COMMERCIAL AVIATION

Status of Air Service to 

Small Communities and the 

Federal Programs Involved

Statement of Gerald L. Dillingham, Ph.D.

Director, Physical Infrastructure Issues

Testimony 

Before the Subcommittee on Aviation, 

Committee on Transportation and 

Infrastructure, House of 

Representatives

For Release on Delivery 

Expected at 10 a.m. ET

Wednesday, April 30, 2014

GAO-14-454T

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-454T, a testimony 

before the Subcommittee on Aviation, 

Committee on Transportation and 

Infrastructure, House of Representatives

April 30, 2014

COMMERCIAL AVIATION

Status of Air Service to Small Communities and the 

Federal Programs Involved

Why GAO Did This Study

Establishing and retaining reliable air 

service to small communities has 

been a challenge for decades.

Communities seek access to air 

transportation services as a driver for 

attracting investment and generating 

employment. To incentivize service, 

Congress established two programs 

to help support air service to small 

communities—EAS and SCASDP. 

Airports are categorized by DOT’s 

Federal Aviation Administration and 

described in terms of “hub” size 

based on the number of passengers

served annually. Airports range from 

large hubs with at least 7.3 million 

passengers in 2012 to nonprimary 

airports with fewer than 10,000 

passengers. Airports receiving 

subsidized EAS service are either 

nonhub or nonprimary, and SCASDP 

airports are small hub or smaller.

This testimony discusses (1) the 

airline industry factors affecting air 

service to small communities, (2) the 

federal programs and policies that 

support air service to small 

communities, and (3) other options 

for improving access to air service 

for these communities. The 

testimony is based on previous GAO 

reports issued from 2003 through 

2014; analysis of industry data for 

years 2007 through 2013; and 

selected updates on EAS and 

SCASDP programs. To conduct 

these updates, GAO reviewed 

program documentation and 

interviewed DOT officials and 

industry representatives.

What GAO Found

Air service to small communities has declined since 2007 due, in part, to higher 

fuel costs and declining population, and for some communities, compounded by 

more attractive service (i.e., larger airports in larger cities) within driving distance. 

In fact, airports of all sizes have lost capacity in the number of available seats, 

and largely for flights as well. However, medium-hub and small-hub airports have 

proportionally lost more service than large-hub or nonhub airports (see figure).

Percentage Change in Number of Flights and Seats, by Airport Category, 2007-2013

The two primary programs, designed to help small communities retain air service, 

administered by the Department of Transportation (DOT), face challenges.

• The Essential Air Service (EAS) program, which received about $232 million

in 2013, provided subsidies to airlines that served 117 eligible non-Alaskan 

communities in 2013. For the most part, only airports in eligible communities 

that received EAS-subsidized service have experienced an increased 

number of flights since 2007. However, the service may not always be the 

most cost-effective option for connecting people to the national transportation 

network, and the total and per-community EAS subsidies have grown since 

2008. Legislation to control costs was recently enacted which limited access 

to EAS, for example by changing eligibility requirements.

• The Small Community Air Service Development Program (SCASDP) is a 

grant program to help small communities enhance air service at small-hub or 

smaller airports. DOT can award no more than 40 grants a year, thus 

SCASDP assists fewer communities than does EAS. Further, unlike EAS, 

funding for SCASDP—$6 million in 2013—has decreased since the program

was created in 2002. Past reviews of SCASDP’s effectiveness have found 

mixed success, with about half or less of the grants achieving their goals.

Multimodal and community-based approaches can be used to help small 

communities connect to the nation’s transportation network. Multimodal solutions, 

such as bus access to larger airports or air taxi service, could be more costeffective than current programs. In addition, some communities have had 

success with attracting air service through methods such as financial incentives 

and marketing support.

View GAO-14-454T. For more information, 

contact Gerald L. Dillingham, Ph.D., (202) 

512-2834, dillinghamg@gao.gov.
Page 1 GAO-14-454T 

Chairman LoBiondo, Ranking Member Larsen, and Members of the 

Subcommittee:

I appreciate the opportunity to testify before you today on the status of air 

service to small communities in the United States and the current issues 

affecting this service. Communities of all sizes seek access to air 

transportation services as a driver for attracting investment and 

generating employment and providing mobility for citizens. However, the 

economics of the airline industry has traditionally made it difficult to 

establish or sustain viable air service in smaller communities.

Many small communities have struggled with limited air service since 

Congress deregulated commercial air service in 1978 to allow a 

competitive market for passenger air service to develop.1 Since 

deregulation, airlines have largely been free to decide where in the United 

States they want to operate, how often they want to fly there, the type of 

aircraft, and how much they want to charge. Small and rural communities 

have found it difficult to retain and enhance their air service. Anticipating 

this difficulty, Congress created the Essential Air Service (EAS) in 1978 

and, later in 2002, the Small Community Air Service Development 

Program (SCASDP)2

—both under the U.S. Department of Transportation 

(DOT)—to help small communities maintain air service.3

This testimony discusses (1) the airline industry factors affecting air 

service to small communities, (2) the federal programs and policies that 

support air service to small communities, and (3) other options for 

Since 2000, the 

overall aviation industry has experienced significant turmoil—including the 

two economic downturns, the terrorist events of September 11, 2001, and 

rising fuel costs—which has curtailed passenger demand and led to 

numerous bankruptcies and restructurings. Although airline profitability 

has rebounded over the last 4 years, fundamental changes in the industry 

have added to small communities’ challenges in retaining or enhancing 

their air service.

 1

Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 (1978). Cargo air 

service was deregulated the year before. Pub. L. No. 95-163, 91 Stat. 1278 (1977).

2

Pub. L. No. 106-181, § 203, 114 Stat. 61, 92 (2000).

3

No common definition exists for what constitutes a small community, however, for 

SCASDP eligibility pursuant to criteria in federal statute, it is an airport serving a 

community which is not larger than a small-hub airport. 49 U.S.C. § 41743.
Page 2 GAO-14-454T 

improving access to air service for these communities. This statement is 

drawn from several GAO reports issued since 2003, as well as additional 

government, industry, and academic reports related to this topic. We have 

updated the information related to our previous work on the EAS and 

SCASDP programs through (1) a review of DOT’s documents and 

interviews with appropriate DOT officials within the Office of Secretary of 

Transportation (OST), (2) analysis of passenger enplanement and DOT’s 

airline activity data for the period 2007 through 2013, and (3) interviews 

with relevant industry stakeholder groups. Related GAO products are 

footnoted throughout the statement. The reports and testimonies cited in 

this statement contain more detailed explanations of the methods used to 

conduct our work. DOT reviewed a draft of this statement and provided 

technical comments, which we incorporated where appropriate.

The work upon which this testimony is based was conducted in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Air service in the United States is highly concentrated, with 88 percent of 

all passenger boardings at the 62 large- or medium-hub airports (see fig. 

1). Small airports refer to small-hub, nonhub, and commercial-service 

nonprimary airports, each with less than 0.25 percent of all annual 

passenger boardings, or less than 1.8 million total boardings in 2012.4

 4

The Bureau of Transportation Statistics also compiles a list of rural airports annually for 

the Department of the Treasury’s Internal Revenue Service. This list is used by airlines to 

assist in establishing airfares. The rural airports designation originated with The Taxpayer 

Relief Act of 1997 (Pub. L. No. 105-34, § 1031(c), 111 Stat. 788, 929 (1997)). The Internal 

Revenue Service defines a Rural Airport as any airport that has fewer than 100,000 

commercial passengers departing from the airport by air during the second preceding 

calendar year and at least one of the following is true: (1)The airport is not located within 

75 miles of another airport from which 100,000 or more commercial passengers departed 

during the second preceding calendar year, or (2) the airport was receiving essential air 

service subsidies as of August 5, 1997, or (3) the airport is not connected by paved roads 

to another airport, and (4) had fewer than 100,000 commercial air passengers on flight 

segments of at least 100 miles during the second preceding calendar year. IRC § 

4261(e)(1)(B).

Many small communities across the United States have access to the 

Background
Page 3 GAO-14-454T 

more than 450 small airports with scheduled passenger service, provided 

mostly by regional airlines that are under contract with mainline network 

airlines, like Delta Air Lines or United Airlines.5 The airport categories in 

figure 1 also determine the allocation of Airport Improvement Program 

(AIP) grants for airport capital improvements.6 FAA awarded nearly $3 

billion in grants to all airports in fiscal year 2013, for safety, capacity, and 

environmental capital improvements. The grants offset the fees that 

airports charge users, so they are critical for small airports hoping to 

retain or attract airport users. For example, any airport with at least 

10,000 passengers is assured at least $1 million in annual grant funding.7

Figure 1: Airport Categories Based on 2012 Boardings

Note: The term “hub” is defined in federal law to identify commercial service airports as measured by 

passenger boardings, and the airports are grouped into four categories (49 U.S.C. § 47102). Most of 

the remaining commercial airports that qualify for federal funding are commercial service nonprimary 

airports, such as the Mid Delta Regional Airport in Greenville, Mississippi, and Cape Girardeau 

Regional Airport in Scott City, Missouri.

 5

Regional airlines provide domestic and limited international passenger service, generally 

using aircraft with fewer than 90 seats, and cargo service to smaller airports.

6

AIP is a federal grant program funded from the Airport and Airway Trust Fund, which 

receives revenue from various aviation-related taxes.

7

49 U.S.C. § 47114(c)(1)(b).
Page 4 GAO-14-454T 

The EAS program has historically provided the most direct support to 

small community air service. Anticipating that airlines would focus their 

resources on generally more profitable, high-density routes, Congress 

established the EAS program as part of the Airline Deregulation Act of 

1978. Under the EAS program, if an airline cannot provide air service to 

eligible communities without incurring a loss, DOT provides an airline a 

subsidy to serve those communities.8 The program was initially enacted 

for 10 years, it was then extended for another 10 years, and in 1996, the 

10-year time limit was removed. Congress has, over time, revised 

eligibility requirements, such as maximum subsidy amounts per 

passenger, and operating requirements, such as providing service with 

two-engine, two-pilot planes. The program now provides subsidies to 

airlines to serve small airports that are (1) at least 70 driving miles from 

the nearest medium- or large-hub airport, or (2) requires a per-passenger 

EAS subsidy less than $200 unless such point is greater than 210 miles 

from the nearest medium- or large-hub airport.

9 The amount of subsidies 

varies by location. Operating airlines receiving the subsidies must provide 

direct service to a nearby medium- or large-hub airport so that 

passengers can connect to the national air transportation network.10 Our 

discussion of EAS in this testimony does not include communities in 

Alaska receiving EAS-subsidized air service since the requirements for 

communities in Alaska are different and are not representative of the 

program in the rest of the country.11

Congress also established SCASDP as a pilot program in 2000 in the 

Wendell H. Ford Aviation Investment and Reform Act for the 21st Century 

(AIR-21),12

 8

EAS-eligible communities are currently in 35 states and Puerto Rico.

to help small communities enhance their air service. AIR-21 

9

Communities located more than 210 miles from the nearest medium- or large-hub 

community airport are exempt from this $200-per-passenger subsidy limit.

10The governing statutes require DOT to consider five general selection criteria for 

airlines: (1) service reliability; (2) contractual and marketing arrangements with a larger 

airline at the hub; (3) interline arrangements with a larger airline at the hub; (4) community 

views as to which airline and option they prefer; and (5) whether the airline has included a 

plan in its proposal to market its services to the community. 49 U.S.C. § 41733(c)(1).

11For example, under EAS requirements for communities in Alaska, airlines may use 

smaller aircraft. Also, eligibility requirements differ for such things as amount of subsidy 

per passenger or distance from nearest large- or medium-hub airport.

12Pub. L. No. 106-181, § 203, 114 Stat. 61, 92 (2000).
Page 5 GAO-14-454T 

authorized the program for fiscal years 2002 and 2003, and subsequent 

legislation reauthorized the program through fiscal year 2008 and 

eliminated the “pilot” status of the program.13 Further, the FAA 

Modernization and Reform Act of 2012 reauthorized funding for SCASDP 

through fiscal year 2015.14 The law establishing SCASDP allows DOT 

considerable flexibility in implementing the program and selecting projects 

to be funded. Grant funds can be used to cover various projects that can 

be reasonably related to improving air service to the community, such as 

any new advertising or promotional activities, or for studies to improve air 

service and traffic. The law defines basic eligibility criteria and statutory 

priority factors, but meeting a given number of priority factors does not 

automatically mean DOT will select a project. SCASDP grants may be 

made to single communities or a consortium of communities, although no 

more than 40 grants may be awarded in a given year and no more than 

four grants each year may be given in the same state.

Air service to small airports as measured by the number of flights and 

seats available has mostly declined since 2007, but so has service to 

airports of all sizes. Small airports generally serve small communities. As 

figure 2 shows, medium-hub, small-hub, and nonhub airports saw the 

largest net declines proportionally in flights and available seats since 

2007, and the largest airports experienced the smallest declines. The 

 13Vision 100—Century of Aviation Reauthorization Act, Pub. L. No. 108-176, 117 Stat. 

2490 (2003).

14Pub. L. No. 112-95, § 429, 126 Stat. 11, 100 (2012).

The Airline Industry Is 

Adapting to Economic 

Pressures that 

Creates Challenges 

to Maintaining Air 

Service to Small 

Communities

Service to Small 

Communities Has 

Declined since 2007
Page 6 GAO-14-454T 

smallest airports—commercial service nonprimary airports—experienced 

a slight increase in flights but a decline in available seats. Further, 

according to a recent Massachusetts Institute of Technology (MIT) study, 

23 airports in small communities lost all service between 2007 and 

2012.15 Airports receiving EAS-subsidized air service saw about a 20-

percent increase in flights and about an 8-percent increase in available 

seats since 2007 as some regional airlines serving EAS communities 

switched to smaller aircraft.16

Figure 2: Percentage Change in Number of Flights and Available Seats by Airport Category, from 2007 through 2013

Note: The term “hub” is defined in federal law to identify commercial service airports as measured by 

passenger boardings and are grouped into four categories (49 U.S.C. § 47102). Most of the 

remaining airports that qualify for federal funding are commercial service nonprimary airports.

 15In the study, the term “smaller airports” refer to airports classified as medium-hubs, 

small-hubs, or nonhubs. See Michael D. Wittman and William S. Swelbar, Trends and 

Market Forces Shaping Small Community Air Service in the United States, MIT 

International Center for Air Transportation (May 2013).

16Air service is not alone in declining levels of transportation access. In addition to losing 

air service, small communities have also lost access to other transportation modes. 

According to DOT, an estimated 3.5 million rural residents lost access to intercity 

transportation (e.g., air, bus, ferry, or rail) between 2005 and 2010. In addition, while the 

percent of rural residents covered by airline service (72 percent) was unchanged during 

this period of time, the number of rural residents with air service as their sole mode of 

transportation more than doubled, increasing from 2.6 million in 2005 to 5.5 million rural 

residents in 2010.
Page 7 GAO-14-454T 

The reduced capacity for airline service in the United States since 2007 is 

attributable to a combination of factors, including higher costs, industry 

consolidation, and the last recession, which reduced demand. These and 

other factors also have had an effect on air service for small communities.

• First, the price of jet fuel more than quadrupled from 2002 through 

2012 in nominal terms and endured a temporary spike where the price 

doubled over the 2007–2008 period. As a result of increased fuel 

prices, fuel costs have grown to become airlines’ single largest 

expense at nearly 30 percent of airline operating costs in 2012. 

According to a study by MIT, regional aircraft—those mostly used to 

provide air service to small communities with between 19 and 100 

seats—are 40 to 60 percent less fuel efficient than the aircraft used by 

their larger, mainline counterparts—those with more than 100 seats.17

• Second, many small communities have lost population over the last 

30 years. In previous work, we have found that population movement 

has decreased demand for air service to small communities.

According to the study, fuel efficiency differences can be explained 

largely by differences in aircraft operations, not technology, as the 

operating costs per passenger for regional aircraft are higher than 

mainline aircraft because they operate at lower load factors and are 

flown fewer miles over which to spread fixed costs.

18

 17According to this study, regional jets are also 10 to 60 percent less fuel efficient than 

turboprops. See Raffi Babikian, Stephen P. Lukachko, and Ian A. Waitz, The Historical 

Fuel Efficiency Characteristics of Regional Aircraft from Technological, Operational, and 

Cost Perspectives, Massachusetts Institute of Technology, Department of Aeronautics 

and Astronautics.

Geographic areas, especially in the Midwest and Great Plains states, 

lost population between 1980 and 2010, as illustrated in figure 3 

below. As a result, certain areas of the country are less densely 

populated than they were 35 years ago when Congress initiated the 

EAS program. For small communities located close to larger cities 

and larger airports, a lack of local demand can be exacerbated by 

passengers choosing to drive to airports in larger cities to access 

better service and lower fares.

18See GAO, National Transportation System: Options and Analytical Tools to Strengthen 

DOT’s Approach to Supporting Communities’ Access to the System, GAO-09-753

(Washington, D.C.: July 2009).

Economic Factors Have 

Contributed to the Decline 

in Service to Small 

Communities
Page 8 GAO-14-454T 

Figure 3: Shift in Population Distributions, from 1980 through 2010

The effect of industry consolidation on the level of service to small 

communities is reflected in “capacity purchase agreements”19

 19Under a capacity purchase agreement, mainline airlines contract with regional airlines to 

provide air service beyond the mainline airline’s route network to increase their capacity 

and revenue. Agreement terms vary, but mainline airlines generally take on all commercial 

functions, such as brand marketing, flight scheduling, and ticket pricing while the regional 

airlines are responsible for the aircraft and crews to operate the flights, and provide 

ground and flight operations.

—

agreements between mainline airlines and their regional partners. Under 

these agreements, a mainline airline pays the regional airline 

contractually agreed-upon fees for operating certain flight schedules. In 

recent years, according to a 2013 MIT study, mainline airlines have 

shifted a larger percentage of their small community service to regional 
Page 9 GAO-14-454T 

airlines.20 However, according to another 2013 MIT study, these mainline 

airlines have been reducing the total amount of capacity for which they 

contract by eliminating previous point-to-point service between nearby 

smaller airports, thus, reducing the level and frequency of service 

provided.21

Two federal programs continue to support air service to small 

communities but also face some challenges. EAS provides subsidies to 

operating airlines that provide air service to eligible communities in order 

to maintain the service and SCASDP provides competitive grants to small 

communities to attract and support local air service.

Subsidies provided to airlines serving EAS airports continue to increase. 

In 2009, we found that EAS subsidies had increased over time.22

Specifically, the average annual subsidy that DOT provided for EAS 

service per community for U.S. states, excluding Alaska, almost doubled 

from $1 million in 2002 to $1.9 million in 2013. In addition, the 

appropriations Congress made available to EAS increased from about 

$102 million in fiscal year 2003 to about $232 million in fiscal year 2013 

(see table 1 below).23 According to DOT, the appropriation for the EAS 

program for fiscal year 2014 is $246 million.

 20See Wittman and Swelbar, Trends and Market Forces Shaping Small Community Air 

Service in the United States.

21See Michael D. Wittman and William S. Swelbar, Modeling Changes in Connectivity at 

U.S. Airports: A Small Community Perspective, MIT International Center for Air 

Transportation (June 2013).

22See GAO-09-753.

23Funding for EAS has come from a combination of permanent and annual appropriations. 

The Federal Aviation Reauthorization Act of 1996 permanently appropriated $50 million of 

such funding for EAS and safety projects at rural airports from the collection of overflight 

fees. Pub. L. No. 104-264, § 278, 110 Stat. 3213, 3249 (1996). Congress has also 

appropriated additional funds from the general fund on an annual basis.

Federal Programs 

and Policies Support 

Service to Small 

Communities but 

Face Challenges 

EAS Subsidies Are 

Increasing and Recent 

Program Changes Are 

Intended to Limit Eligibility
Page 10 GAO-14-454T 

Table 1: Summary of EAS Program Appropriations, Communities Served, and Annual Subsidies, Fiscal Years 2002 through 

2013

Fiscal year

Total EAS 

appropriations 

(in millions)

Includes only non-Alaska

Total annual subsidies 

(in millions)

Number of 

communtiies served

Average subsidy 

amount per 

community 

(in millions)

2002 $113.0 $89.6 94 $1.0

2003 $101.8 $93.1 103 $0.9

2004 $101.7 $89.1 108 $0.8

2005 $101.6 $93.3 115 $0.8

2006 $109.4 $99.1 116 $0.9

2007 $109.4 $98.1 109 $0.9

2008 $109.4 $97.7 103 $0.9

2009 $138.4 $151.8 107 $1.4

2010 $200.0 $163.0 109 $1.5

2011 $199.7 $176.0 109 $1.6

2012 $215.5 $225.0 120 $1.9

2013 $232.2 $219.9 117 $1.9

Source: DOT.

Note: The appropriations data are for the entire EAS program, including Alaska, Hawaii, and Puerto 

Rico. However, DOT’s data, for information about the communities and airlines receiving EAS 

subsidies and their amounts, exclude EAS operations to communities in Alaska. These data do not 

represent a continuous picture of service provided under the EAS program within each fiscal year.

The appropriations include the annually-appropriated $50 million from overflight fees.

EAS subsidies have supported air service to eligible communities as 

shown in table 1 above; however, that service may not always be the 

most cost-effective and practical option for some communities for 

connecting people to the national transportation network.24

 24We have previously reported on how EAS service could be more cost effective and 

better suit community needs. See 

Under the 

EAS program, if an airline cannot provide air service to eligible 

communities without incurring a loss, DOT provides the airline a subsidy 

GAO-09-753 and GAO, Options to Enhance the Longterm Viability of the Essential Air Service Program, GAO-02-997R (Washington, D.C.: 

Aug. 30, 2002).
Page 11 GAO-14-454T 

to serve those communities.25 However, we have found that aircraft 

serving airports that provide EAS service were far less full than aircraft 

serving airports that did not receive such assistance. In 2009, we found 

that planes serving airports in 2008 with EAS service were only about 37 

percent full versus an industry average of about 80 percent.26 This was 

due, in part, to EAS subsidized service not having the destinations, 

frequency, or low fares that passengers prefer. Further, according to DOT 

officials, the population around some of the very small airports is too low 

to result in very high passenger loads. Since then, the load factor for 

these flights—the percentage of available seats filled by paying 

passengers—increased somewhat and was roughly 49 percent versus 

the industry average of 83 percent in 2013. This may be due, in part, to 

more regional airlines serving these EAS airports with smaller aircraft, as 

a result of changes in the EAS program that we recommended in 2009.27

 25Airlines requesting to provide subsidized EAS service must demonstrate to DOT that 

they cannot profitably serve the community without a subsidy. DOT then reviews 

information about the aviation industry’s pricing structure, the size of aircraft required, the 

amount of service required, and the number of projected passengers who would use this 

service. DOT selects an airline based on statutory selection criteria and sets an annual 

subsidy amount intended to compensate the airline for the amount by which its projected 

operating costs exceed its expected passenger revenues as well as a profit element of at 

least 5 percent of total operating expenses, according to statute. 49 U.S.C. § 41734(d)(1).

The number of EAS communities being served by airlines with aircraft 

smaller than 15-seats doubled from 2009 through 2013. In 2009, 16 EAS 

communities were served using 9-seaters, but 32 EAS communities were 

served with this aircraft in 2013. Great Lakes is one of the few remaining 

regional airlines that flies 19-seat turboprops, while other small regional 

airlines such as Cape Air, SeaPort, and Air Choice One—fly smaller 9-

seat aircraft not subject to some FAA rules for operating scheduled 

26See GAO-09-753.

27See GAO-09-753. We recommended that Congress consider revising the EAS program 

to, among other changes, reexamine the statutory requirement that EAS support aircraft 

that are at least 15-seat, 2-engine, 2-pilot aircraft given that (1) the industry was not 

producing such aircraft and (2) a few airlines receiving EAS subsidies were providing 

quality, reliable service with smaller, usually 9-seat, aircraft. The regional aircraft fleet that 

has historically served small communities, the 37 to 50-seat jets, has become too costly to 

operate due to high fuel prices and is being removed from the regional airline fleet. At the 

same time, another mainstay of the small community airports—19-seat turboprops—is 

also exiting from service because of rule changes in the 1990s. The Consolidated and 

Further Continuing Appropriations Act (2012), Pub. L. No. 112-55, adopted our 

recommendation by waiving the requirement that communities that receive EAS service 

do so with 15-seat or larger aircraft. Additional legislation extended the elimination of the 

requirement through September 30, 2014.
Page 12 GAO-14-454T 

service flights.28

Figure 4: Examples of a 19-Seat Beechcraft 1900 Series and a 9-Seat Cessna 402 Turboprop Aircraft

(See fig. 4 for examples of a 19-seat and 9-seat twinengine turboprop aircraft.)

As a result of economic and cost trends, in 2009, we suggested program 

modifications and alternatives that presented the opportunity for more 

targeted and effective use of government subsidies.29

• Congress, through the enactment of the Federal Aviation 

Administration Modernization and Reform Act of 2012, changed the 

DOT fully 

implemented our recommendation, and several reforms have recently 

been enacted limiting some access to the EAS program in an effort to 

control costs.

 2814 C.F.R. Part 121 prescribes rules governing the flight operations to hold an air carrier 

(airline) certificate. Scheduled-service airlines are generally issued a Part 121 certificate 

by FAA and operate turbojet-powered aircraft or aircraft with more than nine passenger 

seats or aircraft having a payload capacity of more than 7,500 pounds.

29See GAO-09-753. We recommended that DOT evaluate the reasonableness of 

providing transportation alternatives, such as unscheduled air service or surface 

transportation that might better serve communities than current scheduled EAS service. 

Further, we suggested Congress consider re-examining the EAS program’s statutory 

requirements to determine if program changes could address how changes in aviation 

industry and population shifts affected the program. Also see GAO, Opportunities to 

Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance 

Revenue, GAO-11-318SP (Washington, D.C. March 2011). We suggested that Congress 

might wish to consider updating eligibility criteria and targeting service to consolidate 

subsidized air service. We also suggested that Congress may wish to consider revising 

the program’s requirements to improve efficiency and better match capacity with 

community use.
Page 13 GAO-14-454T 

eligibility requirements to limit participation in the EAS program by 

allowing only communities that would be eligible for the program to (1) 

have received subsidized EAS service at any time between 

September 30, 2010, and September 30, 2011, or (2) have received a 

90-day notice from their operating airline to terminate subsidized EAS 

service, and DOT required the airline to continue to provide such 

service to the community.30

• The act also requires that in order to remain in the EAS program, 

beginning with fiscal year 2013, EAS communities must maintain an 

average of at least 10 passenger boardings per service day.

Therefore, no new communities can enter 

the program should they lose their unsubsidized service.

31

• Further, the act prohibits DOT from providing EAS subsidized service 

to communities whose annual passenger subsidies are greater than 

$1,000 per passenger regardless of their distance from the nearest 

hub airport. According to DOT, the $1,000 per passenger limit has 

resulted in four communities being eliminated from the EAS program.

On 

April 24, 2014, DOT issued a tentative order terminating EAS eligibility 

at 13 communities because they did not meet the 10-enplanementper-day requirement established in the act.

With some changes to the EAS program having only recently gone into 

effect, the impact on the program is not yet fully known.

Small-hub and smaller airports are eligible for SCASDP grants provided 

the airport is not receiving sufficient air service or had unreasonably high 

airfares.

32

 30The FAA Modernization and Reform Act of 2012 also specified that only locations that 

have at least 10 boardings per day during the most recent fiscal year beginning after 

September 30, 2012, except for locations beyond 175 miles of a large- or medium-hub 

airport, are considered eligible under the EAS program, but the Secretary of 

Transportation is allowed to restore eligibility if certain conditions are met. Alaska and 

Hawaii are exempted from this change. Pub. L. No. 112-95 § 421, codified at 49 U.S.C. § 

41731(a)(1)(B) and 41731(d).

Congress has provided funding for SCASDP since fiscal year 

2002—ranging from a high of $20 million for fiscal years 2002 through 

2005 to a low of $6 million in fiscal years 2010 through 2013. In fiscal 

year 2013, DOT awarded 25 grants totaling almost $11.4 million to 

3149 U.S.C. § 41731(a)(1)(B). The law provides exceptions for communities in Alaska and 

Hawaii, and for those that are more than 175 driving miles from the nearest large or 

medium hub airport. 49 U.S.C. § 41731(c).

3249 U.S.C. § 41743.

Small Community Grants 

Have Had Limited 

Effectiveness in Retaining 

Air Service
Page 14 GAO-14-454T 

airports in 22 states (see table 2). While funding for SCASDP is 

significantly less than funding for the EAS program, some small 

community airports depend on SCASDP grant awards as a means to 

stimulate economic development and attract business to the area 

surrounding the airport through enhanced air service. According to DOT, 

the appropriation for SCASDP for fiscal year 2014 is $5 million.

Table 2: Summary of SCASDP Funding from Fiscal Years 2002 through 2013

Fiscal year 

funding

Total SCASDP 

appropriations 

(in millions)

Total annual 

grant awards 

(in millions)

Number of 

grants

Average grant 

award amount 

(in millions)

2002 $20.0 $20.0 40 $0.5

2003 $20.0 $19.9 36 $0.6

2004 $20.0 $21.8 46 $0.4

2005 $20.0 $19.0 35 $0.6

2006 $10.0 $9.7 25 $0.4

2007 $10.0 $9.0 26 $0.4

2008 $8.0 $6.5 15 $0.5

2009 $8.0 $6.9 20 $0.3

2010 $6.0 $7.0 19 $0.4

2011 $6.0 $15.0 29 $0.2

2012 $6.0 $13.9 33 $0.2

2013 $6.0 $11.4 25 $0.2

Source: DOT.

Note: For fiscal year 2010, Congress appropriated $6 million for SCASDP, but DOT added additional 

funds that could be reallocated from prior year recoveries in order to make funding available for 

additional grant awards, which continued into fiscal year 2013.

We and others who have examined SCASDP have observed that the 

grant program has had limited effectiveness in helping small communities 

retain air service. In 2005, we found that initial SCASDP projects 

achieved mixed results.33

 33See GAO, Commercial Aviation: Initial Small Community Air Service Development 

Projects Have Achieved Mixed Results, 

Specifically, about half of the airports that 

reported air service improvements were self-sustaining after their grant 

had been completed. At that time, we recommended that DOT evaluate 

the program again before the program was reauthorized. 

GAO-06-21 (Washington, D.C.: November 2005).
Page 15 GAO-14-454T 

In response to our recommendation, the DOT Assistant Secretary for 

Aviation and International Affairs requested the DOT Office of Inspector 

General (OIG) to review the program’s effectiveness in improving air 

service to small communities.34 The review included 40 grants awarded 

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

closed for 12 months or more as of March 31, 2007, and determined 

whether the projects could sustain themselves without continued federal 

financial support. The OIG found that 70 percent of the grants in the 

review failed to fully achieve their objectives; specifically, 50 percent of 

the grants were unable to achieve any of their articulated grant objectives 

or were unable to sustain grant benefits beyond the grant completion and 

20 percent were either partially able to obtain or achieve all of their grant 

objectives or were voluntarily terminated. The remaining 30 percent of the 

grants were successful in achieving their grant objectives and sustaining 

the resulting benefits for at least 12 months. The OIG made 

recommendations to improve the grant award process by (1) giving 

priority to communities with better developed grant applications, (2) 

requiring communities requesting non-marketing grants to use a part of 

the funding awarded to them to implement a marketing program, and (3) 

evaluating the impact of the “same project limitation”35 on program 

effectiveness and seek legislative changes, if necessary. According to the 

OIG’s report, DOT concurred with each of the recommendations and took 

the appropriate actions to implement them. Most recently, an academic 

study conducted by an MIT researcher evaluated 115 SCASDP grants 

from 2006 through 2011 and found that less than 40 percent of the grants 

met their primary objectives.36

On the other hand, SCASDP grants have been used to fund some 

successful projects. We found in 2005 and 2007 that SCASDP grantees 

pursued a variety of goals and strategies for supporting air service, and 

some of the grants resulted in successfully meeting their intended 

 34DOT OIG, Report on the Audit of the Small Community Air Service Development 

Program, Office of Aviation Analysis, CR-2008-051 (May 13, 2008).

35Communities that have been awarded grants in previous years that want to apply for 

another grant are precluded from seeking funds for projects with goals for which they have 

already received a grant award. However, previous grant recipients may submit grant 

proposals and seek grant funds for new projects.

36See Michael D. Wittman, Public Funding Of Airport Incentives: The Efficacy Of The 

Small Community Air Service Development Grant (SCASDG) Program, Massachusetts 

Institute of Technology, International Center for Air Transportation (January 2014).
Page 16 GAO-14-454T 

purposes.37

In 2007, we also found that a review of 59 grantees’ final reports for 

completed projects indicated that 48 of these increased enplanements as 

a result of their SCASDP grant. In addition, the 2008 DOT OIG report 

found that grants targeting the introduction of new service rather than 

expanding existing service were more successful and noted that grants 

targeting existing service may be less likely to succeed because mature 

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

markets or may reflect attempts by communities to resuscitate a failing 

service. Lastly, the recent MIT study highlighted three communities—

Appleton, Wisconsin; Bozeman, Montana; and Manhattan, Kansas—that 

were able to effectively use the grants to expand service in their 

communities.

We found these successes include grantees that identified a 

variety of project goals and strategies to improve air service to their 

community, including (1) adding flights, airlines, and destinations; (2) 

lowering fares; (3) upgrading the aircraft serving the community; (4) 

obtaining better data for planning and marketing air service; (5) increasing 

enplanements; and (6) curbing the loss of passengers to other airports. 

For example, our 2005 report found that 19 of the 23 completed grants 

resulted in some kind of improvement in service, either in terms of an 

added carrier, destination, flights, or change in the type of aircraft.

In addition, DOT program officials we interviewed highlighted other 

benefits that have resulted from SCASDP grants that they said extend 

beyond the completion dates of the grants. For example, the officials 

stated that one recipient of a 2011 grant recently reported that simply 

obtaining the federal grant allowed the community to obtain a line of credit 

and prove to an airline that the grantee was able to support sustained and 

profitable service, even though the federal grant funds were not 

expended. In another example, the officials stated that one recipient of a 

2002 grant reported in 2011 that while unable to establish air service prior 

to receiving its grant, the grant enabled the community’s airport to 

establish and sustain air service to the area and has resulted in 

substantial economic benefits for the community.

 37See GAO-06-21 and GAO, Commercial Aviation: Programs and Options for Providing 

Air Service to Small Communities, GAO-07-793T (Washington, D.C.: April 2007).
Page 17 GAO-14-454T 

In addition to the federal programs previously discussed, other legislative 

and regulatory policies could affect the provision of air service to small 

communities.

• Perimeter rules. Airlines operating out of Reagan National, 

LaGuardia, and Dallas Love Field Airports are restricted in the 

distance that they can travel.38 The purposes of these rules vary but 

are intended, in part, to help encourage air service to smaller 

communities closer to the airport. However, the restrictions at Dallas 

Love Field will end later this year, and the number of exemptions to 

the perimeter rule at Reagan National has increased.39

• Safety regulations. A new federal law that increased the qualification 

requirements for pilots to be hired at U.S. airlines has caused some 

concerns related to a potential future shortage of qualified pilots.40 In 

July 2013, FAA, as required by law, issued a new pilot qualification 

rule that increased the requirements for first officers who can fly for 

U.S. passenger and cargo airlines and requires that first officers now 

hold an airline transport pilot certificate, just as captains must hold, 

requiring, among other things, a minimum of 1,500 hours of total time 

as a pilot.41

 38At Reagan National Airport, unless congressionally exempted, no direct service can 

extend beyond 1,250-miles (49 U.S.C. § 49109), at LaGuardia beyond 1,500 miles, and at 

Dallas Love Field to Texas and neighboring states. The Port Authority of New York and 

New Jersey impose the LaGuardia rule, while the Reagan National and Dallas Love rules 

are imposed by statute. In 2006, the Dallas Love restrictions, called the “Wright 

Amendment,” were repealed as of October 13, 2014. Pub. L. No. 109-352, § 2(b), 120 

Stat. 2011.

Regional airlines—most likely to provide air service to 

small communities—have been disproportionally affected by the new 

rule because, prior to the new rule, more of their pilots did not meet 

the new minimum qualifications compared to their larger, mainline 

39GAO, Slot-Controlled Airports: FAA’s Rules Could be Improved to Enhance Competition 

and Use of Available Capacity, GAO-12-902 (Washington, D.C.: September 2012).

40Airline Safety and FAA Extension Act of 2010, Pub. L. No. 111-216, § 217 (c)(1), 124 

Stat. 2348, 2368.

41The airline transport pilot certificate is the highest level of pilot certification, requires the 

highest amount of cumulative flight time and is necessary to fly as a captain or first officer 

for an airline. Previously pilots could work as first officers for regional airlines and build 

additional flight time necessary to qualify for an airline transport pilot certificate, but under 

the new pilot qualification rule, they must attain this experience in other ways prior to 

being eligible to fly for a regional airline. 78 Fed. Reg. 42324 (July 15, 2013).

Legislation, Regulations, 

and Airport Policies Affect 

Service to Small 

Communities
Page 18 GAO-14-454T 

airline counterparts.42 Earlier this year, we found that 11 of the 12 

regional airlines that were interviewed reported difficulties finding 

sufficient numbers of qualified pilots over the past year. Furthermore, 

five of these regional airlines reported to us that they were limiting 

service to some smaller communities because they did not have pilots 

available to provide that service. For instance, Great Lakes Airlines 

recently canceled service to ten small communities reportedly due to 

a lack of available pilots. Similarly, Silver Airways provided DOT with 

the required notice of its intent to discontinue scheduled service to five 

small communities reportedly for the same reason. However, given 

that the congressional mandate to increase pilot qualifications for 

airline pilots only recently went into effect, some market adjustments 

are to be expected, and such adjustments could continue to affect air 

service in smaller community markets.

In July 2009, we concluded that a multimodal approach—one that relies 

on for example, bus service to larger airports or air taxi service to connect 

communities—is an alternative to providing scheduled air-service 

connectivity to small communities. For some communities that receive 

EAS subsidies—for example, those that have limited demand for the 

service due to proximity to other airports or limited population—other 

transportation modes might be more cost effective and practical than 

these subsidies. This approach may be of use to small communities that 

have not been able to generate sufficient demand to justify the costs for 

provision of air service, resulting in rising per-passenger subsidies.43

 42GAO, Aviation Workforce: Current and Future Availability of Airline Pilots, GAO-14-232

(Washington, D.C.: February 2014).

43GAO-09-753.

Multimodal and 

Nongovernmental 

Transportation 

Options Could Help 

Small Communities

A Multimodal Approach 

Could Be Used to Connect 

Communities 
Page 19 GAO-14-454T 

When potentially cost-effective alternatives, such as bus service to other 

airports, are not used, the costs of subsidies may be higher than 

necessary to link these communities to the nation’s passenger aviation 

system.

In 2009, we recommended that DOT assess whether other forms of air 

service or other modes of transportation might better serve some 

communities and at less cost. While DOT did not conduct such an 

assessment, the department took action to implement the options we 

identified in the report and achieved the intent of our recommendation. 

Further, the Future of Aviation Advisory Committee—a committee that 

provides information, advice, and recommendations to the Secretary of 

Transportation on U.S. aviation industry competitiveness and capability to 

address evolving transportation needs—recommended in 2011 that a 

task force be established to examine the EAS program and identify rural 

multimodal service opportunities for EAS-eligible communities, among 

other things. Although no provisions have been enacted into law to 

specifically promote intermodal alternatives to the EAS program, DOT (1) 

convened a working group in 2011 to study this area and (2) added new 

language to its SCASDP 2012 Request for Proposals, such language that 

carried forward in the 2013 request, to clarify that intermodal solutions to 

air service—for example, cost-effective bus service—are eligible for 

grants. In 2009, we also suggested that Congress consider re-examining 

EAS program’s objectives and statutory requirements to include the 

possibility of assessing multimodal solutions for communities. 

Considering options to the current EAS program, such as multimodal 

transportation, may help Congress identify opportunities to limit the 

financial strain on the EAS program.

Some local communities and small airports in danger of losing service or 

hoping to attract new service have opted to provide a range of incentives 

to airlines. The DOT OIG also found that federal SCASDP grants were 

more likely to be successful when paired with funding mechanisms based 

on local community support.44

 44DOT OIG, Report on the Audit of the Small Community Air Service Development 

Program.

The different types of incentives that 

communities and airports offer to airlines include:

Local Community 

Approaches to Attracting 

Air Service Have Had 

Some Success
Page 20 GAO-14-454T 

• Minimum revenue guarantees—agreements that establish a target 

amount of revenue that an airline will receive for operating a particular 

service to a particular destination over a given length of time. 

According to a 2009 Transportation Research Board (TRB) report, as 

airlines have been increasingly reducing service at many communities 

because of financial hardships, airports have increased the amount of 

revenue guarantees that they have provided.

45

• Guaranteed ticket purchases (travel banks)—programs that effectively 

ensure that the target airline will have passenger traffic worth a certain 

volume of revenue. Businesses or individuals deposit funds in a bank 

account that can be used only for purchasing tickets on the target 

airline for travel from a community during a given period of time. In 

2005, we found that most airline officials interviewed were unfavorably 

disposed toward travel banks, citing the difficulty in administering 

them and their poor track record of success.

The report found, 

based on a survey of several airports, that SCASDP funds were often 

used to support the minimum revenue guarantees, and the amounts 

of the guarantees ranged from $250,000 to $1.6 million. For example, 

Rhinelander-Oneida County (Wisconsin) Airport used a SCASDP 

grant to provide a revenue guarantee of $492,000 to support nonstop 

service to Minneapolis. Rhinelander convinced Northwest Airlink to 

convert three of its four daily one-stops (via Eau Claire, Wisconsin) to 

nonstops. Because the service generated more revenue for the airline 

than had been expected, the airport was able to return nearly half of 

the revenue guarantee to DOT.

46

• Cost subsidies—financial incentives that generally offset some aspect 

of an airline’s costs of operation. These subsidies can include waivers 

or discounted fees (e.g., landing fees, terminal rents, gates, jet 

bridges) or ground station costs during a promotional period. Cash 

subsidies are generally a fixed amount and are paid without regard to 

the amount of revenue that an airline may generate during the 

agreed-upon period. For example, according to the 2009 TRB report, 

the Charles M. Schulz Sonoma County Airport waived terminal rents 

and landing fees for Horizon Air for 12 months to incentivize the airline 

to maintain its service at the airport, and valued that waiver at slightly 

Additionally, beginning 

in 2005, DOT announced that it would not support travel banks for 

SCASDP grants.

 45TRB, Passenger Air Service Development Techniques, Airport Cooperative Research 

Program Report 18, sponsored by FAA (Washington, D.C.: June 2009).

46GAO-06-21.
Page 21 GAO-14-454T 

under $100,000. However, according to DOT, this example would be 

considered as a type of in-kind contribution, which is discussed below.

• Marketing and advertising services—agreements whereby airports or 

communities purchase the marketing or advertising on behalf of the 

airline’s new service designed to build awareness for a new service 

and develop demand so that the service can become self-sustaining. 

Many small airports are located in multi-airport regions in which 

passengers will drive long distances to nearby airports to save on 

price, so such advertising is of increasing importance to attract 

passengers to fly from their local airport. For example, according to 

the 2009 TRB report, Huntsville, Alabama, used a SCASDP grant to 

support its airport’s “Huntsville Hot Ticket” program that sent e-mail 

fare alerts to customers when fare specials were announced, and 

allowed customers to book tickets directly on the airport’s 

flyhuntsville.com website.

• Non-financial (in-kind) contributions—assistance referring to products, 

goods, or services that otherwise might have to be paid for, but which 

third-party providers can donate instead. For example, local 

advertising firms may provide billboards or local media may provide 

newspaper or TV coverage.

Each of these incentives has certain advantages and associated risks or 

disadvantages, but more airports in smaller communities tend to use 

revenue guarantees, likely because those communities recognize that 

they need to share in the airlines’ financial risk of serving smaller markets. 

However, few incentives tend to be undertaken as the only type of 

incentive, that is, for example, revenue guarantees are usually combined 

with other forms of incentives, such as cost or fee waivers.47 In addition, 

given that the service may fail, the use of federal funds to support the 

minimum revenue guarantees effectively requires the federal government

to share this potential risk. In its 2008 review of SCASDP, the DOT OIG 

reported that airlines operating in small communities typically have limited 

resources to invest in marketing designed to stimulate demand, and using 

funds for marketing programs in support of other incentive programs—

such as revenue guarantees or cost subsidies—can stimulate demand by 

increasing awareness of airport services and mitigate “leakage” of 

passengers to surrounding airports.

 47TRB, Passenger Air Service Development Techniques.
Page 22 GAO-14-454T 

Chairman LoBiondo, Ranking Member Larsen, and Members of the 

Committee, this completes my prepared statement. I would be pleased to 

respond to any questions that you may have at this time.
Appendix I: GAO Contact and Staff 

Acknowledgments

Page 23 GAO-14-454T 

For further information on this testimony, please contact Gerald L. 

Dillingham, Ph.D., at (202) 512-2834 or dillinghamg@gao.gov. In 

addition, contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this statement. Individuals 

making key contributions to this testimony statement include Paul 

Aussendorf, Assistant Director; Cathy Colwell, Assistant Director; Vashun 

Cole; Bonnie Pignatiello Leer; Joshua Ormond; and Amy Rosewarne. The 

following individuals made key contributions to the prior GAO related work

include: Amy Abramowitz, Dave Hooper, John Mingus, and Sara Ann 

Moessbauer.

Appendix I: GAO Contact and Staff 

Acknowledgments

GAO Contact and 

Staff 

Acknowledgments

(540274)
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