport said that DOT 

suggested the airport come up with ideas for how to use the designation, 

which could serve as a model for other communities. Another airport 

official told us that DOT offered to introduce the airport to other federal 

agencies as part of the designation. However another official said that 

other federal agencies, including FAA, do not “recognize” the designation 

as providing any special status for the airport. DOT officials said all of the 

requirements of other agencies, including DOT agencies, still apply to the 

airport and community. According to one local official, this makes the 

designation ineffective in fostering economic development. 

All three communities told us that the Air Service Development Zone 

designation has neither positive nor negative effects on the airport, 

because it has done nothing to either help or hurt them. The officials from 

all three airports noted that receiving the designation initially provided 

some positive local publicity for the airport, but that was the only effect 

they could name. Community and airport officials told us that any actual 

economic development that has been created at or near the airport would 

have occurred without the Air Service Development Zone designation.

Conclusions Our review of completed Small Community Air Service Development 

Program grants to date found that they had a mixed record of meeting 

program goals. The projects we reviewed included both instances where 

grantees were able to develop self-sustained air service and cases where 

this was not achieved. However, given that relatively few Small Community 

Air Service Development Program projects have been completed thus far 

(23 completed grants of the 157 awarded grants, or about 15 percent, as of 

September 30, 2005), it was too early for us to assess the overall 

effectiveness of the grants in improving air service to small communities. 

Examining the effectiveness of this program when more projects are 

complete would allow the evaluation of whether additional or improved air 

service was not only obtained but whether it continues after the grant 

support has expired. This may be particularly important since our work on 

the limited number of completed projects found that only about half of the 

grantees reported that the improvements were self-sustaining after the 

grant was complete. In addition, our prior work on the Essential Air Service 

program found that once incentives are removed, additional air service 

may be difficult to maintain. Over the next year, an additional 58 projects 

are scheduled to expire and examining the results from completed grants at 

that time may provide a clearer picture of the value of this program. Any 

improved service achieved from this program could then be weighed 
Page 37 GAO-06-21 Small Community Air Service Program

against the cost to achieve those gains. This information will be important 

as the Congress considers the reauthorization of this program in 2008.

We also found that the Air Service Development Zone concept has had no 

identifiable effect at any of the three locations designated from 2002 

through 2004. The officials at the 3 designated airports remained unclear 

about what they were supposed to do once designated a development zone. 

DOT sees this designation as providing an opportunity for the selected 

community to work with its grant award to stimulate economic 

development, increase use of the airport’s facilities, and create a productive 

relationship between the community and the federal government to 

achieve these goals. DOT officials said they are available to help the 

designees, if they are asked. However, DOT has not developed guidance or 

a conceptual model for what an Air Service Development Zone should be or 

what it should accomplish. Without this guidance, DOT advice or direction 

is limited and the designees may or may not pursue any air service 

development zone activities.

Recommendations for 

Executive Action

To ensure the effectiveness of the Small Community Air Service 

Development Program, we are making the following two recommendations 

to the Secretary of Transportation:

• The Secretary should conduct an evaluation of the Small Community Air 

Service Development Program in advance of the program’s 

reauthorization in 2008. Such an evaluation should occur after 

additional grant projects are complete and include a determination of 

the extent to which the program is meeting its intended purpose of 

improving air service to small communities. 

• The Secretary should clarify what support and services it will provide to 

communities that are designated as Air Service Development Zones.

Agency Comments and 

Our Evaluation

We provided copies of a draft of this report to the Department of 

Transportation for its review and comment. We received oral comments 

from DOT officials including the Associate Director, Office of Aviation 

Analysis. The officials told us that, in general, they concurred with the 

report’s findings and agreed to consider the recommendations as they go 

forward with the program. DOT also provided clarifying and technical 

comments, which we incorporated into this report as appropriate.
Page 38 GAO-06-21 Small Community Air Service Program

We are sending copies of this report to appropriate congressional 

committees and the Secretary of Transportation. We will make copies 

available to others on request. In addition, the report will be available at no 

charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions regarding the contents of this report, 

please contact me at (202) 512-2834 or dillinghamg@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this report. Individuals who made major 

contributions to this report are listed in appendix VI.

Gerald L. Dillingham

Director, Physical Infrastructure Issues
Page 39 GAO-06-21 Small Community Air Service Program

List of Congressional Addressees

The Honorable Thad Cochran

Chairman 

The Honorable Robert C. Byrd

Ranking Minority Member

Committee on Appropriations

United States Senate

The Honorable Jerry Lewis

Chairman 

The Honorable David Obey

Ranking Minority Member

Committee on Appropriations

House of Representatives

The Honorable Peter A. DeFazio

House of Representatives
Page 40 GAO-06-21 Small Community Air Service Program

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

To determine how the Department of Transportation (DOT) has 

implemented the Small Community Air Service Development Grant 

Program, we obtained and reviewed legislation authorizing and funding the 

program as well as related orders and guidelines. We interviewed DOT 

officials regarding their grant review and selection process as well as the 

procedures they use to oversee and monitor grant implementation. We 

reviewed grant proposals and award information and information about 

how DOT used grant criteria to review grant applications and award grants. 

We reviewed program controls to understand DOT’s program oversight and 

monitoring. We also reviewed quarterly reports and final reports grantees 

submitted. We obtained and reviewed DOT financial data from the Office of 

the Secretary and from the Federal Aviation Administration. 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 were sufficiently reliable for 

our purposes.

To determine what strategies have been used and what results have been 

obtained, we reviewed the grant applications and agreements for all 157 

grants awarded from 2002 through 2005. We classified the types of 

strategies carried out within the program and summarized the types of 

activities funded.

In addition, we conducted site visits at each of the 10 grantees that had 

completed their projects as of December 31, 2004. This included 

Charleston, WV; Daytona Beach, FL; Fort Smith, AR; Hailey, ID; Lynchburg, 

VA; Mobile, AL; Reading, PA; Scottsbluff, NE; Somerset, KY; and Taos, NM. 

We interviewed airlines associated with these completed grants to obtain 

information on air service trends at small community airports and the 

Small Community Air Service Development Program. Airlines interviewed 

include American Eagle Airlines, Continental Airlines, Delta Air Lines, 

TransStates Airlines, US Airways, Horizon Airlines, Rio Grande Air, and 

Westward Airways. We contacted 13 additional airports that completed 

their grants by September 30, 2005, to obtain basic information on the 

outcome of their grant. We also interviewed selected aviation consultants 

that had prepared grant applications to obtain information on air service 

trends at small community airports and the Small Community Air Service 

Development Program. Aviation consultants interviewed include Wilbur 

Smith Associates, Vesta Rae and Associates, and Intervistas.

In addition, we conducted two Web-based surveys. We sent surveys to the 

146 airport directors involved in the 122 grants awarded by DOT from 2002 
Appendix I

Objectives, Scope, and Methodology

Page 41 GAO-06-21 Small Community Air Service Program

through 2004. We sent a different survey to the 116 airport directors who 

applied for but did not receive a grant. For both surveys, we sent the survey 

to the airport directors or managers who were knowledgeable about the 

grant that was received or, in the case of the nongrantees, were 

knowledgeable about the grant proposal. To determine the airports that 

were included in the grant award, we reviewed the grant applications, 

information on the grants from DOT, and information from the grantees. To 

determine the airport directors who applied for but did not receive a grant, 

we reviewed the grant proposal documents from the DOT docket and 

information on the applications from DOT. We did not include airports 

smaller than a nonhub airport (as defined in 1997) in the nongrantee survey 

because they did not have scheduled commercial service.

Each survey asked a combination of questions that allowed for open-ended 

and closed-ended responses. The survey to airports that received the grant 

included questions about (1) the intended goals of the project, (2) project 

elements, (3) assessments of DOT’s implementation of the grant program, 

(4) results obtained under the project, and (5) recent trends that have 

affected air service at the airport. The survey to airports that did not 

receive the grant included questions about (1) the intended goals of the 

project, (2) project elements, (3) assessments of DOT’s implementation of 

the grant program, and (4) recent trends that have affected air service at 

the airport.

For both surveys, a GAO survey specialist designed the questionnaires in 

conjunction with other GAO staff knowledgeable about the grant program. 

In addition, we pretested the grantee questionnaire with three communities 

that had received fiscal year 2002 grants. We also had two aviation experts 

review the grantee questionnaire and provide comments. We pretested the 

nongrantee questionnaire with three other communities that had applied 

for, but did not receive, grants for each of the fiscal year 2002 through 2004 

periods. During the pretests for each questionnaire, we asked whether the 

questions were understandable and if the information was feasible to 

collect. We refined each of the questionnaires as appropriate. 

Both surveys were conducted using self-administered electronic 

questionnaires posted to the World Wide Web. For the grantee survey, we 

sent email notifications to 146 airport managers and directors beginning on 

March 2, 2005. We then sent each potential respondent a unique password 

and username on March 8, 2005, by email to ensure that only members of 

the target population could participate in the survey. To encourage 

respondents to complete the questionnaire, we sent an email message to 
Appendix I

Objectives, Scope, and Methodology

Page 42 GAO-06-21 Small Community Air Service Program

prompt each nonrespondent each week after the initial email message for 

approximately 3 weeks. We closed the survey on April 18, 2005. Because of 

the location and nature of the two grants awarded to the Aleutians East 

Borough islands in Alaska, we did not send surveys to each airport 

included in the grants. Instead, we asked that the legal sponsor of the 

grants complete a single survey for each of the two grants awarded. For 

those questions in the survey that specifically pertain to the airports 

involved in the grants, we asked that the sponsor respond for any of the 

airports in that grant for that specific grant year. We received 121 

completed surveys, a response rate of 83 percent. To view our survey and 

airport directors’ responses, go to www.gao.gov/cgi-bin/getrpt?GAO-06-101SP.

The nongrantee surveys were also conducted using self-administered 

electronic questionnaires posted to the World Wide Web. For this survey, 

we sent email notifications to 116 airport managers and directors beginning 

on April 12, 2005. We then sent each potential respondent a unique 

password and username on April 14, 2005, by email to ensure that only 

members of the target population could participate in the survey. To 

encourage respondents to complete the questionnaire, we sent an email 

message to prompt each nonrespondent each week after the initial email 

message for approximately 3 weeks. We closed the survey on May 18, 2005. 

There was an application from two airports in Hawaii. Because both 

airports had the same airport director, we sent him only one survey. We 

received 83 completed surveys, a response rate of 72 percent. We removed 

two airport directors from the respondent list because their airports were 

included in a proposal submitted by a representative of the state DOT 

without the airports’ knowledge. Therefore, the airport directors did not 

have sufficient information to complete the survey. To view our survey and 

airport directors’ responses, go to www.gao.gov/cgi-bin/getrpt?GAO-06-101SP. 

Because these were not sample surveys, there are no sampling errors. 

However, the practical difficulties of conducting any survey may introduce 

errors, commonly referred to as nonsampling errors. For example, 

difficulties in how a particular question is interpreted, in the sources of 

information that are available to respondents, or in how the data are 

entered into a database or were analyzed, can introduce unwanted 

variability into the survey results. We took steps in the development of the 

questionnaires, data collection, and the data analysis to minimize these 

nonsampling errors. For example, social science survey specialists 

designed the questionnaires in collaboration with GAO staff with subject 

matter expertise. Then, as mentioned earlier, the draft questionnaire was 

pretested with appropriate officials to ensure that the questions were 
Appendix I

Objectives, Scope, and Methodology

Page 43 GAO-06-21 Small Community Air Service Program

relevant, clearly stated, and easy to comprehend. When the data were 

analyzed, a second, independent analyst checked all computer programs. 

Since these were Web-based surveys, respondents entered their answers 

directly into the electronic questionnaires. This eliminated the need to have 

the data keyed into a database thus removing an additional source of error.

We also called a random sample of 20 small hub and nonhub airport 

directors or managers as categorized in 1997. We selected our sample from 

a total of 206 small and nonhub airports we determined had never applied 

for a grant. We called the 20 airport directors to ask them why they had not 

applied. The sample was stratified by FAA region and airport size. While we 

did not attempt to project these results to all airports that did not apply for 

grants, the sample provided some useful observations on the types of 

reasons airports had for not applying. 

To determine how passenger traffic and air service have changed at the 

nation’s small community airports, we conducted a literature review of 

aviation trends, focusing on studies that describe overall trends at small 

community airports (small hubs and nonhubs) in terms of the number of 

scheduled flights and destinations, available seats on scheduled flights, and 

scheduled flights by aircraft type. We narrowed our criteria to analyses 

contained in published studies and reports in the past 5 years. We reviewed 

each of the studies meeting our criteria and determined that the studies 

were methodologically sound. 

As an additional assessment of the reliability of the studies’ findings, we 

considered the reliability of the underlying data that were used in the 

studies and reports. Where noted in the study, we considered the steps that 

the study authors took to determine if the data used in their analyses were 

sufficiently reliable for their purposes. For example, much of the published 

data are from DOT’s Office of the Inspector General who periodically 

reports to the Congress on small community air service. The Inspector 

General’s reports on aviation trends relied on data from various sources. 

The data that we cited primarily came from the Federal Aviation 

Administration’s Flight Schedule Data System, which derives from the 

Official Airline Guide Schedules Database. While the Inspector General did 

not systematically audit or validate the databases they used in their report, 

they conducted trend analyses and sporadic checks of the data to assess 

reasonableness and comprehensiveness. When their judgmental sampling 

identified anomalies or apparent limitations in the data, they discussed 

these irregularities with managers responsible for maintaining the data. 
Appendix I

Objectives, Scope, and Methodology

Page 44 GAO-06-21 Small Community Air Service Program

Additionally, we made use of BACK Aviation Solutions, a private contractor 

that uses the Official Airline Guide Schedules Database and the Federal 

Aviation Administration Aerospace Forecasts, which is based on the 

Department of Transportation’s Bureau of Transportation Statistics data on 

passenger traffic and fleet type. We recently issued a report and assessed 

the reliability of BACK’s and DOT’s data.1

 Based on (1) reviews of 

documentation from BACK Aviation Solutions and DOT about their data 

and the systems that produced them and (2) interviews with 

knowledgeable agency and company officials, we found the information to 

be sufficiently reliable for these types of analyses. On the basis of our 

review of the methodologies cited in the studies, together with the authors’ 

statements concerning steps they took to assess the reliability of the 

underlying data along with our previous data reliability assessments of 

BACK Aviation Solutions and DOT databases, we concluded that the 

studies’ analyses were sufficiently reliable for our purposes. 

We performed our work from September 2004 through October 2005 in 

accordance with generally accepted government auditing standards.

1

GAO, Transatlantic Aviation: Effects of Easing Restrictions on U.S.-European Markets,

GAO-04-835 (Washington, D.C.: July 21, 2004).
Page 45 GAO-06-21 Small Community Air Service Program

Appendix II

Factors Affecting Air Service to Small 

Communities ApendxiI

Air service to nonhub airports has generally declined in recent years, as 

measured by the number of departure flights. Nonhubs have had an overall 

decrease in departures since July 2000. While all airports showed a 

decrease in service from July 2001 to July 2003 scheduled departures at 

small, medium, and large hub airports have increased since 2003. By July 

2005, scheduled departures at small, medium, and large hub airports largely 

rebounded, with departures from large and small hubs exceeding the July 

2000 number. However, the decline of service at nonhub airports 

continued, with 17 percent fewer departure flights serving these airports in 

July 2005 compared with July 2000. 

Many factors may help explain why some small communities face relatively 

limited air service.1

 First, many network carriers have cut service to small 

communities while carriers face financial difficulties and restructure their 

operations. Regional carriers now operate at small communities where 

network carriers have withdrawn. Second, regional carriers are phasing out 

turboprops in favor of regional jets, which has had a negative effect on 

small communities that have not generated the passenger levels needed to 

support regional jet service. Third, the “Commuter Rule” that FAA enacted 

in 1997 might have also had an effect. This rule was intended to bring small 

commuter aircraft operated under the same safety standards as larger 

aircraft.2

 This change created challenges for small communities because it 

is more difficult to economically operate smaller aircraft such as 19-seat 

turboprops under the new safety requirements. In addition, the Aviation 

and Transportation Security Act instituted the same security requirements 

for the screening of passengers for smaller airports as it did for larger 

airports, creating a “hassle factor” for passengers.3

 Fourth, low cost 

carriers have emerged in the deregulated environment, but these airlines 

have generally avoided small communities, leading to the phenomenon of 

“leakage”—that is, passengers choosing to drive to a larger airport instead 

of the small community airport. According to industry consultants, low 

cost carriers are now looking at medium-sized markets to expand, which 

could result in further reduction of air service at small community airports. 

1

In this instance, we define small communities as those served by small hubs and nonhubs. 

A small hub enplanes 0.05 to 0.249 percent of total U.S. domestic enplanements and a 

nonhub less than 0.05 percent of total U.S. domestic enplanements. 

2 Code of Federal Regulations Title 14 Part 121 (14 CFR Part 121) details certification 

requirements for aircraft that operate scheduled service with 10 or more seats. The 

Commuter Rule was instituted with 62 Fed. Reg. 32412, June 13, 1997.

3

Aviation and Transportation Security Act, Section 110 of P.L. 107-71, 115 Stat. 597 (2001).
Appendix II

Factors Affecting Air Service to Small 

Communities

Page 46 GAO-06-21 Small Community Air Service Program

Network Carrier 

Restructuring and 

Downsizing Negatively 

Affect Service to Small 

Communities

The financial condition of network carriers has negatively affected service 

to small communities, especially those served by nonhubs.4

 We have 

reported that in response to the economic downturn begun in early 2001 

and the events of September 11, 2001, many network carriers have been 

undertaking major restructuring and downsizing of their operations.5

 A 

regional airline association official noted that as part of restructuring, 

network carriers have transferred routes to regional carriers or reduced air 

service to certain communities.6

 According to an industry association, 

network carriers have also discontinued some service at major hubs, which 

can, in turn, reduce service to small communities. Flights to small 

communities have been cut because they are often considered to be less 

profitable than other routes. 

Aircraft Changes at Small 

Communities Pose 

Challenges 

According to aviation consultants, turboprops have been the primary 

source of airline service to small communities, and in particular nonhubs, 

because turboprops have been the most economically viable for small 

communities. However, turboprop use is declining. According to one 

aviation consultancy, from 1995 to 2005, the number of nonstop routes 

served by turboprops declined 54 percent. According to the FAA Aerospace 

Forecast Fiscal Years 2005-2016, the trend is for further decline.7

 By 2016, 

FAA expects that 10-40 seat turboprop aircraft will represent 13.3 percent 

of the fleet, down from 22.8 percent in 2004. 

According to FAA, the primary reason for the decline in turboprops has 

been the rise of the use of regional jets at small community airports. 

According to the DOT Office of the Inspector General, the number of

4

A network carrier operates a significant portion of their flights using at least one hub where 

connections are made for flights on a spoke system.

5

GAO, Commercial Aviation: Factors Affecting Efforts to Improve Service at Small 

Community Airports, GAO-03-330 (Washington, D.C.: Jan.17, 2003).

6

Regional carriers provide service from small cities primarily using regional jets to support 

the network carriers’ hub and spoke systems.

7

FAA Aerospace Forecasts Fiscal Years 2005-2006. U.S. Department of Transportation, 

Federal Aviation Administration, March 2005.
Appendix II

Factors Affecting Air Service to Small 

Communities

Page 47 GAO-06-21 Small Community Air Service Program

regional jet flights at nonhubs has increased 199 percent from July 2000 to 

July 2005.8

 In comparison, flights by other types of aircraft have declined—

by 29 percent for large jets, 39 percent for turboprops, and 17 percent for 

piston aircraft. The increased use of regional jets at small communities is in 

line with national trends at larger airports. The FAA Aerospace Forecast 

Fiscal Years 2005-2016 states that jet departures by regional air carriers 

accounted for 65.8 percent of industry departures in 2004 compared with 

just 0.2 percent in 1991. 

According to an aviation consultant, increased use of regional jets, which 

tend to have 50 seats or more, makes it more difficult for small 

communities to fill the aircraft. Thus, according to an aviation consultant, 

regional jets have not been a direct substitution for turboprops on routes; 

rather, regional jets may fly to denser passenger markets where they can 

profitably operate. Another trend that might negatively affect service to 

small communities is that some airlines have been procuring more 70 and 

90 seat aircraft. According to the FAA Aerospace Forecast Fiscal Years 

2005-2016, because the larger aircraft allow for longer flight lengths, new 

markets may be tapped for point-to-point service that will by-pass 

congested hub airports. We have reported in the past that small 

communities may have particular difficulty attracting regional jet service 

because their passenger demand could not support it.9

In addition, an aviation consultant and industry airline association official 

both stated that scope clauses in labor agreements between regional and 

network carriers can constrain regional airlines in the aircraft size, routes, 

and airports served.10 For example, the aviation consultant said clause 

requirements that jets be used on certain routes have led to the retirement 

of turboprops even where turboprop service had been profitable. 

8

Aviation Industry Performance: Trends in Demand and Capacity, Aviation System 

Performance, Airline Finances and Service to Small Airports. U.S. Department of 

Transportation, Office of the Inspector General.

9

GAO Aviation Competition: Commercial Aviation Regional Jet Service Yet to Reach Many 

Small Communities, GAO-01-344 (Washington, D.C.: Feb. 14, 2001).

10Network air carriers have contracts with regional carriers to provide service. Within these 

contracts are scope clauses, which place restrictions on regional carrier operations.
Appendix II

Factors Affecting Air Service to Small 

Communities

Page 48 GAO-06-21 Small Community Air Service Program

The “Commuter Rule” Has 

Contributed to Loss of Air 

Service to Some Small 

Communities

In 1997, the FAA enacted the “Commuter Rule” that called for “one level of 

safety” among all commercial aircraft and placed stringent safety standards 

on regional carriers. The intent was to bring aircraft that have 10 to 30 seats 

and operate scheduled service under the same safety standards as network 

carriers that operate with larger aircraft. The additional costs required to 

meet the increased safety standards made some smaller aircraft 

uneconomical to operate. According to industry association officials and 

an aviation consultant, the safety upgrades have contributed to eliminating 

the 19-seat plane because of the increased operating costs. According to 

the FAA Aerospace Forecast Fiscal Years 2005-2016, in 1998, 1 year after 

the implementation of the Commuter Rule, the number of city pairs 

serviced by the regional or commuter carriers fell to its lowest level of the 

decade. Although the trend reversed in 1999 as more regional jets entered 

the fleet, the number of short-haul markets under 200 miles continued to 

decline. Furthermore, between 2001 and 2004, 456 city pairs in the 0-199 

mile range and 248 in the 200-499 mile range lost nonstop regional or 

commuter service. Taking into account city pairs that gained service, the 

overall result was a net loss of 184 city pairs in the 0-199 mile range and 90 

in the 200-499 mile range. FAA told us that part of this decline may be due 

to the Commuter Rule.11

Small community airports are required to meet the same security standards 

as larger airports, which can be costly for small community airports and 

create a “hassle factor” for passengers. According to an aviation consultant, 

with the rise in increased security measures at airports, many in the 

traveling public have opted to drive or take trains or buses to travel in the 

post 9/11 era. Consumers believe that with the increased time it takes to 

pass through security, they would be better off using another method of 

transportation to go to their final destination. 

Increase in Low Cost 

Carrier Service May Also 

Contribute to Reduced 

Service at Small Community 

Airports

Low-cost carriers such as Southwest and JetBlue, provide point-to-point 

service in dense population markets with limited access to low fares, and in 

recent years this model has been relatively successful. According to the 

FAA Aerospace Forecast Fiscal Years 2005-2016, since 2000, network 

carriers have reduced their domestic capacity by 14.3 percent, while low 

cost carriers have increased capacity by 40.5 percent. 

11The other major factor affecting service in short-haul markets that FAA noted was that 

regional jet aircraft can more economically operate in denser passenger markets.
Appendix II

Factors Affecting Air Service to Small 

Communities

Page 49 GAO-06-21 Small Community Air Service Program

Low-cost carriers generally avoid nonhub airports where demand for their 

point-to-point service is insufficient to make it economically feasible to 

serve with their fleets of larger aircraft. According to the Department of 

Transportation Office of the Inspector General, low-cost carriers scheduled 

service to only 5 of the more than 500 nonhub airports in July 2005, 

representing approximately 2 percent of the total available passenger seats 

at these airports. An aviation consultant stated that only the six large 

network carriers pay attention to small community air service. 

Low-cost carriers provide a challenge to small communities. Neighboring 

larger airports that have low cost carrier service are attracting passengers 

from smaller airports, a phenomenon called leakage. We have reported this 

as a critical factor determining a community’s demand for air service.12

During interviews with aviation consultants and during an industry 

conference, this issue was noted as one of the most significant challenges 

to bringing and maintaining air service at small community airports. 

According to aviation consultants, some low-cost carriers may begin flying 

from medium density airports. Such a strategy might increase the impact of 

leakage, as more small community passengers become closer to airports 

where low cost service is provided. Some potential small community 

airport passengers may elect to drive to airports served by a low cost 

carrier to access lower fares. Service at the smallest community airports 

might thus be further reduced.

12GAO-03-330.
Page 50 GAO-06-21 Small Community Air Service Program

Appendix III

DOT Additional Selection Factors ApendxiI

Service-related Factors 

1 How many carriers are serving the community?

2 How many destinations are served?

3 What is the frequency of flights?

4 What size aircraft service the community?

5 Has the level of service been increasing or decreasing over the past 3 years?

6 Have enplanements been increasing or decreasing over the past 3 years?

7 Is the Metropolitan Statistical Area population increasing or decreasing?

8 Is the per-capita income increasing or decreasing?

9 Are the number of businesses in the area increasing or decreasing?

10 What is the proximity to larger air service centers?

11 What is the quality of road access to other air service centers?

12 Does the community lack service in identified top Origin & Destination markets?

13 Is the proposal designed to provide:

• First air service,

• Second carrier service,

• New destinations,

• Larger aircraft, or

• More frequencies?

14 If this is an air service project, has the community selected a carrier that is willing 

and committed to serve?

15 If this is an air service project, does the community have a targeted carrier that 

would serve?

Project-related Factors

1 Do demographic indicators and the business environment support the project? 

2 Does the community have a demonstrated track record of implementing air 

service development projects? 

3 Does the project address the stated problem?

4 Does the community have a firm plan for promoting the service?

5 Does the community have a definitive plan for monitoring, modifying, and 

terminating the project if necessary?

6 Does the community have a plan for continued support of the project if selfsufficiency or completion is not attained after the grant expires?

7 If mainly a marketing proposal, does the community have a firm implementation 

plan in place? 

8 Is the applicant a participating consortium?

9 Is the project innovative? 

10 Does the project have unique geographical traits or other considerations?
Appendix III

DOT Additional Selection Factors

Page 51 GAO-06-21 Small Community Air Service Program

11 Is the amount of funding requested reasonable compared with the total amount 

of funding available? 

12 Is the local contribution reasonable compared with the amount requested?

13 Can the project be completed during the funding period requested?

14 Is the applicant a small hub now?

15 Is the applicant a large nonhub now?

16 Is the applicant a small nonhub now?

17 Is the applicant currently subsidized through the Essential Air Service program?

18 Is the project for marketing only?

19 Is the project a study only?

20 Does the project involve intermodal services?

21 Is the project primarily a carrier incentive?

22 Is the project primarily air fare focused?

23 Does the project involve a low-fare service provider?

24 Does the proposal shift costs from the local or state level to the federal level?

25 Does the proposal show that proximity to other service would detract from it? 

26 Is the applicant close to a past grant recipient?

(Continued From Previous Page)
Page 52 GAO-06-21 Small Community Air Service Program

Appendix IV

Status of Grants Awarded, 2002 through 2005 ApendxiIV

2002 Grant Year

Location Grant amount 

 Reimbursed as of 

September 30, 2005 

 Status as of 

September 30, 2005 

1 Abilene, TX $85,010 $85,010 Completed 

2 Akron/Canton, OHa 950,000 731,588 Completed 

3 Aleutians East Borough, AK 240,000 191,134 Ongoing 

4 Asheville, NC 500,000 500,000 Completed 

5 Augusta, GAa 759,004 112,743 Terminated 

6 Baker City, ORa 300,000 0 Terminated 

7 Beaumont/Port Arthur, TX 500,000 163,512 Ongoing 

8 Bellingham, WA 301,500 153,997 Ongoing 

9 Binghamton, NY 500,000 500,000 Completed 

10 Bismarck, ND 1,557,500 166,000 Ongoing 

11 Brainerd, St. Cloud, MN 1,000,000 250,602 Ongoing 

12 Bristol/Kingsport/Johnson City, TN 615,000 224,513 Ongoing 

13 Cape Girardeau, MO 500,000 0 Ongoing 

14 Casper, Gillette, WYa 500,000 120,722 Terminated 

15 Charleston, WVa 500,000 499,443 Completed 

16 Chico, CA 44,000 0 Ongoing 

17 Daytona Beach, FLa 743,333 737,834 Completed 

18 Fort Smith, AR 108,520 105,704 Completed 

19 Fort Wayne, IN 398,000 398,000 Completed 

20 Hailey, ID 600,000 600,000 Completed 

21 Lake Charles, LA 500,000 119,545 Completed 

22 Lake Havasu City, AZ 403,478 316,412 Ongoing 

23 Lamar, CO 250,000 182,342 Ongoing 

24 Lynchburg, VA 500,000 499,997 Completed 

25 Manhattan, KS 388,350 154,406 Ongoing 

26 Marion, IL 212,694 189,236 Ongoing 

27 Mason City, IAa 600,000 16,359 Terminated 

28 Meridian, MS 500,000 500,000 Completed 

29 Moab, UT 250,000 212,246 Ongoing 

30 Mobile, AL 456,137 456,099 Completed 

31 Paducah, KY 304,000 150,144 Ongoing 

32 Presque Isle, ME 500,000 450,119 Ongoing 

33 Rapid City, SD (1) 1,400,000 1,399,295 Completed 
Appendix IV

Status of Grants Awarded, 2002 through 2005

Page 53 GAO-06-21 Small Community Air Service Program

Source: GAO analysis of DOT data.

a

DOT has recovered all or portions of the grant awarded to the grantee.

Location Grant amount 

 Reimbursed as of 

September 30, 2005 

 Status as of 

September 30, 2005 

34 Reading, PAa 470,000 363,662 Completed 

35 Rhinelander, WIa 500,000 262,463 Completed 

36 Santa Maria, CAa 217,530 203,279 Completed 

37 Scottsbluff, NE 950,000 950,000 Completed 

38 Somerset, KY 95,000 85,335 Completed 

39 Taos/Ruidoso, NMa 500,000 404,120 Completed 

40 Telluride, CO 300,000 25,057 Ongoing 

Total reimbursed $12,480,920 

Amoun reallocated in 2004 $1,529,901 

Amount DOT recovered in 2005 $2,588,358

Total $19,999,056 $16,599,179

(Continued From Previous Page)

2002 Grant Year

2003 Grant Year

Location Grant amount 

 Reimbursed as of 

September 30, 2005 

 Status as of 

September 30, 2005 

1 Aguadilla, PR $626,700 $0 Ongoing 

2 Aleutians East Borough, AK 70,000 7,636 Ongoing 

3 AZ Consortium, AZ 1,500,000 0 Ongoing 

4 Bakersfield, CA 982,513 706,151 Ongoing 

5 Bangor, ME 310,000 62,086 Ongoing 

6 Charleston, SCa 1,000,000 0 Terminated 

7 Cut Bank, MT 90,000 74,381 Ongoing 

8 Dickinson, ND 750,000 660,504 Ongoing 

9 Dothan, AL 200,000 59,110 Ongoing 

10 Dubuque, IA 610,000 579,571 Ongoing 

11 Duluth, MN 1,000,000 853,615 Ongoing 

12 Elmira, NY 200,000 0 Ongoing 

13 Erie, PA 500,000 381,689 Ongoing 

14 Fresno, CA 1,000,000 0 Ongoing 

15 Friday Harbor, WA 350,000 181,980 Ongoing 
Appendix IV

Status of Grants Awarded, 2002 through 2005

Page 54 GAO-06-21 Small Community Air Service Program

Source: GAO analysis of DOT data.

a

DOT has recovered all or portions of the grant awarded to the grantee.

Location Grant amount 

 Reimbursed as of 

September 30, 2005 

 Status as of 

September 30, 2005 

16 Gainesville, FL 660,000 17,750 Ongoing 

17 Grand Island, NE 380,000 0 Ongoing 

18 Greenville, MSa 400,000 0 Terminated 

19 Gunnison, CO 200,000 183,390 Ongoing 

20 Joplin, MO 500,000 0 Ongoing 

21 Knoxville, TNa 500,000 0 Terminated 

22 Laredo, TX 400,000 129,350 Ongoing 

23 Lewiston-Nez Perce, ID 675,000 114,460 Ongoing 

24 Mountain Home (Baxter), AR 574,875 0 Ongoing 

25 Muskegon, MIa 500,000 469,155 Completed 

26 NC Consortium, NC 1,200,000 106,131 Ongoing 

27 Owensboro, KY 500,000 388,044 Ongoing 

28 Parkersburg, WV/Marietta, OH 500,000 84,733 Ongoing 

29 Pierre, SD 150,000 41,978 Ongoing 

30 Redmond, OR 515,000 34,461 Ongoing 

31 Savannah, GA 523,495 386,525 Ongoing 

32 Shreveport, LA 500,000 0 Ongoing 

33 Staunton, VA 100,000 74,749 Ongoing 

34 Taos Consortium, NM 1,400,000 557,398 Ongoing 

35 Tupelo, MS 475,000 78,007 Ongoing 

36 Victoria, TX 20,000 19,416 Completed 

Total reimbursed $6,252,273

Amount reallocated in 2004 $400,000 

Amount DOT recovered in 2005 $1,930,845

Total $19,862,583 $8,583,118 

(Continued From Previous Page)

2003 Grant Year
Appendix IV

Status of Grants Awarded, 2002 through 2005

Page 55 GAO-06-21 Small Community Air Service Program

2004 Grant Year

Location Grant amount 

 Reimbursed as of 

September 30, 2005 

 Status as of September 

30, 2005 

1 Albany, GA $500,000 $0 Ongoing 

2 Alpena, MI 583,046 11,802 Ongoing 

3 Beckley/Lewisburg, WV 300,000 0 Ongoing 

4 Bloomington, IL 850,000 0 Ongoing 

5 Butte, MT 360,000 0 Ongoing 

6 Champaign-Urbana, IL 200,000 0 Ongoing 

7 Charlottesville, VA 270,000 73,814 Ongoing 

8 Chattanooga, TN 750,000 6,343 Ongoing 

9 Clarksburg/Morgantown, WV (reallocation) 372,286 0 Ongoing 

10 Columbus, MS 260,000 81,738 Ongoing 

11 Del Rio, TX 318,750 168,320 Ongoing 

12 Dubois, PA 400,000 6,177 Ongoing 

13 Eau Claire, WI 500,000 0 Ongoing 

14 Elko, NV 222,000 222,000 Completed 

15 Evansville/South Bend, IN 1,000,000 0 Ongoing 

16 Farmington, NM 650,000 0 Ongoing 

17 Hot Springs, AR (reallocation) 195,000 14,515 Ongoing 

18 Huntsville, AL 479,950 353,392 Ongoing 

19 Kalamazoo, MI 500,000 0 Ongoing 

20 Lafayette, LA 240,000 0 Ongoing 

21 Latrobe, PA 600,000 0 Ongoing 

22 Lebanon, NH 500,000 0 Ongoing 

23 Lincoln, NE 1,200,000 0 Ongoing 

24 Logan City, UT 530,000 12,101 Ongoing 

25 Marquette, MI 700,000 0 Ongoing 

26 McCook/North Platte, NE 275,000 24,730 Ongoing 

27 New Haven, CT 250,000 88,949 Ongoing 

28 Pocatello, ID 75,000 16,297 Ongoing 

29 Redding/Arcata, CA 500,000 0 Ongoing 

30 Richmond, VA 950,000 0 Ongoing 

31 Rutland, VT (reallocation) 240,000 0 Ongoing 

32 Salem, OR 500,000 0 Ongoing 

33 Santa Rosa, CA 635,000 31,088 Ongoing 
Appendix IV

Status of Grants Awarded, 2002 through 2005

Page 56 GAO-06-21 Small Community Air Service Program

Source: GAO analysis of DOT data. 

Note: Program funds from 2002 and 2003 were reallocated to six cities in 2004.

Location Grant amount 

 Reimbursed as of 

September 30, 2005 

 Status as of September 

30, 2005 

34 Sarasota, FL 1,500,000 900,000 Ongoing 

35 Sioux City, IA 609,800 52,353 Ongoing 

36 Sioux Falls, SD 350,000 52,686 Ongoing 

37 Steamboat Springs, CO 500,000 0 Ongoing 

38 Sumter, SC 50,000 0 Ongoing 

39 Syracuse, NY (reallocation) 480,000 15,946 Ongoing 

40 Tyler, TX 90,000 6,592 Ongoing 

41 Visalia, CA (reallocation) 200,000 0 Ongoing 

42 Walla Walla, WA 250,000 0 Ongoing 

43 Waterloo, IA 550,000 31,834 Ongoing 

44 Wilkes-Barre/Scranton, PA 625,000 55,757 Ongoing 

45 Worcester, MA (reallocation) 442,615 0 Ongoing 

46 Youngstown, OH 250,000 0 Ongoing 

Total $21,803,447 $2,226,435 

(Continued From Previous Page)

2004 Grant Year
Appendix IV

Status of Grants Awarded, 2002 through 2005

Page 57 GAO-06-21 Small Community Air Service Program

2005 Grant Year

Location Grant amount 

1 Aberdeen, SD $450,000 

2 Alexandria, LA 500,000 

3 Bradford, PA 220,000 

4 CA Consortium, CA 245,020 

5 Cedar City, UT 155,000 

6 Durango, CO 750,000 

7 Fargo, ND 675,000 

8 Florence, SC 500,000 

9 Great Falls, MT 220,000 

10 Greenville, NC 450,000 

11 Gulfport/Biloxi, MS 750,000 

12 Hancock/Houghton, MI 516,000 

13 Hibbing, MN 485,000 

14 Huntington, WV 500,000 

15 Idaho Falls, ID 500,000 

16 Ithaca, NY 500,000 

17 Jacksonville, NC 500,000 

18 Killeen, TX 280,000 

19 Knox County, ME 555,000 

20 Lawton/Ft. Sill, OK 570,000 

21 Macon, GA 507,691 

22 Marathon, FL 750,000 

23 Marshall, MN 480,000 

24 Massena, NY 400,000 

25 Modesto, CA 550,000 

26 Monterey, CA 500,000 

27 Montgomery, AL 600,000 

28 Oregon/Washington Consortium, OR/WA 180,570 

29 Rockford, IL 1,000,000 

30 Ruidoso, NM 600,000 

31 Somerset, KY 950,000 

32 Stewart (Newburgh), NY 250,000 

33 Vernal, UT 40,000 

34 Williamsport, PA 500,000 
Appendix IV

Status of Grants Awarded, 2002 through 2005

Page 58 GAO-06-21 Small Community Air Service Program

Source: GAO analysis of DOT data.

Location Grant amount 

35 Wyoming Consortium, WY 800,000 

Total $17,429,281 

(Continued From Previous Page)

2005 Grant Year
Page 59 GAO-06-21 Small Community Air Service Program

Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants ApendxiV

This appendix provides information on the Small Community Air Service 

Development Grants that were completed as of December 31, 2004. For 

each grant, information is provided on the background of the application, 

the project funded by the grant, and the results achieved by the grant. The 

10 completed grants are:

• Charleston, West Virginia

• Daytona Beach, Florida

• Fort Smith, Arkansas

• Hailey, Idaho

• Lynchburg, Virginia

• Mobile, Alabama

• Reading, Pennsylvania

• Scottsbluff, Nebraska

• Somerset, Kentucky

• Taos, New Mexico

Charleston, West Virginia At the time of the grant application, Charleston was served by five major 

airlines that had scheduled flights to 10 destinations. The application noted 

that despite this level of service, there was poor service to communities in 

the southwestern United States, Mexico, Central and South America. The 

application also noted that there were large numbers of local public and 

private firms, as well as academic entities that needed service to the 

Houston metro area.

In 2002, Charleston proposed that the grant would be used to obtain new 

regional jet service between Charleston’s Yeager Airport and Houston, 

Texas’ Intercontinental Airport. The application stated that this new service 

from Continental Airlines would have benefits for Charleston and West 

Virginia, including:

• serving a major origin and destination market for Charleston;
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 60 GAO-06-21 Small Community Air Service Program

• enhancing connectivity for the region, saving consumers considerable 

time when connecting from points throughout the Southwestern United 

States;

• opening same-carrier service to the important industrial centers of 

northern Mexico;

• giving West Virginia consumers an additional carrier choice; and

• enabling businesses to save employee time by eliminating connecting 

time for traveling to and from Houston.

Charleston desired two weekday nonstop round trips to Houston, plus two 

round trips on the weekend using 37-seat or regional jets. Charleston would 

require Continental to offer fares reasonably consistent with those charged 

on a per mile basis on other routes of similar length and with the same 

aircraft. 

Project Funded by Grant On June 26, 2002, Charleston was awarded a $500,000 Small Community Air 

Service Development Pilot grant to facilitate acquiring service to Houston. 

The community provided an additional $100,000 local match. Charleston 

allocated $500,000 as a revenue guarantee to reduce the risk of losses for 

Continental in the early months of the new service. The community also 

allocated $20,000 for expenses necessary to meet with the new carrier and 

to provide basic advertising and marketing support for the new service. 

Grant Outcome On October 1, 2002, Continental started new nonstop service from 

Charleston to Houston. Initially, the service provided two flights daily, with 

the exception of Saturday when one daily departure was provided. In 

January 2004, the service was reduced to one flight daily. Airport officials 

told us the reduction in the number of flights was a result of aircraft fleet 

utilization issues at Continental. However, according to an airport official, 

Continental subsequently resumed the second daily flight.
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 61 GAO-06-21 Small Community Air Service Program

The community stated in their final project report to DOT that the airport 

experienced an increase in enplanements and a reduction in passenger 

leakage as a result of the Charleston to Houston service. Additionally, as 

shown in table 5, the airport has experienced a 31.8 percent overall 

increase in enplanements in October 2004 versus October 2002 when the 

service first started. In 2004, the airport set a record for enplanements with 

291,300 and experienced a 15.6 percent increase in overall enplanements 

versus 2002. An airport official told us enplanement levels continue to rise 

as the airport continues to expand its catchment area, and that service 

levels at the airport are comparable to communities that are double the size 

of the airport.1

 In 2002, there were 11 carriers representing five major 

airlines serving the airport, and in 2004 there were 12 carriers serving the 

market. 

Table 5: Charleston, WV Passenger Enplanement Report for October 2002 through 

October 2004, and Overall Yearly Totals for 2002-2004

Source: Charleston, WV (Yeager Airport). 

a

Denotes when new Continental service went into effect.

One local official told us that the success of the new Charleston to Houston 

service had a secondary effect in obtaining an additional airline as well. In 

July 2004, Independence Air started serving the Charleston market. The 

official told us that the success of the Houston service, and the fact that 

Charleston had not experienced a drop in enplanements, showed 

Independence Air that Charleston could continue to handle additional 

service from another airline. 

1

An airport’s catchment area is the potential geographic area for drawing passengers. The 

geographic size of a catchment area varies from airport to airport depending on such factors 

as how close an airport is to other airports and whether the airport is served by a low-fare 

airline (and, therefore, attractive to passengers from farther distances).

2002

Percent 

change 

from 2001 2003

Percent 

change 

from 2002 2004

Percent 

change 

from 2003

October 22,366a 18.4% 21,710 -2.93% 29,474 35.8%

Totals 251,942 4.1% 242,485 -3.85% 291,300 20.1%
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 62 GAO-06-21 Small Community Air Service Program

Daytona Beach, Florida At the time of the grant application, Delta Air Lines and Continental 

Connection Carrier, Gulfstream were the only two carriers serving Daytona 

Beach. Delta provided daily service to Atlanta, Georgia, and Saturday 

service to Cincinnati, Ohio. Continental Connection provided 14 weekly 

nonstop flights to Tampa, Florida. However, the community in its grant 

application told DOT that the airport could handle an increase in scheduled 

commercial airline service, particularly to New York. The airport stated 

that they had a market area of 1,383,000 people, that the community had 8.5 

million visitors to the area in 2000, and that more than 325,000 of these 

visitors were from New York. Additionally, the grant application told DOT 

that the New York area provided the strongest pattern of in-migration to 

Volusia County/Daytona Beach, among all states, excluding Florida. Thus, 

the community in its grant application stated that it needed direct service 

to the New York area. According to the grant application, Daytona Beach 

used to have service to New York, but as of September 11, 2001, the service 

was discontinued despite having an 81 percent average load factor 

(percentage of occupied seats on flights) for the last 12 months of service. 

According to Daytona Beach’s grant application, air service had suffered in 

the community due to the large amount of traffic leakage to nearby 

airports. Daytona estimated that 50 percent to 60 percent of their leakage 

was to either Orlando (65 miles) or Jacksonville (90 miles). Community 

officials in the grant application said that this high traffic leakage was a 

direct result of a lack of competitive air service, inadequate seat inventory, 

and resulting fare differentials at Daytona Beach International Airport. At 

the time of the grant application, Orlando had approximately 354 daily 

departures and Jacksonville had 220 daily departures. Daytona at the same 

time had an average of 7 daily departures.

According to the grant application, higher fares flying out of Daytona 

versus the nearby airports of Orlando and Jacksonville contributed to this 

leakage. Daytona Beach officials told DOT that on average, their airport’s 

fares were 13 percent higher to the same cities than Orlando, and 15 

percent higher than Jacksonville when purchased 21 days in advance. The 

community noted in the grant application that weaker load factors and 

additional seats at Orlando and Jacksonville have led to higher fares in 

Daytona. In order to increase this air service, Daytona Beach stated in their 

grant application that it desired twice daily regional jet service to New York 

area’s Newark Airport. The new service provided by Continental Airlines 

was scheduled to begin on December 14, 2002.
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 63 GAO-06-21 Small Community Air Service Program

Project Funded by Grant On June 26, 2002, Daytona/Volusia County was awarded a $743,333 Small 

Community Air Service Development Program grant. The local community 

provided an additional $165,000 for a total project cost of $908,333. The 

community allocated $743,333 to Continental Airlines for a revenue 

guarantee for the initial 12-month ramp-up period. The community’s goal 

was to make this service self-sufficient in the second year. Additionally, the 

community provided $165,000 for advertising and marketing for 

Continental’s new service. Components of the marketing program included: 

newsprint advertising, newsletter advertising, Web site promotions, media 

press releases, radio advertising, ribbon cutting ceremonies, and magazine 

advertising in both Daytona Beach and New York areas. 

Grant Outcome On December 12, 2002, Continental Airlines began service between 

Daytona Beach and Newark Airport. Continental operated two daily trips 

utilizing 50 seat regional jets. The revenue guarantee between Daytona 

Beach and Continental for service to Newark lasted 1 year until December 

11, 2003. Table 6 shows the quarterly passenger totals for this service. 

Table 6: Quarterly Passenger Totals between Daytona Beach and Newark 

Source: Daytona Beach International Airport.

Note: 4th Quarter Totals Ended December 11, 2003, when the revenue guarantee between Continental 

and Daytona Beach ended.

A local official told us that the project has been a success. The Daytona 

Beach to Newark service continued to operate as of September 30, 2005. In 

addition, following the completion of the revenue guarantee, Continental 

extended its agreement 2 years with the airport to provide service between 

Daytona Beach and Newark. The agreement expires in December 2005, but 

a local official expects the agreement to be renewed with Continental to 

continue providing this service.

In addition, according to a community official, passenger traffic has risen 

30 percent at the airport in the last 2 years since the grant. The airport now 

has service to Cleveland, Ohio, and seasonal commuter service to Tampa, 

Florida. Also, Delta has increased its service to 12 flights per day and has 

Period

1st Quarter 

2003

2nd Quarter 

2003

3rd Quarter 

2003

4th Quarter 

2003 Totals

Passengers 12,545 14,480 13,663 10,491 54,247

Load Factor 73% 81% 78% 79% 78%
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 64 GAO-06-21 Small Community Air Service Program

brought in larger aircraft to serve those flights. In their final report to DOT, 

one community official told DOT that the service expansion would not 

have been possible without the DOT grant. An airline official told us that 

the grant was successful because even with the grant completed, Daytona 

Beach still has service to the New York area.

Fort Smith, Arkansas At the time of the grant application, Fort Smith was served by eight daily 

round-trips via American Eagle Airline to Dallas/Ft. Worth, Texas, and three 

daily round-trips by Northwest Airlink to Memphis, Tennessee. Airport 

officials noted in their grant application that they had inadequate service to 

the North and East at the time of the grant application. Furthermore, the 

grant application told DOT that business travelers in the region noted that 

excessive backtracking was a reason they did not use the Fort Smith 

airport for travel to markets in the North and East.

According to an airport official, the airport suffers traffic leakage to other 

airports. Fort Smith loses passengers primarily to Tulsa, Oklahoma (118 

miles), Oklahoma City, Oklahoma (183 miles), and to a lesser extent, Little 

Rock, Arkansas (159 miles). A local official estimated this leakage to be 

approximately 46,000 enplanements per year. 

To overcome this lack of service to the North and the East, Fort Smith 

proposed to obtain service to St. Louis, Missouri, or Chicago, Illinois. The 

community previously had service to St. Louis, but problems in the service 

resulted in its cancellation in 1999. The community believed that this lost 

service led business travelers in the area to use alternate airports to 

provide service to markets in the North and East. Thus, the community 

believed that initiation of service to St. Louis or Chicago would help answer 

this untapped demand. Additionally, the grant application stated that 

officials at Fort Smith needed to overcome other challenges to improve the 

airport, including:

• the general lack of understanding of the airline industry within the 

business community had created unrealistic expectations;

• business travelers were not fully considering the productivity losses 

sustained due to the use of other airports;

• the terrorist attacks of September 11, 2001, and the weak economy, had 

created uncertainty among potential travelers; and
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• a general community perception that local air service was limited and 

available fares were high.

Project Funded by Grant The June 26, 2002, grant agreement provided Fort Smith $108,520 and the 

local community provided $20,000. The application stated that the town 

would (1) develop an aggressive marketing campaign to illustrate 

advantages of flying from Fort Smith and associated productivity savings, 

(2) conduct market research and prepare professional presentations to 

prospective airlines and (3) utilize a public/private partnership to 

demonstrate market demand and community support for new service. Fort 

Smith allocated the grant funding in the following manner:

• Business Traveler Campaign-$51,700

• Leisure Traveler Campaign-$38,200

• Brochures and Direct Mail-$8,620

• Airline Presentations-$15,000

• Special Events-$10,000

• Promotional Materials-$5,000

Grant Outcome On October 7, 2002, American Connection began providing three daily 

round trips from Fort Smith to St. Louis. The service was initially provided 

with Jetstream 41 turboprop aircraft. Table 7 provides quarterly 

enplanements for this service. American Connection posted its strongest 

monthly performance with 1,144 enplanements in June 2003. 

Table 7: American Connection’s Quarterly Enplanement Numbers Fort Smith to St. 

Louis 

Source: Fort Smith Airport Commission.

Note: The American Connection service did not begin until the 4th quarter of 2002. The service ended 

1 month into the 4th quarter of 2003.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Totals

2002 2,641 2,641

2003 2,484 2,543 3,829 1,310 10,166
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At the end of the third quarter in July 2003, American Airlines announced 

its plans to downsize its St. Louis hub. Daily departures out of St. Louis 

were reduced from 417 to 207 on November 1, 2003. Additionally, 26 feeder 

cities, including Fort Smith, lost service to St. Louis as of November 1. An 

airline official stated that had American not downsized St. Louis, the 

service from Fort Smith to St. Louis would have continued if passenger 

levels remained the same. 

According to Fort Smith’s quarterly reports to DOT, an indirect benefit that 

Fort Smith has seen since the grant application is that American Airlines 

and Northwest Airlink have transitioned from turboprop service to a 

regional jet service. According to airport officials, passenger loads are high 

and the airport continues to gain seats they lost from the termination of the 

St. Louis service. Additionally, as shown in table 8, the community has seen 

an overall increase in passenger numbers from 2002 to 2004. 

Table 8: Quarterly Enplanements for Fort Smith, Arkansas 2002-2004

Source: Fort Smith Airport Commission.

Fort Smith officials stated that the money spent on marketing and studies 

helped their cause despite losing service to St. Louis. An official told us that 

the studies were helpful because they showed prospective airlines that they 

could fly profitably from Fort Smith. The official told us that due to the 

flight reductions at Chicago and St. Louis, the studies are important 

because local officials are now looking to acquire service to Detroit, 

Michigan via Northwest Airlines. Airport officials told us that Detroit can 

serve as an alternative to Chicago and St. Louis. A local official told us that 

Detroit will provide Fort Smith travelers access to the northeastern part of 

the country as well as Europe and Japan. Local officials told us that the 

studies performed under the grant put the airport in a position to talk with 

airlines about potential service to Detroit.

Hailey, Idaho At the time of grant application, Hailey’s Friedman Memorial Airport had 

scheduled commercial air service to Seattle/Tacoma, Washington, and Salt 

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Totals

2002 18,500 23,393 22,382 23,669 87,944

2003 19,737 23,839 24,004 22,913 90,493

2004 19,990 23,977 24,337 24,624 92,928
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Lake City, Utah. Seattle service was provided by de Havilland Dash 8 (37- 

seat) and Salt Lake service was provided by Embraer 120 (30 seat aircraft). 

Hailey’s application stated that it was a resort destination community with 

an economy dependent on tourism. It stated that Los Angeles, California, 

was the area’s number one market. The purpose of the grant request was to:

• provide air service improvements to stimulate air travel and reduce 

travel expense between Sun Valley2

 and Los Angeles;

• stimulate local economic activity by improving air service between Sun 

Valley and Los Angeles;

• improve air access from the Sun Valley region to key destinations in the 

western United States; and 

• improve air service to a rural region whose airport, Friedman Memorial 

Field, is significantly restricted by high altitude and mountainous 

terrain.

The grant application told DOT that the airport’s location does not allow for 

certain aircraft to be able to land at Friedman Memorial Airport. Elevation 

of the airport (5,300 ft.) and the length of its runway (6,600 ft.) present a 

challenge for the airport. The high altitude and short runway restrict the 

types of aircraft that can utilize the airport. During winter months, flights 

are sometimes diverted due to low visibility conditions. During the 

summer, flights are weight-restricted due to the higher density altitude 

caused by warmer temperatures. A community official told us that this 

difficult operating environment is a factor hampering air service.

Additionally, the grant application told DOT that the airport experiences 

leakage. Other airports used by potential Friedman passengers include 

Boise (154 miles), Magic Valley/Twin Falls (64 miles), Pocatello (150 miles), 

and Idaho Falls Regional Airport, Idaho (140 miles). Additionally, a local 

official told us that the expense of flying into Hailey is also a challenge. 

In order to increase its air service, the community proposed new service to 

Los Angeles. Horizon Airlines would provide daily round trip service from 

2

Friedman Memorial Airport is a nonhub airport located in Hailey, ID. The Airport serves the 

Sun Valley/Wood River Valley resort community and surrounding areas.
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Friedman Memorial Airport in Hailey to Los Angeles on 70-seat turboprops. 

Project Funded by Grant The June 26, 2002, grant agreement provided the City of Hailey $600,000. 

The community provided a local match of $271,743. The community 

allocated $644,344 of their money to cover a revenue shortfall for Horizon 

Airlines for a 12 month ramp up period. The community estimated that it 

would take up to 12 months for passenger projections to reach full 

maturity. An airport official told us that the grant allowed the airline to 

overcome the initial risk of operating a new route by providing a subsidy 

for the first year. 

Additionally, Hailey allocated $175,000 for marketing, including direct 

sales, direct mail, print advertising, internet marketing, and radio 

advertising. Marketing would be targeted to people living in the Los 

Angeles area that may be interested in visiting nearby Sun Valley and 

residents in the Sun Valley area that may be interested in travel to Los 

Angeles for business or personal reasons. 

Grant Outcome On December 15, 2002, Horizon Air commenced scheduled service from 

Hailey to Los Angeles via Horizon Air with one daily round trip until 

December 17, 2003. In the community’s final project report to DOT, it told 

DOT that the recreational nature of Hailey and the nearby Sun Valley 

market generated more traffic in the first and third quarters, versus the 

second and fourth quarters. The two higher seasons where more traffic 

occurred were in the winter and the summer months, which are peak 

tourist seasons in the area. In their final report to DOT, the community told 

DOT that Hailey’s projections for the first year had been 27,366 origin and 

destination passengers, which would lead to a 53.6 percent load factor. As 

shown in table 9, their actual passenger totals were 19,335 passengers and a 

41.5 percent load factor.

Table 9: Horizon Air’s Hailey to Los Angeles Passenger Totals with Revenue 

Guarantee

Source: Hailey, ID Final Report to DOT.

Period

12/15/02-

12/31/02

1st Quarter 

2003

2nd Quarter 

2003

3rd Quarter 

2003

4th Quarter 

2003 Totals

Passengers 1,373 5,388 3,568 6,902 2,104 19,335

Load Factor 63% 46% 29% 54% 28% 41%
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A local official in the final project report told DOT that the 70-seat de 

Havilland Dash 8-400Q is a large aircraft for the market, thus resulting in 

lower load factors. The official told DOT that the flight Horizon Airlines 

provides would be best served by a 50-seat aircraft. According to Hailey 

officials, there are no 50 seat regional jets that have the capability to serve 

the market, given the airport’s current limitations. 

In 2004, upon completion of the Small Community Air Service 

Development Program grant, Horizon Airlines stopped providing year 

round service to Hailey. Instead, the community contracted with Horizon to 

provide seasonal service between Hailey and Los Angeles. Additionally, 

with the grant completed, a local Hailey company provided Horizon 

Airlines a revenue guarantee to continue to fly the service into Hailey. The 

company official told us that the grant provided the company justification 

to promote air service in the community. The official’s goal is to make the 

service between Los Angeles and Hailey self-sufficient in 5 years so a 

revenue guarantee is no longer needed. In addition, a local official told us 

that the grant helped start new air service provided by Horizon Airlines 

between Oakland, California, and Hailey. 

A local official told us that the grant has reduced passenger leakage to 

Boise and Twin Falls, Idaho. However, a local official told us that one 

problem that the community still encounters is that flights are diverted to 

Twin Falls due to weather. An airport official told us that if a new 

instrument landing system were introduced, up to 30 percent of the flights 

that are now diverted could land in Hailey. Currently, under Hailey’s 

agreement with Horizon Airlines, the community pays for the costs of 

busing passengers from Twin Falls to Hailey when planes are diverted due 

to weather. An airline official told us that the grant definitely succeeded 

and met their expectations for being able to provide service between Hailey 

and Los Angeles for part of the year. 

Lynchburg, Virginia At the time of the grant application, Lynchburg had service to Atlanta, 

Georgia; Charlotte, North Carolina; and Philadelphia and Pittsburgh, 

Pennsylvania. The Atlanta service was provided by Atlantic Southeast 

Airlines/Delta Connection, and the Charlotte, Philadelphia, and Pittsburgh 

service was provided by US Airways/Air Midwest/Shuttle America. 

According to the April 19, 2002, grant application, Lynchburg had recently 

lost service from United Express/Atlantic Coast to Washington’s Dulles 

Airport. Furthermore, the community had experienced a recent overall 

decline in service at the time of the grant application. From April 1999 to 
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April 2002 the community had lost 580 weekly departing seats and 23 

weekly departing flights. 

According to the grant application, to fill its air service deficiency and 

recapture lost traffic, Lynchburg proposed an upgrade to small jet service 

from turboprop for service to Atlanta and Pittsburgh. Additionally, the 

community wanted an upgrade to a larger turboprop for service to 

Charlotte. According to the grant application, the objectives of the 

application were to:

• Establish additional service that will meet the needs of the region.

• Capture passengers from the service area that use other airports due to 

insufficient services.

• Build additional ridership at the airport as a result of offering service 

options that are competitive with those found at communities of 

comparable size.

• Strengthen the economic base of the region.

• Enhance levels of air service in Lynchburg.

Lynchburg noted in its grant application that it had higher airfares relative 

to other nearby airports in the region such as Newport News, Roanoke, and 

Charlottesville, Virginia. For example, in a study the community found that 

fares between Lynchburg and Los Angeles are 19.7 percent greater than 

from Roanoke (55 miles), 227.8 percent greater than Newport News (213 

miles), and 23.9 percent greater from Charlottesville (66 miles) based on 3- 

day advance purchase business fares. Overall, in the community’s grant 

application, only one market (Chicago O’Hare) in the five sample locations 

provided had a community that exceeded fares offered at Lynchburg.

In addition, the grant application stated that the airport suffered a great 

deal of passenger leakage to nearby airports. In the application, the 

community noted that a recent study concluded that 38.4 percent of the 

traffic generated by the population residing within Lynchburg’s catchment 

area travel to other airports was due to lower fares and wider availability of 

air service. It was estimated that 9 percent of the traffic was leaking to 

Roanoke (55 miles) and 13 percent to Raleigh/Durham, North Carolina (180 

miles), to utilize low fare air service. Six other nearby airports also 

accounted for approximately 17 percent leakage out of the community, 
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according to the application. The community told DOT in its application 

that some of this leakage could not be recaptured due to low fare service at 

Raleigh/Durham. However, the community also told DOT that much of the 

lost traffic was due to consumer preference for larger and more 

comfortable aircraft. 

Project Funded by Grant The June 26, 2002, grant agreement provided Lynchburg $500,000, while the 

local community provided $100,000 in matching funds for a total of 

$600,000. Lynchburg allocated $475,000 of the program for a 12-month 

revenue guarantee for Delta upgrading to small jet aircraft (32 seats or 

greater). The remaining $125,000 was used for advertising and marketing 

for the airport’s newly upgraded service. This sum included payments for 

consulting services to negotiate with the target carrier and marketing 

efforts after the recruitment to the benefit of both the new carrier and 

incumbents as well. 

Grant Outcome Lynchburg Airport and Delta negotiated a revenue guarantee to upgrade 

their Lynchburg to Atlanta service from 30-seat turboprops to 40-seat 

regional jets beginning on May 4, 2003. The service provides three 

roundtrips a day between Lynchburg and Atlanta, and helped increase 

Delta’s passenger capacity in this market by 25 percent. Additionally, on 

May 2, 2004, US Airways upgraded its Lynchburg to Charlotte service from 

19 seat turboprops to 37-seat Dash-8 turboprops. This upgrade in service 

was provided without a revenue guarantee from Lynchburg. In a quarterly 

progress report to DOT, an airport official told DOT that US Airways had 

upgraded its service partly due to the success of the new Delta jet service. 

The Charlotte service provides the airport six daily departures. In total, 

upgraded US Airways and Delta flights provided Lynchburg with nine daily 

departures and 342 passenger seats. 

Lynchburg has, however, lost air service from US Airways to Pittsburgh and 

Philadelphia since the 2002 grant application. An airport official told us that 

the service was lost due to the economic problems facing major airlines, a 

general unwillingness for people to fly after September 11, and US Airways 

reducing its operations in Philadelphia.

Despite this loss in service, Lynchburg’s enplanements have risen since 

2002. (See table 10.) Additionally, total passenger traffic has increased from 

100,274 in 2002 to 120,174 in 2004. The airport in their final project report to 

the DOT credits this increase in traffic to the upgrade in jet service, 

lowering of fares at the airport, and increased service at the airport. 
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Table 10: Quarterly Enplaned Passengers for Lynchburg, Virginia for 2002-2004

Source: Lynchburg, VA, Airport.

An airport official told us that the program was a success because it 

resulted in an additional three sustainable jet flights daily. Additionally, 

Delta Air Lines on April 5, 2004, deemed the upgraded jet service a success 

and agreed to continue providing the service without a revenue guarantee 

after the Small Community Air Service Development Program revenue 

guarantee ended in May 2004. 

Furthermore, the community’s final report to DOT noted that the airport 

has seen an increase in enplanements and a decrease in leakage. The 

community told DOT that this has occurred due to the upgrade in jet 

service and a lowering of fares at the airport. The community still has the 

same amount of weekly departures as before the grant, but the upgrade in 

jet service has led to more available passenger seats for the community 

than in January 2002. Despite this increase in passenger seats, airlines at 

Lynchburg airlines’ load factors have risen since the 2002 grant application.

Mobile, Alabama At the time of the grant application, Mobile was served by Delta Air Lines, 

US Airways Express, Continental Express, and Northwest Airlink. These 

four airlines provided Mobile service to Atlanta, Georgia; Dallas/Fort 

Worth, Texas; Charlotte, North Carolina; Houston, Texas; and Memphis, 

Tennessee. In previous years, however, Mobile had experienced a decline in 

air service. Between 1996 and 2002, six airlines cancelled service on seven 

routes. According to the grant application, since September 2001, the 

community had lost service to Chicago, Illinois; Cincinnati, Ohio; 

Birmingham, Alabama; and Washington, D.C. Furthermore, since July 2001, 

the community has gone from 28 daily departures to 20, and has declined 

from 10 nonstop cities to 5. 

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Totals

2002 11,132 13,820 12,263 12,676 49,891

2003 9,984 11,367 12,194 14,649 48,194

2004 12,434 16,012 15,278 16,763 60,487
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According to the grant application, fares had been a long-standing problem 

for Mobile. Mobile stated that it had paid up to 40 percent higher average 

fares than counterparts since 1995. These higher fares had led Mobile 

passengers to drive to nearby airports such as Pensacola, Florida (60 

miles), Gulfport, Mississippi (70 miles), and New Orleans, Louisiana (150 

miles) to access lower fares or direct service.

To obtain additional service, Mobile proposed to develop an airport-airline 

business model to enable more profitable air service at the airport. Under 

the model, Mobile Airport Authority would own and operate the airline 

ground stations, charging the airline on a per turn (one arrival and 

subsequent departure) basis for its use of equipment and staff. The airline 

station staff would be airport employees, and the airport would provide all 

the equipment required to handle ground operations. An airport official 

told us that the community believed that this initiative would help airlines 

with their high start up costs in a market. If several airlines serve the 

airport, the program can reduce cost and inefficiency by not having to 

duplicate staff, equipment, and operations. In addition to developing the 

airport-airline business model, the goals of the grant according to the grant 

application were to:

• recruit new service from US Airways Express; additional frequencies to 

Charlotte and new service to selected US Airways cities; and

• recruit nonstop service to target cities of New York, Orlando, Chicago, 

and Birmingham.

At the time of the application, the Mobile Airport Authority had already 

established the new airport-airline program for US Airways. Responding to 

an announcement that US Airways would completely withdraw from 

Mobile after September 11, 2001, the Airport Authority hired 10 former 

station employees and took over handling ground operations for US 

Airways. In turn, US Airways maintained one local employee and kept open 

some service. The goal of the program was to use the business model to 

prevent other airlines from pulling out of the market or to recruit carriers 

into the market.

Project Funded by Grant The June 26, 2002, grant agreement provided Mobile $456,137 for the 

airport-airline business model, and the city of Mobile contributed $20,000 

toward the project for a total of $476,137. The grant allowed Mobile to 

allocate $144,645 to purchase appropriate ground handling and office 

equipment to continue to operate the existing station. The equipment they 
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were utilizing at the time for US Airways was on loan from a previous 

tenant. In addition, $311,492 of the program was allocated as funding for 

direct operating expenses for personnel, supplies, and maintenance for the 

existing station for 1 year of operation. The remaining $20,000 was 

allocated toward marketing support for any new service that participated 

in the new airport-airline program. 

Grant Outcome Mobile successfully retained US Airways service to Charlotte. An airline 

official told us before the grant that the Mobile to Charlotte service was not 

performing as well as expected, and that the airline was planning to leave 

the market. The airline official told us that much of the problem was due to 

US Airways staff not being used efficiently. This was due to US Airways 

having a limited number of flights, which led to high ground station costs 

per flight. The airline official told us that the Small Community Air Service 

Development Program grant for US Airways was enough of a cost savings 

to keep them in the market. 

Currently, there are eight Airport Authority staff allocated to the program. 

The staff is put through a training program sponsored and paid for by US 

Airways, with the exception of lodging and food which is paid for by the 

airport. One airport official told us that they were not sure how much they 

were saving US Airways, but US Airways continues to provide Mobile air 

service. After the training takes place, the staffing initiative is administered 

and funded by the airport. There are no local taxes or funding supporting 

the program. 

Additionally, Mobile officials told us that station cost program was 

successful in securing new service from American Airlines. On April 11, 

2005, Mobile announced that American Airlines would operate two daily 

round-trip flights between Mobile and Dallas/Ft. Worth, Texas, beginning 

June 9, 2005, using 44-seat Embraer ERJ-140 jets. An airport official told us 

that Mobile’s station cost program was the reason for American’s decision. 

The airport official convinced American that Mobile was prepared to take 

over ground station costs until the airline made a profit with its new 

service. 

US Airways and American Airlines are the only airlines in Mobile to utilize 

the airport’s station cost offer so far. Airport officials told us that they have 

offered the ground station program to other air carriers serving Mobile, but 

none of the carriers expressed interest in the program. An airport official 

told us that the program would not work as well for incumbent airlines 

because ground staff would likely lose their jobs. If other carriers chose to 
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participate, the Authority would probably not need to hire all airline staff. 

The authority would economize the operations with the staff that they 

already have employed and increase staff as needed. However, an airport 

official told us that it would work well for airlines like US Airways that are 

planning to pull out of the market, and for smaller carriers coming into the 

market where the start-up costs are prohibitive. 

Reading, Pennsylvania At the time of the grant application, Reading was served by US Airways 

with two daily flights to Philadelphia, Pennsylvania, and four daily flights to 

Pittsburgh, Pennsylvania. The community noted that lack of other air 

service and the fares at the airport caused 91 percent of Reading’s ticketed 

passengers to leak to nearby airports. Additionally, at the time of the grant 

application, the airport enplanement numbers were half of the volume 

generated in 1989. 

In the community’s grant application, Reading indicated that they have 

attempted to have talks with US Airways regarding service improvements 

and with additional carriers about providing service to Reading. The 

community told DOT that they had discussions with US Airways to return 

service to pre-September 11 levels. Additionally, they had discussions with 

Delta Air Lines for new service to Atlanta, Georgia, or Cincinnati, Ohio; Air 

Tran for service to Atlanta, Georgia, and Florida; and Northwest Airlink for 

service to Detroit, Michigan. 

Reading’s 2002 application desired to (1) implement a marketing campaign 

to raise awareness of flying from Reading, (2) retain a marketing and air 

service consultant to develop and manage the airport’s local advertising 

campaign, and (3) develop the Reading Connection to provide regularly 

scheduled bus service to Philadelphia to demonstrate the demand for air 

service that has been reduced. 

Project Funded by Grant The June 26, 2002, grant agreement provided Reading $470,000 for the total 

project and Reading added a local match of $30,000. Reading allocated 

$300,000 to subsidize the Reading Connection bus service, $50,000 towards 

general airport advertising, $50,000 for consultant services, and $70,000 

toward advertising and promotion of new carrier services at the airport. 

The Reading Connection was a bus service between Reading and 

Philadelphia that was intended to demonstrate demand to airlines that 

there was a need for increased air service at Reading. General airport 

advertising included radio promotions, print advertising, press releases, 
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direct mail pieces, email newsletters, and website development. The 

consultant services were used to retain a marketing and air service 

development consultant to manage the airport’s local advertising, public 

relations, and community outreach programs. The advertising and 

promotion component would be used to aggressively market a new 

carrier’s entrance into the Reading market. Elements of the program 

included: billboards, radio, print, direct mail, and community receptions. 

Grant Outcome Reading Airport lost all commercial air service as of September 2004. The 

community lost service to Philadelphia and Pittsburgh via US Airways and 

was unable to recruit new additional service. A local official told us that US 

Airways stopped serving Reading because they felt the bus service would 

be in direct competition with the airline. Additionally, the official told us 

that Reading’s proximity to nearby airports in Philadelphia, Allentown, and 

Harrisburg, Pennsylvania, made Reading a low priority for air service in 

Pennsylvania. 

According to a local official, the Reading Connection’s bus service operated 

until the subsidy provided by Small Community Air Service Development 

Program was completed.3

 After the grant, the service could not be 

sustained on its own, and the service ended. However, a local entrepreneur 

has since started the service again without subsidy and provides five round 

trips daily between Reading and Philadelphia. According to a local official, 

although the grant did not work the first time, the name recognition that 

the original grant provided has led to the demand for the bus service now. 

Scottsbluff, Nebraska At the time of the grant application, Scottsbluff was served by Great Lakes 

Airlines with three daily round trip flights to Denver, Colorado. The 

community told DOT that for travelers that travel to Lincoln or Omaha, 

Nebraska the connections and fares were poor through Denver. A local 

official told us that the 450 miles from Scottsbluff to Omaha could be 

driven faster than flying to Denver and waiting several hours for a 

connecting flight to Omaha. 

Additionally, a local official told us that people in western Nebraska feel 

separated from the rest of the state. In the grant application, the 

3

Reading did not ask DOT for the final $106,000 of the grant and did not file a final report. In 

September 2005 DOT informed Reading that it had de-obligated the funds.
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community noted that the lack of intrastate service hinders government 

entities, businesses, educational institutions, and individuals traveling for 

personal reasons. Thus, Scottsbluff in its 2002 grant application proposed 

to support the development of an intra-state air service, provided by 

Westward Airways, linking eastern and western Nebraska. Scottsbluff 

previously had similar intra-state service, but operations ceased in 

November 1995 when the carrier declared bankruptcy. This previous 

service had been provided under the Essential Air Service program. An 

airport official told us that there is no direct competition for the Westward 

Airways intra-state service. 

Project Funded by Grant The June 26, 2002, grant agreement provided Scottsbluff $950,000 for the 

project, and the local community provided $750,000 in funding for a total of 

$1,700,000. Westward Airways in conjunction with Scottsbluff provided the 

intra-state service. The grant allocated $867,893 to be used to fund preoperating expenses. These expenses included all the costs the company 

anticipated during the 6 month pre-operating period. Examples of these 

expenses include administrative and flight operations personnel wages and 

benefits, personnel training, professional fees, facility rent and insurance, 

and aircraft acquisition. The remaining $832,107 was allocated to fulfill the 

company’s working capital requirement. Working capital requirements 

included funds for cash flow operations and forecasted growth phases. 

Grant Outcome Westward Airways commenced their Nebraska intra-state service in June 

2004 and ceased operations in July 2005. The service consisted of two daily 

weekday roundtrips that stop in Scottsbluff, North Platte, Lincoln, and 

Omaha, Nebraska. All Westward Airways flights in Nebraska were 

conducted on the Pilatus PC-12 aircraft, a pressurized aircraft capable of 

300 miles per hour cruising speeds at altitudes up to 30,000 feet. As shown 

in table 11, Scottsbluff service had 234 passengers in April 2005. 

Table 11: Scottsbluff Total Enplanements June 2004-April 2005

Source: Scottsbluff County, Nebraska.

June 

2004

July 

2004

Aug. 

2004

Sept. 

2004

Oct. 

2004

Nov. 

2004

Dec. 

2004

Jan. 

2005

Feb. 

2005

Mar. 

2005

Apr. 

2005

Scottsbluff Total Passenger 

Enplanements 1041 997 1151 1145 1248 1108 1099 852 791 945 891

Westward Airways Scottsbluff 

Passenger Enplanements 149 130 143 166 205 173 177 138 152 215 234
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Air Service Development Program Grants

Page 78 GAO-06-21 Small Community Air Service Program

Note: Westward Airways started service in Scottsbluff, Nebraska on June 1, 2004.

Westward Airways intra-state service added 10 weekly flights from 

Scottsbluff, increasing the airport’s weekly departures from 18 to 28. The 

community in its final report to the DOT stated that the program increased 

enplanements and reduced passenger leakage at the airport. However, the 

final project report said that initial passenger enplanements were not as 

robust as expected. It noted that the market had taken longer to develop 

because travelers are extremely price sensitive. In July 2005 Westward 

Airways had financial difficulties and ceased operations. 

Figure 9: Westward Airways Pilatus PC-12 Aircraft

Somerset, Kentucky At the time of the grant application, Somerset did not have commercial air 

service. Passengers in the region travel to Lexington, Kentucky (80 miles), 

Louisville, Kentucky (130 miles), and Cincinnati, Ohio (150 miles) to utilize 

commercial air service. According to the grant application, because 

Somerset is not located on the interstate highway system, access to these 

nearby commercial airports is more difficult.

Source: GAO.
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 79 GAO-06-21 Small Community Air Service Program

The community told DOT in the grant application that the lack of 

commercial air service in the region limits the community’s ability to 

attract additional industry and recreational travelers. In the grant 

application, Somerset noted that the nearest airport at Lexington offered 

only a modest amount of nonstop service at a relatively high average fare. 

Thus, the community noted that an air traveler wanting to go to or from the 

Somerset region was faced with the alternative of driving a considerable 

distance and paying high prices for air travel. The community noted that 

these factors tended to constrain air travel demand and the economic 

development of the Somerset region.

As a result, Somerset in association with the counties of Casey, McCreary, 

Pulaski, Russell, and Wayne proposed to conduct a feasibility study to 

determine the potential for commercial air service for the Somerset-Pulaski 

County Airport. If feasible, the study would also identify a mechanism to 

implement an appropriate level of service. The objectives of the application 

included:

• identifying the level of demand under different operating scenariosoperators, equipment, frequencies, destinations, and fares;

• preparing materials for presentation to potential carriers; and

• contacting potential carriers to determine implementation needs.

Project Funded by Grant The grant provided Somerset with $95,000 and the community provided a 

local contribution of $18,000. The grant was used to complete a feasibility 

study for commercial air services in the region and also provided the 

community with funds to solicit potential airlines. Specifically the study 

goals were to look at (1) potential travel demand for the airport, (2) 

development of proposed operating scenarios, (3) economics of operating 

scenarios, (4) identification of potential operators, and (5) development of 

Somerset-Pulaski County air service marketing plan.

According to the grant application, the potential demand projections would 

allow Somerset to estimate demand if air service was available to the 

region. The development of proposed operating scenarios would help 

determine possible service options, scheduling, and selection of 

appropriate aircraft. The economics of operating scenarios would 

determine potential operating scenarios of location and aircraft and rank 

them accordingly based on their economic potential. Identification of 

potential operators would place emphasis on air carriers with the 
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 80 GAO-06-21 Small Community Air Service Program

appropriate equipment to serve the Somerset market. Lastly, a marketing 

plan would be developed to include identifying future budgetary needs.

Grant Outcome Somerset developed an air service development plan study to document 

the air service needs of the community. A local official told us that the 

community learned from the development plan that they can support new 

air service. The community is currently attempting to attract commuter air 

service to help with tourism, to attain more industry, and for better jobs. 

According to the local official the air service development plan has led to 

initial talks with airlines with regard to providing service to Somerset.4

Community officials told us that they predict people using the airport 

would be interested in saving time and money by flying out of Somerset. 

The community’s feasibility study found that 30 percent of businesses in 

the Somerset area stated that good air transportation access is important or 

very important for business expansion. For recreation, one local official 

told us that the community attracts six to seven million tourists per year, 

and that the number could increase if commercial air service were 

provided. 

Community officials told us that they believe that given the drive time and 

costs, such as gas and parking fees at other airports, passengers will utilize 

Somerset’s airport. However, one local official told us that to see the new 

service succeed the community must support it and market it extensively. 

For example, this official suggested that local businesses could tell their 

employees to fly the routes served by Somerset to keep the load factors 

high.

Furthermore, community leaders told us that the study has had indirect 

benefits as well. The study has spurred spin-off improvements at the 

airport and community, including new lights at the airport, a new 

Instrument Landing System and a new inter-modal transportation park. 

Additionally, the community is in the process of building a new $2 million 

terminal at the airport, and are adding $1.5 million in airport infrastructure. 

4

In 2005, DOT awarded Somerset a second grant for a revenue guarantee to support air 

service between Somerset and Cincinnati.
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 81 GAO-06-21 Small Community Air Service Program

Taos, New Mexico Taos had scheduled commercial air service at the time of the grant 

application via Rio Grande Air to Albuquerque, New Mexico. The service, 

provided on 9-seat Cessna Caravans, began in August 1999 with scheduled 

service between Taos, Los Alamos, and Albuquerque, New Mexico. In 

January 2000, the state helped supplement this service when they awarded 

a grant of $100,000 which was matched by the Town of Taos, the Village of 

Taos Ski Valley, and the county of Los Alamos. In October 2001, the state 

awarded a grant of $190,000 to help fund service between Taos, Ruidoso, 

and Albuquerque, New Mexico. Taos provided $25,000 in matching funds, 

the Village of Taos ski valley provided $25,000, and Ruidoso provided 

$150,000. In 2002, Taos and Ruidoso jointly applied for a Small Community 

Air Service Development Program grant. The primary objective of the grant 

was to fund Rio Grande’s service to Albuquerque. Ruidoso eventually 

decided to withdraw from the grant due to their desire to obtain service to 

El Paso, Texas. 

According to an airport official, the elevation of the Taos airport (7,091 ft.) 

and the length of the runway (5,800 ft.) pose landing problems for aircraft: 

the runway is too short and narrow to land many types of airplanes. He told 

us that if the runway situation improved they would try to get larger aircraft 

to serve Taos. At the time of the grant application, the community noted 

that there is a reluctance of some travelers to fly on small aircraft that serve 

Taos. Along with reluctance to fly small aircraft, the application noted that 

capturing local passengers that drive to Albuquerque is a problem. The 

community noted in its grant application that many travelers and travel 

agents in other markets were not aware of Rio Grande Air. Additionally, the 

community described the air service at the time of the grant application 

provided by Rio Grande as fragile due to its relative newness. 

The goals of the grant application were to:

• fortify Taos’ air service,

• expand advertising and promotion to solidify support for the service, 

• create a self sustaining air service for Taos’ mountain resort 

communities, and

• provide a link to new air service through ground transportation 

connections and other communities of the Taos/Enchanted Circle 

region.
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 82 GAO-06-21 Small Community Air Service Program

The application sought funds to continue service by Rio Grande Air to 

Albuquerque at the time of the grant. At the time of the grant application, 

the service was only 2 years old and the community considered it fragile. 

Project Funded by Grant The June 26, 2002, grant agreement provided Taos with $500,000. The Town 

of Taos, Taos Ski Valley Incorporated, and Taos Aviation Services provided 

$200,000. The State of New Mexico provided another $200,000 in state 

funding for the project, bringing the overall project total to $900,000. 

The application allocated $634,423 of the program’s cost to cover a revenue 

guarantee for Rio Grande Airways during the initial phases of service. In 

addition, the application allocated the Town of Taos $265,577 for 

advertising and promotion of the continuing service. The advertising and 

promotion component includes billboards, newspapers, magazines, 

television, and radio advertisements. The advertising and promotion 

program was used to target the drive market visitor, business travelers, and 

in-state tourists.

Grant Outcome Rio Grande continued to provide service to Albuquerque until June 2004. At 

that time, the service was discontinued because the airline went bankrupt. 

An airline official from Rio Grande Airline told us that the support from the 

community had not sustained after the Small Community Air Service 

Development Program funding was completed. He also told us that there 

were many setbacks that the grant could not control, such as a tremendous 

drought in the region leading to a weak ski season, a major forest fire that 

caused a drop in enplanements and a drop in the overall economy after 

September 11. Additionally, the Rio Grande official told us that the airline 

needed more planes to improve their economies of scale to support itself. 

The official also told us that an airline cannot succeed if all the overhead 

costs have to be applied to just two aircraft, since the aircraft become too 

expensive to operate.

However, the Rio Grande official told us that the service, when operating, 

helped build enplanements and a steady growth in passengers for Taos. An 

airport official told us that the project was a success because the 

community had a taste of air service and that there is now a demand for 

service from Taos to Albuquerque. Table 12 shows the passenger traffic for 

Rio Grande Airways from the 2002 grant application year through May 

2004. 
Appendix V

Summary of 10 Completed Small Community 

Air Service Development Program Grants

Page 83 GAO-06-21 Small Community Air Service Program

Table 12: Rio Grande Airways Total Passengers (Arrivals and Departures) from Taos 

from 2002 Grant Application to 2004 Termination of Service

Source: Taos Airport.

Notes: Taos agreed to the Small Community Air Service grant in June 2002.

Includes total passengers through May 2004, the service was terminated in June 2004. 

In 2003, Taos and a consortium of New Mexico communities received 

another Small Community Air Service Development grant. The grant 

provided intrastate service for Gallup, Taos, and Las Cruces, New Mexico. 

The new service began in December 2004 and was provided by Westward 

Airways. However the service was discontinued in July 2005 when 

Westward Airways filed for bankruptcy.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

2002 1,429 1,169 1,432 1,283

2003 1,494 1,242 1,768 1,653

2004 1,974 1,046
Page 84 GAO-06-21 Small Community Air Service Program

Appendix VI

GAO Contact and Staff Acknowledgments ApendxiVI

GAO Contact Gerald L. Dillingham, (202) 512-2834 or dillinghamg@gao.gov

Staff 

Acknowledgments

In addition to the individual named above, other key contributors to this 

report were Glen Trochelman, Assistant Director and Robert Ciszewski, 

Catherine Hurley, Stuart Kaufman, Alexander Lawrence, Bonnie Pignatiello 

Leer, Maureen Luna-Long, and Nitin Rao.

(540093)
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