National Transportation System: Options and Analytical Tools to Strengthen DOT's Approach to Supporting Communities' Access to the System
Published: 2009-07-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 1978, the Essential Air Service (EAS) program has subsidized air service to eligible communities that would otherwise not have scheduled service. The cost of this program has risen as the number of communities being served and subsidies to air carriers have increased. At the same time, the number of carriers providing EAS service has declined. Given continuing concerns over the EAS program's long-term prospects, GAO was asked to review the program. GAO reviewed (1) the characteristics and current status of the EAS program, (2) factors affecting the program's ability to provide air service, (3) options for revising the program, and (4) tools for assessing the program, the options for its revision, and the program's performance. GAO interviewed stakeholders and reviewed the results of an expert panel convened by GAO, Department of Transportation (DOT) data and program documentation, and potential methodologies for assessing federal programs.
section_title: What GAO Found
paragraphs: The EAS program has changed relatively little in 30 years, but current conditions raise concerns about whether the program can continue to operate as it has. Over the past 2 years subsidies to carriers have been increasing, along with EAS program obligations to fund those subsidies. In response, the administration is requesting $175 million for the EAS program in fiscal year 2010, a $50 million increase over recent funding levels. At the same time, the number of carriers providing subsidized air service is declining, from 34 in 1987 to 10 in 2009. More than one-third of the EAS-supported communities temporarily lost service in 2008, when 3 carriers ceased operations. Several factors contribute to the increasing difficulty in providing subsidized air service. The EAS program has statutory requirements for minimum aircraft size and frequency of flights, effectively requiring carriers to provide service that may not be "right-sized" for some small markets. Also, the growth of air service especially by low-cost carriers--which today serve most U.S. hub airports---weighed against the relatively high fares and inconvenience of EAS flights, can lead people to bypass EAS flights and drive to hub airports. Moreover, the continued urbanization of the United States may have eroded the potential passenger base in some small and rural EAS communities. While Congress, DOT, GAO, and others have proposed various revisions to the EAS program, Congress has not authorized many changes to program requirements. Proposed Federal Aviation Administration reauthorization legislation would include performance-based incentives, among other changes. GAO and others have suggested increasing flexibility and other changes that could make EAS service more sustainable for smaller communities. Finally, members of an expert panel organized by GAO all believed that small and rural communities would benefit from a multimodal approach to transportation. Generally they believed that other modes of transportation could be more responsive to communities' transportation needs in some cases. Although it is difficult to select options for the EAS program since stakeholders do not always agree on program objectives, certain analytical tools can help policymakers assess the EAS program. Tools include a re-examination framework to revisit the program's objectives, and help evaluate options to make the program more effective. Other analytical tools include an analytical approach GAO developed that, for a sample of small and rural communities, identified their access to different modes of transportation. This approach has the potential for broader application to examinations of communities' access to the national transportation network. Finally, once a change is implemented, performance measures can be used to periodically evaluate program effectiveness.

section_title: Letter
paragraphs: In 1978, Congress deregulated the airline industry and established the  Essential Air Service (EAS) program to ensure that communities that had  air service at the time of deregulation would continue to receive at least a  minimum level of service. Under the EAS program, if an air carrier cannot  provide air service to eligible communities without incurring a loss, the  Department of Transportation (DOT) awards the air carrier a subsidy to  serve those communities. In 2008, this program helped support  commercial air service to about 150 communities throughout the United  States. The prospects for the EAS program are a matter of concern to  many Members of Congress. In April 2009, 22 Senators submitted a letter  to the Director of the Office of Management and Budget requesting that  the administration’s budget request “reflect the priority of the EAS  program to rural America . . .” The administration, in its fiscal year 2010  budget request for DOT notes that the current EAS program is not  efficiently designed, and states its intent to work with Congress to develop  a sustainable program that will fulfill its commitment while enhancing  convenience for travelers and improving cost effectiveness.
Many factors appear to be contributing to increased operating costs for  EAS carriers and increasing demand from communities, leading to higher  subsidy costs for the EAS program. The administration’s fiscal year 2010  budget request includes increased funding for this upcoming year to help  cover the costs of increased demand for the program. In addition, over the  years Congress has expressed concern that changes in the aviation  industry and rising costs may jeopardize the EAS program’s long-term  viability. Finally, in a 2002 report, we also identified several factors that  were likely in the near term to create pressure to increase potential future  subsidy requirements of the EAS program, and described various options  that could promote the long-term viability of the program.
Given continuing concerns over the EAS program’s long-term prospects,  you asked us to review the program. This report addresses (1) the  characteristics and current status of the program, (2) the factors affecting  its ability to provide service to communities, (3) options for revising the  EAS program, and (4) tools for assessing the program, options for its  revision, and the program’s performance. To complete this work we  reviewed previous reports and studies of the EAS program, including  previous GAO reports. We also held a panel discussion attended by  experts on community air service including airline officials, program  administrators, economists, other transportation providers, and state and  local officials. These experts discussed the factors affecting the EAS  program and options for providing service to communities across the  country, in addition to responding to our questions about the federal  government’s options for assisting communities with connecting to the  national transportation system. We gathered information on the  experiences of airports served by the EAS program from a national  association of airports, and from seven of their member airports. We  obtained DOT data on the EAS program. Our review focuses on  communities within the continental United States that have received EAS  subsidized service. We focused our review on these communities because  the requirements for communities in Alaska are different than for  communities in other states, and airports outside the contiguous states  and are not representative of the program in the rest of the country. In  identifying tools for assessing the program, options for its revision, and the  program’s performance, we compared the program status to GAO’s re- examination criteria and compared DOT’s performance measures for this  program against the criteria of the Government Performance and Results  Act of 1993 and the Office of Management and Budget’s Program  Assessment Rating Tool. We found DOT’s data sufficiently reliable for  providing status information on the program.
We conducted this performance audit from March 2008 through July 2009  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 believed that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. See appendix I for more details  on our scope and methodology.
subsections: section_title: Background
paragraphs: In 1978, 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. Free  to determine which communities they would serve, as well as what fares  they would charge, most major carriers became “network” carriers,  developing “hub-and-spoke” networks and providing service from their  hubs to many “spoke” cities they served. Anticipating that airlines would  be free to focus their resources on generally more profitable high-density  markets, Congress became concerned that major carriers would eliminate  their less profitable routes serving smaller communities, causing these  communities to lose air service. In response, Congress established the  Essential Air Service (EAS) program as part of the Airline Deregulation  Act of 1978. The EAS program subsidizes commercial air service for  communities that would otherwise have lost service as a result of  deregulation. The law specifies that if an air carrier cannot continue  service to a community without incurring a loss, DOT shall then use EAS  program funds to award a subsidy to that carrier or another carrier willing  to provide service. Congress initially enacted the program for 10 years, and  later extended it for another 10 years. In 1996, Congress removed the 10- year time limit.
Under the Airline Deregulation Act, communities that were eligible for air  service on October 24, 1978, are eligible for EAS-subsidized service. There  are EAS-eligible communities in 49 states, Puerto Rico, and American  Samoa. As of November 2008, DOT had agreements with carriers to  provide subsidized service to almost 150 communities—102 in the  continental United States, 43 in Alaska, and 2 in Puerto Rico. Not all  communities that are eligible for EAS service currently receive it; many  currently have unsubsidized air service. Figure 1 shows the communities  that had access to EAS service as of January 1, 2009, or are projected to  ojected to  have service starting later in the year.  have service starting later in the year.
Communities near airports with EAS service vary in their population. For  example, 58 percent of the communities within 40 miles of an airport with  EAS-subsidized service as of January 1, 2009, had a population of less than  10,000 while 2 percent had a population of over 100,000.
A multistep process is required for subsidized EAS service to begin at a  community. For a community that is not currently receiving EAS  subsidies, the process starts when the last air carrier providing  unsubsidized service to an EAS-eligible community files a Notice of  Termination, which is a 90-day notice of its intent to suspend, terminate,  or reduce service below the minimum level of service required by law. If  no other air carrier is willing to provide unsubsidized air service to the  community, DOT solicits proposals from carriers that would be willing to  provide service with a subsidy. Carriers requesting a subsidy must  document that they cannot profitably serve the community without a  subsidy by submitting various financial data, such as profit-or-loss  statements, to DOT. DOT then reviews these data along with 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 also considers the community’s  preferences for the proposed service. Finally, DOT selects a carrier based  on statutory selection criteria and sets an annual subsidy amount intended  to compensate the carrier 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.  Once air service is under way, DOT makes monthly subsidy payments to  the carrier based on the number of scheduled flights completed. DOT’s  agreement with the carrier is subject to renewal generally every 2 years, at  which time other air carriers are permitted to submit proposals to serve  that community with or without a subsidy.
In general, the law currently requires that an EAS carrier provide the  following:    service to a hub airport, defined as an Federal Aviation Administration  (FAA)-designated medium- or large-hub airport; two daily round trips, 6 days a week, with not more than one intermediate  stop to the hub; flights at reasonable times taking into account the needs of passengers  with connecting flights;   service in an aircraft with an effective capacity of at least 15 passengers,  under certain circumstances, unless the affected community agrees in  writing to the use of smaller aircraft;    service in aircraft with at least two engines and using two pilots; and    service with pressurized aircraft under certain circumstances.
Congress and DOT revised the program’s eligibility requirements during  the late 1980s and early 1990s, in response to insufficient program funding.  For example, in June 1989, Congress prohibited DOT, beginning in fiscal  year 1990, from subsidizing service to or from any essential air service  point in the contiguous 48 states where the subsidy exceeded $300 per  passenger. In December 1989, DOT implemented a regulation that,  among other requirements, would eliminate EAS funding for communities  that had EAS service with a per-passenger subsidy exceeding $200 per  person, or that were located less than 70 highway miles from the nearest  medium- or large-hub airport, if appropriations for the EAS program were  less than the amount needed to maintain EAS service at the communities  being served. The Aviation Safety and Capacity Expansion Act of 1990  superseded this regulation by prohibiting DOT from declaring any  community ineligible for any reason not specifically set forth in statute.  Finally, in fiscal year 1994, Congress prohibited DOT from subsidizing  service to communities that (1) are less than 70 highway miles from the  nearest medium- or large-hub airport, or (2) require a per-passenger EAS  subsidy in excess of $200. Communities located more than 210 miles  from the nearest medium- or large-hub community airport are exempt  from this $200-per-passenger subsidy limit.
Over the years, several communities have lost eligibility for EAS service  for various reasons. In some instances—after the requirements went into  effect—-it was because the per-passenger subsidy for their service  exceeded the allowable limit, or because the community was less than 70  miles from a medium- or large-hub airport. Other communities lost EAS  service in the early 1990s as Congress took actions to address program  funding constraints. DOT monitors participating air carriers’ operations to  help ensure their service complies with program requirements. For  example, DOT periodically reviews carriers’ enplanement data for the EAS  routes carriers serve, to determine whether the carriers’ per-passenger  subsidy exceeds the statutory cap of $200. Because DOT’s subsidy  payments to carriers are based on the number of flights completed,  regardless of the number of passengers on board, an EAS route with few  passengers has a higher per-passenger subsidy than it would have with  more passengers. When DOT does find that a carrier’s subsidy per  passenger exceeds $200 for an EAS route, the agency warns the  community of its tentative decision to terminate the route subsidy and  allows the community 20 days to object if the community finds that DOT  has made a mistake in its calculations. Since 1989, 61 communities have  lost EAS service because they became ineligible to receive subsidized  service.
Twenty-six communities lost service in fiscal year 1990 as a result of  reduced program funding. Six of these communities lost service as  October 1989 because their carrier’s subsidy per passenger exceeded the  $300 limit then in effect, and 20 more lost service as of January 1990  because their carrier’s per-passenger subsidy was over $200.
Twelve communities lost service in fiscal year 1994, a year when funding  for the EAS program was reduced, because their carrier’s per-passenger  subsidy exceeded $200 or because they were within 70 miles of a medium-  or large-hub airport.
Twenty-two more communities became ineligible at various times since  fiscal year 1995 because their carrier’s per-passenger subsidy exceeded  $200.
One community became ineligible to receive subsidized service in 1995  because a nearby small hub was reclassified as a medium hub.
Also, 11 communities that were not receiving EAS-subsidized service lost  their eligibility for EAS service when the last unsubsidized carrier filed to  suspend service at their airport and DOT determined that the community  was ineligible because it was within 70 miles of a medium- or large-hub  airport.
section_title: The EAS Program Is Providing Air Service to More Communities, but Service Is Costing More and the Number of Carriers Providing Service Is Declining
subsections: section_title: EAS Program Obligations and Appropriations Have Generally Increased to Support Service to More Communities and Higher Carrier Subsidies
paragraphs: The number of communities served by the EAS program in the continental  United States has risen in recent years— from 87 communities as of June  1, 2003, to 102 communities as of November 1, 2008. The subsidies that  carriers require to serve those routes have also increased since 2003,  adding to the long-term cost of the EAS program. For example, the  average annual subsidy DOT has awarded for EAS service per community  in the continental United States increased from about $883,000 as of June  2003 to about $1,371,000 as of November 2008. After adjusting this growth  for the effects of inflation, the average EAS subsidy in 2008 was about 35  percent higher than in 2003.
In addition, significant increases in carrier subsidies per community have  come within the past 2 years. Between November 2007 and November  2008, DOT renewed or awarded agreements to 57 communities in the EAS  program in the continental United States, with the total annual subsidy for  those communities increasing from $52.4 million to $86.3 million (in  nominal dollars)—an increase of 65 percent. For many of these routes, the  carrier’s annual subsidy amount more than doubled.
While the number of EAS communities and the amount of subsidies have  increased, annual obligations ranged between $103 million and $114  million (in nominal dollars) from fiscal year 2003 through fiscal year  2007. In fiscal year 2008, obligations for EAS subsidies increased to about  $116 million. An additional $31 million in balances from completed EAS  agreements that could not be retained for the EAS program was returned  ed for the EAS program was returned  to FAA, bringing total obligations to $147 million as shown in figure 2.  to FAA, bringing total obligations to $147 million as shown in figure 2.
While our review focuses on EAS service in the 48 contiguous states, obligations are  reported for the EAS program as a whole, including obligations for Alaska, Hawaii, and  Puerto Rico. However, EAS service outside of the 48 contiguous states does not represent a  large portion of EAS program funding—DOT estimates service to these locations  accounted for about 8 percent of total program subsidies as of 2008. communities. Specifically, in the first 6 months of 2008, three carriers  serving 37 communities ceased operations. Most of these communities  were without service for several months because replacement carriers  were not able to start up immediately.
Keeping pace with the rising financial requirement to manage the program,  total appropriations for the EAS program have generally increased in  recent years. Total appropriations have increased from about $102  million in fiscal year 2003 to just over $124 million in fiscal years 2007 and  2008. For fiscal year 2009, appropriations available for the program  include $123 million in fiscal year 2009 appropriations and a supplemental  appropriations act which provides an additional $13.2 million in fiscal year  2009 supplemental funding for the EAS program. This increases EAS’s  fiscal year 2009 appropriations to $136.2 million. The administration has  requested about $175 million for the program in 2010, which would  represent a further increase in program funding.
EAS program funding comes from multiple sources. Each year, the EAS  program receives $50 million in overflight fees. Recently, Congress also  has annually appropriated additional funds from the Airport and Airway  Trust Fund and has supplemented these EAS program funds in 2005, 2007,  2008, and 2009 with additional appropriations, as shown in figure 3. DOT  had requested additional funding for 2005, 2007, and 2008 to account for  the higher dollar amounts required to reimburse carriers for serving EAS  communities. For example, in fiscal year 2005, DOT transferred $5 million  from the Small Community Air Service Development Program, which  provides grants to enhance small communities’ air service, to help fund the  EAS program’s increased costs.
Recently, DOT officials have been concerned about whether the EAS  program has sufficient funding to serve both current EAS communities  and additional communities that may be eligible for subsidized service.  The EAS program is appropriated a specific amount each fiscal year.  However, since fiscal year 2005, language has been included in  appropriations legislation stating that if the annual amount provided for  EAS is insufficient to meet the costs of the EAS program in the current  fiscal year, the Secretary of the Department of Transportation is required  to transfer funds to EAS from any other amounts appropriated to or  directly administered by the Office of the Secretary. This would require  DOT to draw upon other funding sources within the Office of the  Secretary to be able to make payments to carriers and enter into new  service agreements. DOT had to do this once, using some Small  Community Air Service Development Program funding for the EAS  program in 2005. In addition, a DOT official noted that the EAS program  faces a significant potential financial liability, in that there are about 40  other EAS-eligible communities in the country with airports currently  served by a single unsubsidized commercial carrier. DOT officials believe  that the agency would encounter a significant financial liability—about $60  million annually—if the airlines serving these single-carrier airports all  filed a Notice of Termination requiring DOT to subsidize continued  service. In fact, three communities that have not previously had EAS  service have come into the program since June 2008, and a fourth is  expected to obtain subsidized service later this year.
section_title: Carrier Withdrawals from the Program in 2008 Caused Service Interruptions for Many Communities, While Others Still Do Not Have EAS Service Restored
paragraphs: According to a DOT official, the EAS program has recently experienced an  unusually high level of carrier turnover. In 2008 alone, three EAS carriers  serving 37 communities ceased operations in the first 6 months of the year.  According to a DOT official, various factors caused the three carriers to  cease operations, and recent fuel price increases might have accelerated  this situation. DOT was able to obtain a replacement carrier to continue  service, without interruption, for one of the 37 communities. However, 30  of the other 36 communities were temporarily without EAS air service for  up to 10 months, and 6 communities are still without service because the  carrier that DOT selected in 2008 to serve those communities withdrew  before it started service. An official of the carrier stated that it withdrew  because it was unable to finance the refurbishing of aircraft needed to  serve those routes. In late June 2009, DOT awarded agreements to two  carriers to provide EAS service to these 6 communities; dates for the start  of service had not been set.
A DOT official noted that while the number of communities that  experienced carrier turnover in 2008 was unprecedented, the number of  carriers providing air service to communities under the EAS program has  actually been declining over many years. The number of carriers providing  EAS service has declined from 34 as of February 1987 to 10 in 2009. In  addition, as the number of carriers has declined, the percentage of EAS  routes served by just a few carriers has increased. In February 1987, the  largest number of routes served by any one carrier was 13, and the four  carriers that served the most communities accounted for 33 percent of the  EAS routes. At present, four carriers serve about 85 percent of the routes  in the EAS program, with a single carrier serving nearly half of the EAS  routes. As noted above, one carrier recently withdrew from 6 EAS routes  that it was awarded last year before it even started service. Also, DOT  faces a potential rise in the number of communities requiring subsidized  air service should their single unsubsidized carrier end operations. Should  additional EAS carriers withdraw from the program or be financially  unable to serve additional communities seeking EAS service—the  remaining carriers may not have enough capacity to provide EAS service  to all communities that qualify.
section_title: The EAS Program’s Ability to Provide Service Is Affected by the Financial Viability of Service on EAS Routes
subsections: section_title: Program Requirements and Other Factors Appear to Contribute to Increasing Costs of EAS Service for Carriers and Higher Program Subsidies from DOT
paragraphs: Many of the expert panelists and other stakeholders we interviewed stated  that some EAS program requirements significantly add to the cost of  providing subsidized air service to communities. For example, members of  our expert panel thought the EAS mandate requiring carriers to use  aircraft with a 15-seat capacity for most communities presented the  biggest challenge to providing and sustaining air service to communities  under the EAS program. The mandate requires carriers to use larger  aircraft than may be needed to adequately serve some communities. In  addition, the 15-seat aircraft that this requirement was based upon are no  longer available. Currently, to satisfy the 15-seat minimum, most EAS  routes are served by 19-seat twin-engine turboprop aircraft. (See fig. 4 for   4 for  an example of a 19-seat twin-engine turboprop aircraft.)  an example of a 19-seat twin-engine turboprop aircraft.)
According to industry representatives, these 19-seat turboprop aircraft  used on many EAS routes are relatively costly to operate. First, the aircraft  are no longer in production, are in limited supply, and are also relatively  costly to acquire and refurbish to comply with current operating  standards. Second, the “Commuter Safety Rule” which FAA implemented  in 1997, has increased EAS carriers’ costs for operating 19-seat turboprop  aircraft. Through the rule, FAA intended to increase safety by requiring  aircraft in the 10-to-30 passenger range to meet more stringent safety  requirements. The increased safety standards made some aircraft,  including 19-seat turboprop aircraft, more costly to operate, because they  required carriers to improve ground deicing programs, carry additional  safety equipment for passengers, and comply with additional operating  constraints. For example, an industry group, in a petition to DOT for  exemptions from this rule, provided information showing that one EAS  carrier’s training costs increased by almost 600 percent because of the  additional training required for its captains by the revised rule. An EAS  carrier official stated that the carrier’s cost to operate 19-seat aircraft,  calculated as cost per passenger seat mile, is now about twice what it was  in 1994 primarily due to these additional regulatory requirements.  According to industry representatives, the increased operating costs  associated with the required safety upgrades have contributed to some  carriers’ decisions to eliminate their inventory of 19-seat planes. As a  result, there are fewer airlines with the type of equipment suitable to serve  most EAS routes.
The EAS minimum service requirements may also require a carrier to  provide more service than needed to meet the demands of a community  and can therefore increase the carrier’s operating costs. For example, the  EAS program statutes stipulate a minimum level of service for EAS  subsidized routes—two daily round-trip flights, 6 days per week to a hub  airport. Carriers flying 19-seat aircraft can be effectively locked into  service that may not be right sized—that is, with capacity exceeding  passenger demand—for some smaller markets, and possibly more costly  than necessary to fulfill communities’ service needs. If the need to meet  EAS program requirements results in carriers providing more capacity  than some communities might be able to support, EAS service to those  communities may be too costly for the carrier, leading it to withdraw from  the EAS program.
Further, the carriers’ 2-year agreements with DOT to provide EAS service  can complicate the carriers’ efforts to lease aircraft to serve EAS routes.  For example, some industry officials maintain that the 2-year agreements  that DOT enters into with carriers can be too short because carriers often  must lease aircraft for longer periods, such as 5 years. Therefore, a carrier  entering into a 5-year lease to obtain aircraft to serve EAS routes risks  having to maintain excess aircraft if it loses the routes after 2 years.  However, DOT officials note that under the EAS program’s current funding  structure, longer-term agreements would still be subject to availability of  annual funding, so the agreement would not be guaranteed.
Finally, spikes in fuel prices may add to EAS carriers’ costs and make it  difficult to continue service. Although fuel prices typically vary over time,  in 2008 fuel began to comprise an increasing portion of airlines’ costs, in  some cases contributing to carriers ceasing operations. For example, one  EAS carrier reported that its fuel costs increased from 28 percent of its  operating costs in 2007 to 35 percent of its operating costs in 2008,  although fuel prices began to decline late that year. We also found that last  year, selected EAS carriers experienced a rapid and dramatic spike in fuel  prices, as the average per-gallon fuel price for selected EAS carriers more  than doubled between January 2007 and July 2008, before declining  through December 2008, as illustrated in figure 5. December 2008 was that  latest month for which fuel price data were available for these carriers.
Legislation passed in 2003 explicitly provided DOT with the option of  adjusting the subsidy paid to an EAS carrier if the carrier’s expenses  substantially increased. However, according to an industry group that  represents regional airlines and the majority of EAS carriers, DOT officials  are generally not willing to renegotiate EAS agreements to reflect  increased costs because the DOT officials are concerned about retaining  sufficient funds to renegotiate the agreements and provide service for all  the communities that may qualify for service. DOT officials indicated they  are also concerned that establishing a policy of renegotiating subsidies  upward for fuel costs could lead carriers to underestimate fuel costs in  order to be selected as the carrier for a route, only to turn around soon  after selection and ask for fuel rate relief. However, industry officials  explained that if a carrier is unwilling to continue providing service under  an EAS agreement because of operating cost increases, the carrier’s only  recourse is to file a formal Notice of Termination with DOT of its intent to  terminate service. For example, in June 2008, Mesaba Airlines filed such a  notice informing DOT of its intent to terminate service at two communities  in Michigan because of fuel price increases. Mesaba indicated that it  would withdraw the notice if DOT agreed to apply a fuel adjustment to  bring the EAS subsidy rate for the communities in line with current fuel  conditions. DOT denied the request and rebid the routes. DOT eventually  reselected Mesaba Airlines to serve the routes and awarded the airline a 28  percent increase over its previous annual subsidy for the routes. Still,  industry and small airport officials said that filing a termination notice is  an undesirable option for airlines because service interruptions and carrier  turnover can negatively affect communities’ confidence in EAS service,  and result in a further reduction in ridership.
section_title: The Declining Number of Willing Carriers Reduces Competition for EAS Routes
paragraphs: As the pool of carriers willing to provide EAS service declines,  competition for EAS routes has also declined. For example, of the 37  routes that DOT awarded after three EAS carriers in 2008 ceased  operations, 20 were awarded without competition, including 7 that were  awarded to the one viable bidder remaining after the only other bidder  went out of business. However, DOT officials informed us that their  sealed-bid process prevents carriers from knowing whether there are  competing bids from other carriers. They also indicated that they can  reject bids that they believe are too high, and they can negotiate with the  carrier. For instance, the officials cited a recent example of one carrier’s  subsidy request of approximately $2.3 million being negotiated down to  about $1.6 million. Nevertheless, a declining number of carriers willing to  provide EAS service can reduce the level of competition among carriers  for EAS routes.
section_title: The Continued Urbanization of the United States and Changing Characteristics of the Airline Industry Contribute to Low Ridership of EAS Flights
paragraphs: The viability of EAS routes also depends on the number of passengers that  take EAS flights. According to DOT data, some EAS routes do not carry  many passengers, creating a financial challenge for the carriers attempting  to serve these communities. During fiscal year 2008, the average load  factor—the percentage of available seats filled by paying passengers—was  37 percent across all EAS flights. By comparison, the average load factor  for unsubsidized commercial flights nationwide has averaged about 80  percent in recent years. Two factors may contribute to the lack of  passenger traffic on EAS flights. First, the EAS program has always served  areas with limited population, but demographic shifts in the last 30 years  may have reduced the population of some EAS communities, further  limiting the potential passenger base for the local airport. Second, the EAS  program loses potential passengers and fare revenue when low fares or  more convenient air service schedules at nearby larger airports encourage  passengers to bypass EAS service at their local airport in favor of driving  or taking other transportation to the nearby airport.
subsections: section_title: Continued Urbanization of the United States May Lead to Reduced Passenger Ridership in Some EAS Markets
paragraphs: A significant degree of urbanization occurred throughout the 20th century  as people moved out of rural areas and into cities and suburbs. Although  much of this migration happened early and in the middle of the century,  the trend has continued. Geographic areas, especially in the Midwest and  Great Plains states, lost population between 1980 and 2007, as illustrated  in figure 6. As a result, certain areas of the country are less densely  populated than they were 30 years ago when Congress initiated the EAS  program. Accordingly, some EAS communities’ reduction in ridership may  be attributable, in part, to a smaller population base.
Airports generally attract passengers from the surrounding population.  However, people who live near smaller airports often choose to either  drive to their destination or use larger airports that are farther away than  their local airport. This phenomenon is typically referred to as “leakage.”  Surveys of passengers as well as travel agents in communities served by  small airports suggest that leakage can be widespread. For example, a  travel agent survey in Arizona estimated that the small airports in that  state often suffer significant leakage, in some cases as much as 90  percent. Another study we conducted found that EAS airports often  serve less than 10 percent of the local passenger traffic, and that leakag is a significant factor. Moreover, it appears that some people may be  willing to drive considerable distances—more than 150 miles—to get to a  larger airport. The loss of passengers from an EAS route reduces the  carrier’s fare revenues, while increasing the average per-passenger subsidy for that EAS service. Therefore, significant passenger leakage can lead to  (1) the carrier seeking a larger subsidy from DOT, (2) the community  losing service if the per-passenger subsidy rises above the $200 cap, or (3)  the route becoming so costly for the carrier that it chooses to file a notice  of intent to terminate service.
Certain key factors appear to underlie the propensity of travelers to  bypass small airports in favor of driving to larger airports.
Fares for EAS flights are generally high, relative to fares on  comparable unsubsidized flights. We analyzed calendar year 2007 fares  on routes involving EAS airports and compared these fares to the fares for  routes of similar distances involving only non-EAS airports. We found that  fares for EAS routes tend to be considerably higher—on average about 50  percent higher—than fares for similarly distanced non-EAS routes. Our  analysis did not attempt to identify reasons for the difference in fares  between EAS and unsubsidized flights, but likely factors that could include  the number of airlines serving the route, the number of passengers, and  the portion of passengers paying the generally higher business fares on  that route. Whatever the cause, relatively high fares for EAS flights can  make those flights less attractive, compared to the alternative of driving to  another airport. Studies of the use of airports in small communities have  generally found that passengers may drive to nearby larger airports to  obtain lower fares rather than use EAS service.
The growth of low-cost carriers has created alternatives to EAS  service. Fifteen of 18 experts on our panel cited the expansion of low-cost  carriers as one of the biggest challenges facing EAS providers, and 9 of  these panelists cited low-cost carrier expansion as the most important  challenge to EAS providers. In the past decade, low-cost carriers have  considerably expanded their networks; these carriers’ share of domestic  airline capacity increased from 20 percent in 2000 to 29 percent in 2007. By  2007, low-cost carriers were serving virtually every large and medium-hub  airport in the country as well as half of the small hubs. As low-cost carriers  have extended service to more airports around the country, they provide  more alternatives for community residents who can drive or take other  transportation to other airports to get lower air fares offered by these  carriers. Many industry stakeholders have said, and a previous GAO  study has found, that community residents who reside near an EAS  airport drive to other airports to obtain lower airfares, such as those that  low-cost carriers offer.
Larger airports tend to offer better service than that available at  EAS airports. Larger airports are generally more attractive to travelers  than small airports served by EAS flights because they offer more frequent  flights and more nonstop destinations. EAS communities receive at least  the required two daily round-trip flights, 6 days per week—although some  communities receive more. Still, most EAS routes connect a community to  a single airport. Such limited service may be too inconvenient to meet the  needs of time-sensitive business travelers. Studies have found that a key  reason passengers avoid small airports is the more frequent flight offerings  at larger airports, which can be more convenient for travelers. So, if  driving to a larger airport is feasible, a traveler from a community may  choose that option to get a nonstop flight to his or her destination, instead  of taking an EAS flight from the local community airport.
Difficulties in making useful connections at the hub airports EAS  carriers serve also discourage potential EAS passengers. For most  EAS passengers, the hub airport where their EAS flight lands is not the  end of their trip. Typically, EAS passengers need to transfer to a  connecting flight to take them to their final destination. If the EAS flight  takes passengers out of their way and increases their trip time, they may  seek alternative travel options. Even if the EAS flight takes them in the  direction of their final destination, limited EAS flight schedules may  provide poor connection options. A representative of an airport in Iowa  served by EAS-subsidized flights to Kansas City said it is hard to get  business people to use the EAS flights because the flights often don’t  match up well with the timing of connecting flights at Kansas City,  resulting in long waiting times there. These problems promote passenger  leakage away from EAS flights, when potential EAS passengers decide that  traveling directly to larger airports is more practical. The problem is  exacerbated as major carriers cut back their flights at the hub airports that  are EAS destinations. For example, according to an official of one EAS  carrier, connecting seats on flights out of two of their destination airports  have decreased, reducing options for connecting flights, making the  carrier’s EAS service to these airports less practical for passengers. As a  result, the official said the carrier’s revenue on the routes serving these  airports has declined significantly because potential passengers have  decided to use other transportation to travel to a larger airport.
Problems with EAS service reliability are another deterrent to  using EAS service. Five of the seven representatives of EAS-served small  airports who responded to our questions noted that the reliability of EAS  service was a significant concern. According to one of these airport  representatives, delays, cancellations, and route and schedule changes are  commonplace in most EAS communities. Another airport representative  noted that reliability of air service may be even more important at small  airports than at larger airports, because a cancelled or delayed EAS flight  leaves passengers with no other options. Some experts we spoke with  indicated that this is a particular disincentive to business travelers, who  may choose to drive to a larger airport.
section_title: Current Economic Conditions Are Also Decreasing Demand for Air Travel
paragraphs: As we noted in our recent report on the financial health of the airline  industry, the current economic recession is contributing to decreased  industry-wide air travel. Beginning in the second quarter of 2008,  passenger traffic began to decline, when compared with the same quarter  in the prior year. By the third and fourth quarter of 2008, traffic fell off  more significantly, and airlines reduced capacity to maintain their load  factors—which would not be an option for EAS carriers, because these  carriers cannot reduce service below the minimum level required by the  program. The downward trend appears to be continuing, as industry  demand for the first two quarters of 2009 was less than was expected as of  the beginning of the year. Indications are that the economy also affects  carriers providing EAS service. Reported passenger enplanements for the  first quarter of 2009 for one EAS carrier are down about 26 percent from  the same period 1 year ago, and the carrier’s load factors declined from 46  percent to 32 percent for that same period.
section_title: Options for Modifying the EAS Program and Instituting a Multi- modal Approach to Community Transportation
subsections: section_title: Changes to Certain EAS Program Requirements Could Help Carriers Operate More Effectively and Potentially Reduce Program Costs
paragraphs: Congress and others have been aware of the increasing difficulty EAS  carriers face in providing service to communities. Congress, previous  administrations, and GAO have proposed options to change the EAS  program that might help address some of the program requirements that  limit the flexibility of carriers providing EAS service or potentially  increase costs of providing service—leading to carriers requiring higher  subsidies from DOT. For example, DOT has proposed a number of options,  but they have not been included in authorization or appropriations  legislation. In addition, the House of Representatives’ proposal for  reauthorizing FAA (H.R. 915) includes several options that could alter  DOT’s management of the EAS program and possibly make program  participation more attractive to carriers. This proposal is not yet through  the legislative process. We also have described a number of similar options  that could promote efficiencies in the EAS program. Again, none of these  options have been adopted. Table 1 summarizes some of the key options  that have been proposed.
Each of the proposed options has potential advantages and disadvantages.  Some options would be beneficial in certain circumstances, but not for all  communities or all parts of the country. Further, not all stakeholders will  likely agree on which options should be implemented, especially when  different options produce different beneficiaries. Finally, different options  will have different impact on federal program costs—some likely  increasing total program costs, while others might decrease or limit  program costs.
subsections: section_title: Allow Carriers More Flexibility on Type of Aircraft
paragraphs: The EAS program’s current statutory minimum service requirements— such as providing service with aircraft of at least 15-seats—may add to the  cost of providing EAS service as discussed previously. Fifteen of the 17  members of our expert panel who addressed the issue of aircraft size  indicated that giving carriers more flexibility to use smaller aircraft would  make the EAS program more effective. Currently, communities entitled to  15-seat or larger aircraft can have EAS service with smaller aircraft only  when they waive their rights to the larger aircraft. According to industry  stakeholders, some communities are interested in having service from  larger, at least 15-seat, planes because it is what the law provides for as  well as for reasons including prestige and perceived concerns about  comfort.
Without this requirement for minimum aircraft size, a carrier would be  allowed to “right size” or better match the services it provides with the  communities’ demand, potentially reducing carrier operating costs as well  as the subsidy needed from DOT and total federal program costs. Also, we  previously reported that allowing carriers to provide EAS service with  smaller aircraft could, on certain routes, be cost effective and better suit  community needs. For example, officials of one EAS carrier which flies  9-seat Cessna 402 aircraft told us that their lower operating costs allow  them to provide more frequent flights and charge lower fares than the  previous carriers which flew 19-seat aircraft on those same EAS routes.  (See fig. 7 for an example of a 9-seat twin-engine aircraft.)
This change has yielded significantly increased passenger ridership.  According to the officials, in the first 10 months of service on one of their  EAS routes, passenger ridership has gone up 143 percent compared to the  previous EAS carrier’s ridership for a comparable period. In addition, the  EAS program manager stated that if he could make one recommendation  to Congress, he would suggest that Congress eliminate the 15-seat  requirement because a few EAS carriers are providing good service with  smaller aircraft.
A disadvantage of this option is that smaller aircraft might not be suitable  for all parts of the country. So, while this could be an option for certain  routes, it would not fully replace the use of larger aircraft. For example,  officials of the carrier that operates the 9-seat Cessna aircraft told us that  the aircraft are not pressurized and may not be practical in mountainous  areas in the west. Also, one airport representative believed that people  would be more reluctant to fly on such smaller aircraft. In addition, these  smaller aircraft operate under a different set of safety standards than the  larger 19-seat turboprop aircraft most frequently used on EAS routes.  According to industry representatives, this could negatively affect airlines  that spent money to upgrade their aircraft to meet the safety standards  now required for the 19-seat aircraft. An official of one EAS carrier that  primarily flies 19-seat aircraft indicated that acquiring the infrastructure  and personnel to support an additional type of aircraft would be a costly  venture and not an option for their company.
section_title: Allow Carriers More Flexibility on Service Frequency
paragraphs: The EAS program’s current statutory minimum service requirements—- such as providing at least twice-daily service, 6 days per week at EAS  communities—potentially add to the cost of providing EAS service. Six of  the 17 members of our expert panel who addressed this issue of service  frequency believed such a change would make the program more effective.
If a community is unable to generate enough passenger traffic to make  twice daily, 6-day-per-week service viable for a carrier, even with an EAS  subsidy, less frequent service might be more economically viable for the  carrier. This change could also reduce the subsidy the carrier requires  from DOT, assuming that passengers would adjust to the reduced  schedule, and that overall passenger volume would not significantly  decline due to increased passenger leakage.
Some industry experts we spoke to believed that the current minimum  level of service frequency is already so low that it is inconvenient for time- sensitive business travelers, and encourages them to drive to other  airports. One airport representative commented that service to one  destination, twice a day, does not really fit the definition of “service.”  Reducing service frequency might only further reduce a community’s  support for EAS service by making that service less available and less  useful.
section_title: Award Long-term EAS Agreements and Incorporate Financial Incentives
paragraphs: Some industry representatives have stated that the 2-year EAS agreements  are too short, considering that carriers must lease aircraft for longer  periods of time, such as five years. Five of 17 of our panel members  identified extending the length of agreements as a way to make the  program more effective. In addition, representatives of two airports served  by EAS flights noted that carriers are not penalized for poor service— carriers are still compensated when performance is poor or unreliable.
Some industry representatives we contacted believed that authorizing  DOT to award EAS agreements for longer than 2 years could better assure  carriers that they will be able to stay in the program long enough to justify  the commitments of financing and equipment that they need to effectively  manage EAS service. This change may also attract more carriers willing to  participate in the program. Financial incentives could also encourage  better service by EAS carriers. In the view of one airport representative,  carriers have spread themselves thin as they try to serve many subsidized  communities, leading to undependable service, including late arrivals and  departures. Incentives, or other means of linking subsidies to  performance, can strengthen carriers’ commitment to providing reliable  service.
DOT and some communities have expressed concerns about lengthening  the agreements because DOT would then have less frequent opportunity to  remove carriers that are providing poor service—such as a large number  of canceled or delayed flights. Instituting longer agreements would also  reduce how often a route would be opened to competition, potentially  reducing DOT’s ability to manage program costs. DOT officials also  pointed out that they could award longer agreements under current  legislation, but the program is still subject to annual appropriations.
section_title: Allow Agreements to Be Renegotiated
paragraphs: Carrier and industry officials also said they would like EAS agreements to  allow DOT to adjust subsidy amounts in response to certain cost increases  that occur during these agreements. For example, fuel costs increases in  early 2008 affected EAS carriers’ operations. Program reauthorization  legislation passed in 2003 allows DOT to adjust carrier compensation in  response to increased costs, but DOT has chosen to not use this  authority. Among our expert panel, 6 of the 17 individuals who addressed  this issue believed allowing renegotiation of EAS agreements in response  to rising costs would make the program more effective. Some industry  representatives also believe the $200 per-passenger subsidy limit has been  in effect for a long time and should be increased, even if only to reflect  cost inflation.
Allowing renegotiation of EAS agreements in response to rising costs  would enable carriers to continue service when they are faced with rising  costs rather than file a Notice of Termination which starts the process of  reawarding the agreement to serve the community. Industry  representatives have said that having to file a termination notice when  cost increases make it uneconomic to continue service harms their  relationship with the community and adds to the perception that service is  unreliable. The proposal to allow an increase in the subsidy per passenger  in response to fuel cost increases could allow some communities to retain  EAS service—in times of rising fuel prices—which might otherwise lose it  if carriers needed higher subsidies to continue that service. However, it  could increase program costs faster than they would otherwise increase.
Although authorized to do so, DOT generally has not adjusted carrier  subsidies for current EAS agreements, because, according to DOT  officials, they have limited program funds and reopening agreements could  jeopardize funding to continue EAS service for all eligible communities  that might qualify for it. A DOT official we spoke with also stated his belief  that the $200 per-passenger subsidy cap has been effective as a primary  tool to control costs. In addition, almost none of the experts on our panel  believed that increasing the $200 per-passenger subsidy cap would make  the EAS program more effective.
section_title: Consolidate EAS Flights at Regional Airports
paragraphs: We have also described an option of regionalization—essentially  consolidating EAS service to and from a number of closely located EAS  communities at a single airport. For example, there are currently 12 pairs  of EAS communities that are within 60 miles of each other, and in 5 of  these pairs the communities are within 50 miles of each other. The  previous administration’s fiscal year 2009 budget request included  language that would have supported regionalized air service. However this  language was not incorporated in DOT’s appropriation, and was not  included in the administration’s fiscal year 2010 budget request for DOT.
In more sparsely populated areas, or areas where population has declined,  this approach would focus EAS program support on one airport, and could  increase the number of passengers using that airport, potentially making  the service more viable. With more passengers using the airport,  expanding service to include more flights, larger aircraft, or additional  destinations, could be another potential benefit.
Consolidating service at multiple airports into a single airport may not be  initially popular with the communities that would lose EAS service at their  local airport; passengers who did use the service provided at those  airports would be inconvenienced. Also, some airport representatives and  other experts said this option would depend on local circumstances, such  as distance between the communities and driving conditions. However, if  air service for several communities was consolidated at a single airport, in  connection with support for ground transportation between those  communities and the airport, it could increase the likelihood that  communities would accept the consolidation. If this option is pursued, a  nonpartisan commission may need to be established to make the difficult  decisions—on an impartial basis—about where to provide EAS service.
section_title: Focus EAS Service on the Most Remote Communities
paragraphs: The existence of leakage demonstrates passengers’ willingness to bypass  their local EAS service in favor of traveling to a larger airport that offers  more flight options, more direct flights, and lower fares. Currently, to  qualify for EAS service, a community must be at least 70 highway miles  from the nearest medium- or large-hub airport. In previous reports we  discussed the options of both increasing the 70-mile minimum qualifying  distance, and including small hubs in this criterion. For instance, DOT  information shows three communities with EAS service are within 50  miles of a small-hub airport. As another approach to the same issue,  DOT’s fiscal year 2009 budget request proposed ranking EAS-subsidized  communities in order of decreasing driving distance to their nearest large-  or medium-hub airport, and funding communities starting with the most  isolated, and continuing in that order, until funding is exhausted, although  this language was not incorporated in the fiscal year 2009 appropriation  and not included in the fiscal year 2010 budget request. In addition, 13 of  the 17 members of our expert panel who addressed this issue believed  extending the qualifying distance from a hub airport above the current 70- mile minimum would make the EAS program more effective.
Proposals to extend the minimum qualifying distance from an EAS  community to the nearest hub airport, or to otherwise focus EAS program  funding on the more remote communities, would allow the EAS program  to serve communities with relatively poor transportation access, while  accommodating increasing costs and subsidies in an environment of  limited program funding.
Implementing one of these options would mean some communities that  currently have EAS service would lose it, just as past changes in  community eligibility requirements have led to some communities being  dropped from the program. Also, some officials of community airports  caution that basing eligibility on distance from a hub airport should  consider local terrain and conditions—even the current 70 miles may not  be a practical driving distance in mountain terrain, or where there is  hazardous driving in winter.
section_title: Capping Eligibility of Program as of a Specified Date
paragraphs: The cost of the EAS program and the number of communities served has  grown substantially in recent years, with the potential for more  communities seeking service in the near future. Essentially the  communities eligible for subsidy would be limited to those receiving  subsidy as of a given date.
Capping the program at the currently subsidized communities would help  contain the program’s total costs. The stable size of the program would  make it easier for DOT to manage the program and make funding the  program more predictable, while not expelling any community currently  receiving benefits under the program.
If a community that is currently receiving unsubsidized commercial air  service should lose that service, that community would not be able to get  EAS subsidized service if this change was implemented. Since  communities historically have come into and gone out of the program, the  decisions about who would be eligible for subsidies would be based on the  effective date selected for this change.
section_title: A Multimodal Approach to Connecting Communities to the National Transportation Network Is Another Option
paragraphs: Several of the proposed changes to the EAS program may help to address  current concerns and enable the program to continue providing air service  to communities. However, even with changes to the EAS program, some  EAS communities would still have limited demand for the service, due to  proximity to other airports or limited population. For such communities,  other transportation modes might be more cost effective and practical  than EAS service for connecting communities to the transportation  network. Our expert panel, in addition to considering changes to the EAS  program that would make it more effective, also considered the potential  offered by more fundamental changes to the federal government’s  approach to supporting intercity transportation for small communities.  The 17 members on our panel who addressed this issue all believed that  the EAS program needed substantive change to make it more effective in  supporting small communities’ access to the national transportation  network, and that a multimodal approach to provide financial assistance  to small community transportation could potentially be more responsive  to communities’ needs.
GAO and others have also made proposals that would broaden the  government’s approach to small community transportation to include  other transportation modes. Proposals include support for other types of  transportation besides scheduled air service and other approaches to  financial assistance besides subsidies to carriers. For example, as part of  the Vision 100-Century of Aviation Reauthorization Act in 2003, Congress  authorized a number of changes to the EAS program, including the  Community and Regional Choice programs, which allowed DOT to provide  financial assistance directly to communities to obtain air taxi service, or  pursue other transportation options. According to a DOT official, this  program generated almost no interest from communities, perhaps because  communities may believe that air service they have under current law is  better than the alternatives. We have also proposed similar options that  might enable the EAS program to provide less costly and more sustainable  service, including better matching air service capacity with community  needs by allowing the use of “on demand” service such as air taxis and  changing the carrier subsidies into local grants, thus allowing communities  more flexibility to determine how to the use the funds to best meet their  needs. The previous administration’s fiscal year 2009 budget request also  proposed modifying EAS program service requirements to allow program  funds to be used for air taxi or charter service, or ground transportation.  Congress did not enact any changes in response to this proposal.
Most of the panel members thought that allowing the EAS program to fund  other types of air service, such as air taxis, would make the program more  effective. For communities with low passenger volume, this may be a more  practical option than underutilized scheduled service. On-demand service  could be more useful to some communities because flight departures  would not be constrained by a limited schedule. Also, current EAS routes  typically connect a community to just a single destination. On-demand  service could still take community passengers to the hub, but it could also  go to any airport within the range of the service’s aircraft. These features  could make air service more useful to the community, increase demand,  and make the operation more commercially viable. However, current EAS  statutes require scheduled service by carriers and would have to be  revised by Congress to accommodate air-taxi-type services. Additionally,  current commercial air taxi services are relatively expensive. It may be  hard to predict what such a service would cost under EAS, or the level of  subsidy it would require, until it is tried.
Alternatively, a community that cannot support EAS service within the  subsidy limit might be better served through ground transportation. In  many parts of the country, motorcoach companies and passenger rail  already deliver passengers to large hub airports. For example, according  to an American Bus Association official, motorcoach companies transport  more than 2.5 million passengers annually from Maine, Vermont, and New  Hampshire to Boston’s Logan Airport. The official said that about half of  the communities currently in the EAS program are also served by  motorcoach companies, which in some cases even provide community-to- hub airport service that competes with EAS service. If a community  cannot support air service even with an EAS subsidy, it may be able to  support subsidized motorcoach or other ground transportation.
Experts on our panel, as well as others with whom we spoke recognized  that there will be difficulties if a multimodal approach to small community  transportation is adopted. They noted that a multimodal approach to  providing transportation assistance to small communities would likely  face opposition from communities if they were to lose air service. In  addition, it would create concerns about the potential source of funding  because current DOT funding is largely “stove-piped” through funds that  support—and are financed by—specific transportation modes. For  example, federal funding for airports and aviation primarily comes from  the Airport and Airway Trust Fund, which is funded by several aviation- related excise taxes. Federal funding for highways is provided through the  Highway Trust Fund which is supported by motor fuel and other vehicle- related taxes. Experts on our panel and others said a multimodal approach  can also result in different transportation modes “competing” for funds, as  advocates for the various transportation modes may oppose any change  that is seen as diverting funds dedicated to one transportation mode to  support another. Taking a multimodal approach to small community  transportation will require creative approaches to address these concerns.  Finally, some of the experts in our panel expected that a true multimodal  approach to support small community transportation would require more  federal funding than the EAS program alone provides.
section_title: Selecting Options for the EAS Program Is Difficult, but Tools Exist for Assessing the Options and Improving Program Evaluation
subsections: section_title: Selecting Options to Implement Is Difficult and Depends on How Program Objectives Are Defined
paragraphs: Over the years, Congress has made incremental changes to the program  such as changing the eligibility criteria or funding; however the program’s  approach remains little changed since it was implemented 30 years ago.  Although Congress, the administration, GAO, and others have proposed  potential changes to the EAS program, it is difficult for policymakers to  determine which options to select, since different options for modifying  the program might affect stakeholders such as airlines and community  residents differently. For example, supporting increased use of smaller  planes may increase the cost effectiveness of certain routes, but one  industry association commented that this would penalize carriers who  have made the investment in larger aircraft to satisfy current program  requirements. In addition, as some of the panel experts and others  recognize, these transportation decisions could become politicized. For  example, a regional airport may make sense in certain geographic areas;  however, no community would want to lose its local service, along with  the assumed prestige and economic benefits to another community.
Further, it is difficult to determine which option or suite of options to  select, since stakeholders have different opinions on what the program is  to achieve. When the program was established in 1978, it provided  subsidized air service to communities that were receiving air service at the  time and would have lost air service under deregulation, so in one sense,  the program supports scheduled air service. However, the legislative  history accompanying the Airline Deregulation Act also describes the  program as supporting both connectivity to the national air transportation  system and the growth and economic development of the communities  served. These multiple program objectives make it difficult to assess  which options to use. For example, if the objective is to continue  providing air service to communities that were receiving air service at the  time of deregulation, providing additional funding to cover expected cost  increases and renegotiating contracts in response to cost increases like  fuel prices could meet that objective. If the objective is to provide cost- effective air service, options such as allowing more flexibility for type of  aircraft and service frequency or establishing regional airports might be  appropriate. Or if the objective is to provide access to the national  transportation system, perhaps a multimodal approach or focusing on the  most remote communities might be better options.
section_title: Using GAO’s Re- examination Approach to Revisit the EAS Program’s Objectives Could Help Clarify the Extent to which Different Options Meet those Objectives
paragraphs: Changes in the aviation industry and the nation’s financial situation over  the past 30 years may make this an opportune time to revisit program  objectives and evaluate design options for the program. In 2005, we  reported that federal deficits portended an economically unsustainable  situation in the long term, making it incumbent upon the federal  government to periodically re-examine programs to assure they are able to  meet current and future challenges. Certainly, the deficit picture has only  grown more critical since then, as has the need for reviewing and updating  federal programs to assure their continued effectiveness. In our report 4  years ago, we developed several criteria designed to address whether  existing programs are relevant to the challenges of the 21st century, and to  support making tough choices in setting priorities. These criteria relate to  (1) having well-defined goals with direct links to an identified federal  interest and role, (2) defining and measuring program success, (3)  targeting benefits, and (4) affordability and cost effectiveness. These  criteria, which could be used to re-examine the EAS program, are  summarized below and discussed in more detail in appendix III.
subsections: section_title: EAS Program Goals and the Federal Government’s Role in Supporting These Goals and Objectives
paragraphs: The EAS program has multiple objectives, which are in some ways  conflicting, contributing to a lack of clarity in the federal role. Revisiting  the goals and objectives of the EAS program would help define the federal  government’s role in the program, that is, what the federal government  should be doing and how it should be doing it. For example, defining the  EAS program’s objective as subsidizing scheduled commercial air service  at communities that would not otherwise have air service, as the program  has operated since it began, could lead to one program design and related  performance measures addressing such factors as the number of  communities with subsidized air service, the cost effectiveness of that  service, and various measures for the quality of that service. However,  identifying the objective of the program as providing rural and small  communities with connectivity, including air service, to the national  transportation network—which was also identified as an objective of the  EAS program at the time it was enacted—could lead to defining a different  set of options not limited to providing subsidized air service, but also  considering multiple transportation modes. Supporting the broader  objective of connectivity would also be consistent with DOT’s Strategic  Plan, which identifies global connectivity as one of the agency’s strategic  goals.
section_title: Defining and Measuring Program Success in Supporting DOT’s Strategic Goals
paragraphs: The performance measures that DOT has established for EAS relate to  maintaining uninterrupted service at EAS-subsidized communities and the  timeliness of processing agreements and making payments to carriers.  Setting additional measurable targets for what the program is intended to  accomplish would allow DOT to (1) assess the relative success of the  program and (2) more effectively manage program resources toward  achieving program goals or determine what level of resources are needed  when the program is not achieving its objective.
section_title: Targeting Program Benefits to Improve Program Results
paragraphs: Congress has modified eligibility criteria for the EAS program in the past.  In 1978, the list of communities potentially eligible for EAS subsidized  service was established. In 1994, Congress added the requirement that a  community must be at least 70 miles from the nearest medium- or large- hub airport to qualify for EAS service. Examining the criteria again, given  changes in population and the air service industry, may help target the  benefits of the program to those communities that have the least access to  the national transportation system.
section_title: Analyzing Cost Effectiveness of Existing Program Options
paragraphs: Analysis of the cost and affordability of EAS program can support  decisions that may need to be made to address how and where to use  existing program resources or if options to revise the program are  warranted. Given the trend of increasing carrier subsidies and the  potential for more communities seeking EAS subsidies if they lose their  unsubsidized service, it is important for policymakers to assess whether  the EAS program is affordable and financially sustainable over the long  term, given known trends and risks. Consolidating service from two or  more closely located EAS communities at a single airport is one option  that could make service more cost effective. Another option that has the  potential to improve cost effectiveness of EAS service for some  communities would be to allow more latitude in determining the type of  aircraft and flight schedules that would provide the level of service the  community needs and can support.  Finally, establishing a multimodal  approach could provide cost-effective options for connecting people to the  national transportation network.
section_title: Analytical Tools Could Help Assess Program Demand and Transportation Options
subsections: section_title: Geographic Information Systems Analysis
paragraphs: Since the EAS program’s basic design is 30 years old, policymakers may  want to reconsider the characteristics of communities that are provided  with federal transportation assistance. Reconsidering the design of federal  programs—-such as the EAS program—requires a variety of information,  and methods exist that can help develop such critical data. For example,  Geographic Information Systems (GIS) analysis can be used to evaluate  community access to transportation—both to air service and to other  modes. In general, GIS applications are tools in which varied geographic  information is compiled to enable analyses based on the relationship of  one element, such as communities, to another element, in this case, modes  of transportation. These tools have become critical in the field of  transportation planning and management over the past 30 years. Such  analyses can be used to evaluate transportation options, and help develop  cost-of-service estimates. We analyzed the access that different groups of  communities have to the various transportation modes by mapping those  communities along with the availability of the transportation modes. The  goal was to take a fresh look at community access to transportation  networks in the geographic context that exists today—a less rural society  and potentially different transportation options than existed 30 years ago  when the EAS program was conceived.
The goal of our analysis is to use information on community  demographics, access to transportation modes, and other relevant factors  to illustrate how these key factors could be considered in developing an  approach to ensuring access to air service or other modes of  transportation. We examined the proximity of the selected communities— community selection depended on community size and distance from  medium- or large-hub airports—to transportation modes. We selected  communities that had a population of between 10,000 and 500,000 people  and that were at least 90 miles from the nearest medium- or large-hub  airport. It would have been possible to select different sized communities  or those that were either closer or farther from a medium or large hub. For  selected communities, proximity to various types of airports, passenger  rail stations, and entry ramps onto major highways were considered. This  enabled comparisons across the communities as to their relative access to  varied transportation modes. In appendix IV we provide outcomes of the  analyses we performed to illustrate how GIS analysis can be used to re- evaluate small community transportation options. This type of analysis  might help determine the impact of the option to focus EAS assistance on  communities that are most distant from alternative hub airports.
Also, DOT’s Bureau of Transportation Statistics has taken steps to identify  the intermodal connectivity of the population of the United States. In 2005,  it published work showing that in 2003 about 93 percent of the rural  residents lived within what DOT determined to be a reasonable coverage  area of at least one of the four (air, bus, rail, and ferry) intercity public  transportation modes. They acknowledge that this access may have  diminished because of a recent reduction of Greyhound bus terminals and  a portion of an Amtrak line. To get an even better idea of how connected  the country is, DOT is continuing to work on an intermodal passenger  connectivity project that involves cataloging and geographically plotting  all transportation facilities in the United States and indicating what modes  serve these facilities to develop a database of this information. While this  is an ongoing project, data DOT has available could provide an additional  source of information with which to evaluate the extent to which certain  communities are connected to the national transportation network.
section_title: Benefit-Cost Analyses
paragraphs: In addition to GIS analysis, the tools and methods of benefit-cost analyses  can be used to provide information on economic factors that may be  useful in evaluating options. The cost of providing subsidized service to  communities may vary considerably depending on the communities’  location or the type of service provided. Developing data to better  understand these tradeoffs would help policymakers design the most  appropriate program for the current circumstances. For example,  estimates of program costs across various alternative modes and the value  provided to communities for these services could help to ensure that  programs are designed to use funds in the most beneficial way.  Specifically, generating information on the expected demand for  transportation services from communities could help stakeholders better  understand the value gained by citizens from having access to service  across various modes.
section_title: Expanded Performance Measures Would Enhance DOT’s Ability to Evaluate Program Effectiveness
paragraphs: The Government Performance and Results Act of 1993 requires executive  agencies to develop a long-term strategic plan, prepare annual  performance plans, and measure progress toward the achievement of the  goals described in the plans. The annual performance plans should  establish the connections between the long-term goals outlined in the  agency’s strategic plan and the day-to-day activities of managers and staff.  In addition, the goals and measures in the plan should address program  results and how programs help the agency progress toward their strategic  goals.
EAS program performance is difficult to assess beyond providing air  service to eligible communities because DOT does not have performance  measures that demonstrate the extent to which the program is  contributing toward DOT’s strategic goals of connectivity or congestion  reduction—the strategic goal where the EAS program is located. Further,  the Office of Management and Budget most recently evaluated the EAS  program under its Program Assessment Rating Tool in 2006 and found the  program does not have enough long-term performance measures that  focus on outcomes and meaningfully reflect the purpose of the program.  The EAS program’s current annual performance measures include one  long-term measure that addresses program performance in a specific  way—maintaining continuous air service at 98 percent of eligible  communities. Other measures relate to administrative activities, including:  (1) the percentage of renewal agreements that are established before the  existing agreement expires, (2) the percentage of new agreements  processed within 160 days of carriers’ notices to suspend services, and (3)  the percentage of payments to carriers that are processed within 15  business days. In 2007, the most recent year DOT published information  on its performance in these areas, DOT exceeded its goals for the  percentage of new agreements processed within 160 days and renewal  agreements established before the existing agreement expires. DOT nearly  met its goal for processing payments within 15 business days, and did not  meet its goal for maintaining continuous air service at 98 percent of  eligible, subsidized communities. DOT’s single long-term performance  measure—maintaining continuous air service at 98 percent of eligible  communities—- reflects an important aspect of program operations. But  additional performance measures, addressing other aspects of program  performance, could provide a broader perspective on how the EAS  program contributes to DOT’s strategic goals.
section_title: Conclusions
paragraphs: For many communities, the EAS program provides a valuable connection  to the national transportation network. Many EAS routes carry 10,000 or  more passengers per year. However, low passenger volume and high  subsidies remain the norm for many EAS communities. Changes in the air  service industry, including the growth of air travel alternatives provided by  low-cost carriers, have changed the environment in which the EAS  program operates. However, some legislative EAS program requirements,  and the growing cost to operate aircraft for EAS service, contribute to the  program’s inability to maintain service to EAS communities. Further, rural  population shifts since deregulation, and continuing passenger leakage  away from small airports with EAS service combine to limit passenger  ridership on EAS flights. These factors contribute to the continuing  financial strain on the EAS program which brings its long-term viability  into question.
A re-examination of the EAS program, assessing options to make the  program more sustainable and effective, and the development of  performance measures to monitor program performance, may be  warranted. Many options to help address the problems and limitations the  current program faces exist. However, making these decisions is difficult;  and Congress has yet to implement any of these options. These decisions  are difficult because no one option may work for all communities. Options  to change the program requirements might be necessary to sustain EAS.  Further, in some locations it might be beneficial to study air taxi and  multi-modal approaches to ensuring small and rural communities are  connected to the national transportation network.
Finally, if decisions are reached to revise the program design, steps should  be taken to implement and monitor the program. For example, if the  program design is to be revised the legislation governing the program  would need to be revised accordingly. In addition, additional performance  measures to evaluate the program may need to be developed.
section_title: Matters for Congressional Consideration
paragraphs: In light of developments related to population shifts, the aviation industry,  and the national transportation infrastructure, Congress should consider  re-examining the program’s objectives and related statutory requirements  and seek information from DOT as needed to support this effort. Such a re- examination could include (1) consideration of the rationale behind  existing statutory requirements, such as those for 15-seat, 2-engine, 2-pilot  aircraft in EAS service; (2) the possibility of providing greater flexibility as  to plane size, frequency of service, eligible communities, or regionalization  of service; and (3) the possibility of assessing multimodal solutions for  communities.
section_title: Recommendations for Executive Action
paragraphs: We are recommending that the Secretary of Transportation  1.  Evaluate the reasonableness of    providing transportation service, whether through unscheduled air  service or surface modes of transportation, when these alternatives  might better serve communities than current scheduled EAS  service, and   DOT’s current practices for carrier agreements, including the 2-year  duration of agreements, and not renegotiating subsidy amounts in  response to quantifiable cost increases.  2.  Once decisions are made about any changes to the EAS program, DOT  should determine whether additional performance measures are  needed to evaluate program outcomes.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOT for its review and comment.  DOT provided technical comments in an e-mail message on July 6, 2009,  which we incorporated into this report as appropriate. In reviewing our  original recommendation calling for additional performance measures for  the EAS program, DOT officials indicated that some performance  measures were already in use, and said that they also monitor other  performance data, such as passengers served. They acknowledged that  additional performance measures would support operational  improvement, and stated that they would determine those measures as  needed. We believe the implementation of any changes to the EAS  program—or how the EAS program is used to provide communities with  access—which result from Congressional or DOT action would warrant  consideration of additional performance measures. As a result of DOT’s  comments and the possibility of changes to the program, we modified our  original recommendation. DOT concurred with our revised  recommendations.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 7 days from the  report date. At that time, we will send copies to appropriate congressional  committees, to the Secretary of Transportation, and to appropriate  officials within the Office of the Secretary. We will also make copies  available to others upon request, and the report will be available at no  charge on the GAO Web site at www.gao.gov.
If you have any questions about this report, please contact me at (202) 512- 2834 or at dillinghamg@gao.gov Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix V.  erald L. Dillingham, Ph.D.
section_title: Appendix I: Objectives, Scope and Methodology
paragraphs: To describe the status of the Essential Air Service (EAS) program, we  reviewed Department of Transportation (DOT) data on the EAS program,  DOT’s agreements with airlines to provide service, and financial data for  the program and selected airlines. We also reviewed relevant studies and  interviewed industry experts. Our review focused on communities within  the 48 states of the continental United States that have received EAS  subsidized service. This is because the requirements for communities in  Alaska are different than for communities in other states. In addition, EAS  subsidized service outside of the contiguous states are not representative  of the program in the rest of the United States.
We obtained DOT data that represented the characteristics and current  status of the program at specific points in time in order to describe trends  in EAS service. We obtained DOT data from 2003 through early 2009 on  the number of communities served by the EAS program, the subsidies  awarded airlines to serve these communities, and the passengers enplaned  on EAS flights. We selected 2003 as our base year because that was the  first full year DOT required carriers to file air traffic activity in a uniform  reporting system. DOT provided the information about EAS communities,  associated subsidies, and carrier enplanements in a series of excel  schedules. The schedules document EAS service only as of a specific dates  and therefore do not represent a continuous picture of service provided  under the EAS program. To assess the reliability of the community and  subsidy information in the schedules, we selected a random sample of the  subsidy award information in the schedules and traced the information  back to the DOT order where DOT officially announced its agreement with  a carrier to serve an EAS route. DOT issues its orders via its docket,  accessible at www.regulations.gov. However, we could not assess the  reliability of the carrier’s enplanement data in the schedules. To do so  would have required a comprehensive review of DOT orders to identify the  carrier serving each route, the destination hub, when the carrier initiated  service on each route, and when the carrier either suspended or  terminated service. Because the schedules do not represent a continuous  picture of service provided under the EAS program, our review of DOT  orders would also be incomplete. In addition, during the course of our  review, we also found we could not develop trend information on  passengers that board (enplane) subsidized EAS flights as well as the  agreed-upon subsidies for those flights from available DOT data other than  the information DOT provided in the schedules.
We also obtained relevant financial data for the EAS program including  appropriations and expenditures data. We reviewed relevant legislation to  verify the appropriations information but did not have sufficient  information to validate the expenditures data. We also obtained data  documenting fuel use and cost in 2007 and 2008 for selected airlines from  OAG BACK Aviation Solutions, a private contractor that provides online  access to U.S. financial, operational, and passenger data with a query- based user interface. FAA does not require smaller airlines to file  information on fuel use and cost, so we could only extract fuel data on  certain larger airlines providing EAS service. We also compared fare data  for routes involving EAS flights with fares on comparable unsubsidized  routes, to assess how EAS fares compared to unsubsidized fares.
We conducted a literature search to obtain research studies that examine  the role of air service in the economic development of small communities  and their connections to the national transportation network. Where  applicable, the research and studies were reviewed by a GAO economist to  determine that the studies were sufficiently reliable for our purposes. We  also reviewed previous reports and studies of the EAS program including  previous GAO, DOT, and other federal agency reports. We reviewed  studies about the national transportation network and how rural  communities connect to this network, reports on the rationale for the EAS  program, and legislation that established and extended the program. We  reviewed relevant regulations and legislation to obtain information on EAS  program criteria and requirements for communities to be eligible for  subsidized service under the EAS program.
Finally, we conducted interviews with DOT officials, industry associations  and consultants, airlines and community airports, local governments, and  other relevant officials.
To identify the factors affecting DOT’s ability to provide service to  communities, we reviewed relevant literature, including previous GAO  reports as well as other studies of the EAS program and air service to  small communities. We identified the factors that limit the capacity of the  EAS program to provide subsidized service to communities. We also  examined the literature to identify the limitations inherent to small  communities, aviation industry trends as well as the EAS program itself.  We also analyzed data on fares charged for EAS flights.
We held a panel discussion attended by 19 experts on small community air  service including airline officials, current and former EAS program  administrators, economists, other transportation providers, and state and  local officials. We discussed and surveyed these experts on the factors  affecting the EAS program and options for providing connectivity to small  communities across the country, including (1) the challenges facing air  service to communities, (2) the role of the federal government in  supporting communities’ access to the national transportation network,  and (3) the federal government’s options for supporting small community  transportation. We composed this panel of experts representing different  types of stakeholders in the EAS program, including program officials.  Thus, although individual panel members were not independent, the panel  as a whole was balanced for our purposes. See appendix II for a summary  of panel responses to questions we submitted to them, as well as a list of  the panel participants.
We reviewed Geographic Information Systems (GIS) and Bureau of the  Census information as well as data from other sources to examine the  extent to which the rural and small community population has shifted in  the 30 years since the EAS program began. We identified areas where the  population has grown as well as areas where the population has  decreased. Further, we examined the extent to which selected rural areas  are connected to the national transportation network. See appendix IV for  further information.
We identified options for improving the EAS program through a review of  previous GAO reports, and discussions with officials from DOT and  industry associations as well as industry consultants. We also identified  options in proposed legislation that would affect the EAS program. We  discussed these options with our expert panel, industry and program  representatives, community officials, and other experts to obtain their  views on the viability and feasibility of the options for providing assistance  to remote communities and increasing their connectivity to the national  transportation network. For example, a national association of airports  sent questions we developed to seven of their member airports about  their experiences and views of the EAS program and forwarded their  responses to us.
To identify tools that may help DOT to re-examine and assess the  performance of the EAS program, we reviewed literature that discussed  options for improving the EAS program as well as GAO reports that  discuss methods for re-examining federal programs in light of budget  limitations. We reviewed previous GAO reports that discuss our re- examination framework to determine how such a framework could aid  DOT in clarifying the strategic goals and options for the EAS program. We  further examined DOT’s EAS program data and current performance  measures in light of their usefulness for monitoring and managing the  program.
We conducted this performance audit from March 2008 through July 2009  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.
section_title: Appendix II: Panelist Responses to GAO Questionnaire
paragraphs: Table 2 summarizes responses provided by the members of our expert  panel to the questionnaire we administered during the panel sessions. A  listing of the panel members follows the summary of questionnaire  responses.
For each question, rank the three most significant factors, from 1 to 3.
Number of panelists who ranked  as 1, 2, or 3 1) Which category of challenges is the most significant, in terms of its  impact on carriers’ ability to provide air service under the EAS  program? (19 panel members addressed this question)
Challenges in serving the small community market.
Challenges in the air service industry environment.
All of the above are equally important  2) Which of the following aspects of providing and sustaining air  service to small community markets present the biggest challenges?  (19 panelists responded to this question)
Small populations limit the market of potential passengers.
Limited community business activity limits the market of potential  business passengers.
Rural and small community populations have shifted in the 30 years  since deregulation—the EAS program may not be serving  communities that have the greatest need for subsidized air service,  in terms of other transportation options they may have.
EAS carriers may do insufficient marketing so that local residents  are unaware of service.  “Leakage,” as small community residents bypass their local airports,  and use other options for travel.  “Prop avoidance,” or travelers’ reluctance to fly in smaller turboprop  aircraft that serve small airports.
Inadequate financial support, or other commitment, for EAS service  from local government or the business community.
Inadequate federal funding for the EAS program.
Number of panelists who ranked  as 1, 2, or 3 3) What changes in the air service industry environment since  deregulation have been the biggest challenges to small community air  service, including EAS service? (18 panel members addressed this  question)
Major carriers shifting to a hub-and-spoke route structure.
The expansion of low-cost carriers, creating more opportunities for  small community residents to bypass their local airport in favor of  lower fares at another airport.
Decreasing availability of 19-seat turboprop aircraft used most often  by EAS carriers.
EAS carriers’ difficulty in obtaining code share agreements with  larger carriers that would allow passengers to book connecting  flights on those carriers as part of the same trip.
Lack of interline arrangements with larger carriers that would allow  passengers to check bags to their final destination.
Congestion at hub airports, with fewer slots available for small  carriers.
The growth in business owned or leased aircraft, reducing the need  for commercial business travel.
Increased post-9/11 security requirements at small airports.  4) What EAS program requirements represent the biggest challenges  to providing and sustaining air service to small communities under the  EAS program? (16 panel members addressed this question)
The $200 per passenger subsidy cap (for communities less than  210 miles from a medium or large airport).
The EAS program mandates using 15-seat or larger aircraft.
Minimum service requirements of two daily round trips, six days a  week.
Two-year EAS agreements are too short.
No built-in agreement provisions for renegotiating subsidies to  reflect rising costs (other than carriers filing a notice to terminate  service, in order to negotiate a higher subsidy).
Insufficient profit margins (5 percent of operating expenses) allowed  by the program.
Eligibility criteria—that a community must have had service at the  time of deregulation—-has not changed since 1978.
Part 2: The role of the federal government in supporting small communities’ access to the national transportation network  1.) Should it be the federal government’s role to provide financial assistance to support small  communities’ connection to the national transportation network? Check One. (17 panel members  responded to this question)  2) If the federal government should support small community transportation, what is the primary reason  for doing so? Check one. (17 panel members responded to this question.)
Supporting economic sustainability or growth in those communities.
Supporting those communities’ connection to the national transportation network.
Both of the above are equally important.  3) Should there be performance goals, or measures of success, established for DOT to meet in  carrying out transportation assistance programs, such as the EAS program? Check one. (17 panel  members responded to this question.)  4) What performance standards and measurable goals could be established for the EAS program?  Check as many that apply. (16 panel members responded to this question.)
Standards for access to the national transportation system.
Standards for community economic development.  5) In general, do you believe the federal government should prioritize the relative transportation needs  for communities, for the purpose of deciding which communities get federal funding? Check One. (16  panel members responded to this question.)  6) Do you believe a system for assessing communities’ relative need for transportation, such as the  methodology described by GAO, would be useful for targeting federal transportation assistance to  small communities? Check One. (17 panel members responded to this question)
Part 3: What are the federal government’s options for supporting small communities’ access to the national transportation  network?  as 1, 2, or 3 1) Are there any EAS program criteria or requirements that should be  revised to make the program more effective in supporting economic  development and connectivity in the communities served? Check One. (17  panel members responded to this question)  2) If so, what changes might make the program more effective? Rank the  three most significant, from 1 to 3. (17 panel members responded to this  question)
Increase the passenger subsidy cap from $200.
Award EAS agreements for longer time periods (e.g., 5 years).
Allow agreements to be renegotiated in response to rising costs.
Change criteria to focus program resources on more remote  communities (i.e., increase the minimum 70-mile distance from a  medium or large hub for a community to qualify).
Give carriers more flexibility to use smaller aircraft.
Give carriers more flexibility to provide less frequent service.
Require carriers to commit funding to local marketing for EAS service.
Require carriers to have code share agreements with large carriers at  destination hubs, to obtain an EAS agreement.
Require carriers to have interline agreements with larger carriers, to  obtain an EAS agreement.  3) Does the EAS program need more substantive change or restructuring  to make it more effective in supporting small communities’ access to the  national transportation network? Check one. (17 panel members  responded to this question)  4) If so, what changes would make the program more effective? Rank the  three most significant, from 1 to 3. (17 panel members responded to this  question)
Open the program to more communities by dropping the requirement  that a community must have had air service at the time of deregulation in  order to qualify for subsidized service.
Allow the program to subsidize other types of air service, such as air taxi  service, as an alternative to regularly scheduled air service.
Give eligible communities the option of getting a grant, in lieu of EAS  service, which can be used to obtain other transportation (e.g.,  subsidizing air taxi, or ground transportation).
Require local or state matching funding equal to some percentage of the  federal funding.
Base continued financial assistance upon meeting minimum  performance standards, or other measures of success.
Limit the number of years that a community can receive subsidized  service under the program.  5) What would be the benefits, if any, of the federal government taking a  multi-modal approach to providing financial assistance to small community  transportation? Check as many that apply. (17 panel members responded  to this question)
Potentially more responsive to individual community needs.
Potentially a better return in terms of useful services provided for the  level of federal investment.
May promote local and regional transportation planning.  6) What would be the costs or trade-offs, if any, of the federal government  taking a multi-modal approach to providing financial assistance to small  community transportation? Check as many that apply. (15 panel members  responded to this question)
Would require increased federal funding to be effective.
Funding may be diverted away from the EAS program.
Transportation modes will be competing against each other for funding;  decisions on how funding is used will become increasingly politicized.
There would be no added costs or trade-offs.
section_title: Appendix III: 21st Century Questions for Program Re-examination
paragraphs: In 2005, we reported that federal deficits portended an economically  unsustainable situation in the long term, making it incumbent upon the  federal government to periodically re-examine programs to assure that  they are able to meet current and future challenges. Many current federal  programs and policies were designed decades ago to respond to trends  and challenges that existed at the time of their creation. Much has changed  since then. Therefore, we developed criteria for policymakers to consider  as they address emerging needs by weeding out programs and policies that  are outdated and ineffective and updating existing programs that are still  relevant. We framed the criteria as questions designed to address the  legislative basis for the program, its purpose and continued relevance, its  effectiveness in achieving goals and outcomes, its efficiency and targeting,  its affordability, its sustainability, and its management. We used these  criteria to generate specific 21st century questions about those programs  and priorities already identified. The resultant 21st century questions  illustrate the kinds of issues that a re-examination and review initiative  needs to address.
subsections: section_title: Relevance and Purpose of the Federal Role
paragraphs: Does it relate to an issue of nationwide interest? If so, is a federal role  warranted based on the likely failure of private markets or state and local  governments to address the underlying problem or concern? Does it  encourage or discourage these other sectors from investing their own  resources to address the problem?
Have there been significant changes in the country or the world that relate  to the reason for initiating it?
If the answer to the last question is ‘yes,’ should the activity be changed or  terminated, and if so, how? If the answer is unclear as to whether changes  make it no longer necessary, then ask, when, if ever, will there no longer  be a need for a federal role? In addition, ask, “Would we enact it the same  way if we were starting over today?” Has it been subject to comprehensive  review, reassessment, and re-prioritization by a qualified and independent  entity? If so, when? Have there been significant changes since then? If so,  is another review called for?
Is the current mission fully consistent with the initial or updated statutory  mission (e.g., no significant mission creep or morphing)? Is the program,  policy, function, or activity a direct result of specific legislation?
section_title: Measuring Success
paragraphs: How does it measure success? Are the measures reasonable and  consistent with the applicable statutory purpose? Are the measures  outcome based, and are all applicable costs and benefits being  considered? If not, what is being done to do so?
If there are outcome-based measures, how successful is it based on these  measures?
section_title: Targeting Benefits
paragraphs: Is it well targeted to those with the greatest needs and the least capacity to  meet those needs?
section_title: Affordability and Cost of Effectiveness
paragraphs: Is it affordable and financially sustainable over the longer term, given  known cost trends, risks, and future fiscal imbalances?
Is it using the most cost-effective or net beneficial approaches when  compared to other tools and program designs?
What would be the likely consequences of eliminating the program, policy,  function, or activity? What would be the likely implications if its total  funding was cut by 25 percent?
When taken together, these questions can usefully illustrate the breadth of  issues that can be addressed through a systematic re-examination process.
section_title: Appendix IV: Geographic Information Systems Analysis of Small Community Transportation Access
paragraphs: This appendix provides an overview of the GIS analyses we conducted of  community access to the transportation network. In this appendix we  discuss (1) the motivation for the analysis, (2) some key societal and  industry factors that have changed since deregulation, (3) how we  generated the set of communities for examination, (4) how an index  measuring of “access” was defined, and results for communities’ access to  airports, Amtrak, and major roads.
subsections: section_title: GIS Analysis Could Aid a Re-examination of Community Access to Transportation Network
paragraphs: It has been approximately 30 years since the EAS program was developed  as part of the deregulation of the airline in industry in 1978. The program  had the particular goal of ensuring that communities that had commercial  airline service in the regulated era retained that service even if the newly  deregulated airlines chose not to provide service to some of those  locations. Given that goal, the communities that were eligible for the  program were essentially those that had had airline service at in 1978.
Thirty years later much has changed in the industry and in the country.  The country has experienced demographic shifts, automobiles are of  better quality, and the airline industry has continually restructured itself. If  the EAS program—or any program that promotes access to the national  transportation network—is to be re-examined, consideration of these  developments is warranted. The goal of our analysis is to use information  on community demographics, access to transportation modes, and other  relevant factors to provide illustrations of how these key factors could be  considered in developing an approach to ensuring access to air service or  other modes of transportation. Our intent is not to point to any particular  program structure, but rather to illuminate the type of information that can  be brought forth to help policymakers answer those questions.
section_title: U.S. Settlement Patterns and Key Industry Factors Could be Considered in Re-examination of Subsidy Program
paragraphs: Throughout the 20th century, a significant degree of urbanization occurred  as people moved out of rural areas and into cities and their suburbs.  Although much of this migration occurred during the early and middle  parts of the 20th century, the trend has continued. Figure 8 illustrates how  rural areas, especially in the Midwest and Great Plains states, lost  population between 1980 and 2007. This migration left areas of the country  less densely populated than they were 30 years ago when the EAS program  was initiated. To the extent that the provision of unsubsidized commercial  air service is a function of the size of the local market, information on the  shifting settlement patterns might be a useful input into a re-examination  of a transportation access program.
Along with demographic shifts, the airline industry has changed since  deregulation. Airlines have continually restructured their route networks,  fleet mix, and pricing structures. New airlines with varied business plans  have entered the industry, some airlines have exited the industry  (sometimes through bankruptcy), airlines have formed alliances, and the  manner in which airlines meet in the marketplace and compete has been  dynamic. One of the most significant elements of the industry’s  development has been the entry and growth of low-cost carriers over the  past decade. These carriers developed different route networks than the  so-called “legacy” carriers, used different pricing structures, and generally  charged lower fares. Evidence suggests that, to obtain lower fares,  passengers are often willing to drive to a distant airport where a low-cost  carrier offers service. This availability may thus have created new travel  options for residents of remote communities.
section_title: Characterization of Community Access to Transportation Could Be Based on Demographic and Geographic Information
paragraphs: As noted above, our goal was to evaluate current community access to air  and other transportation modes. Here, we define access as the point at  which the traveler begins her journey on an airplane, on an interstate  highway, or on an intercity passenger train. Because travelers from any  given community could be going anywhere in the world, we do not assess  access relative to reaching any particular destination. That could be done,  say with respect to travel to a major medial facility, and could be  appropriate depending on how the transportation needs of a community  are framed. Our intent here is to show, in the most general way, how  geospatial analysis is a useful analytical tool for analyzing EAS or any  other program that aims to provide access to the national transportation  network.
To allow comparison of communities’ access to transportation modes, we  made a number of informed but ultimately arbitrary assumptions about  what size communities to include and how to define access to commercial  air service in terms of distance to an air embarkation point. An advantage  of geospatial analysis is that these thresholds may be easily varied to  determine the sensitivity of the results to different assumptions. The  analysis we describe illustrates the potential for this approach to  understanding access.
Specifically, because we know that settlement patterns have shifted since  the inception of the EAS program, we examine communities in a  contemporary setting. In particular, we considered all urbanized areas— based on the most recent Census information—in the lower 48 states;  there are 3,569 urbanized areas. At deregulation in 1978, Congress was  specific about which communities would be eligible for subsidies to  ensure continuation of scheduled air service—the communities were  those that had or were eligible for scheduled air service under the Civil  Aeronautics Board’s regulatory regime when the industry was deregulated  and airlines were given the ability to choose what routes they would fly. In  today’s setting, the underlying concept of which communities should be  ensured service might translate as a concern about the vulnerability of  communities to loss of commercial air service or an inability of  communities to attract commercial air service.
So, for our analysis, we asked “Which communities are most likely to  encounter difficulty attracting, retaining, or expanding air service?” We did  not consider those with fewer than 10,000 people based on the assumption  that it would not be feasible, in terms of the federal budget or airline  operating capacity, to extend service to many relatively small places. The  remaining 1,284 communities, those with populations between 10,000 and  less than 500,000, include 36 percent of all urbanized areas and account for  about 25 percent of the U.S. population.
Within this group of 1,284 communities, there are those that can be  considered relatively close to an airport of considerable size, defined as a  medium or large hub. While the EAS program uses a 70-mile criterion for  that element of eligibility, we ran an analysis using 90 highway miles. This  increase in distance was motivated by the general improvement of  automobiles over the past 30 years. With this threshold in place the  number of urbanized areas in our base-case analysis dropped to 727.
Across the 727 communities in the group of interest (with population  between 10,000 and less than 500,000 and more than 90 miles from a  medium or large hub), there is variation in access to scheduled  commercial air service. Some of these communities may be close to small  air hubs or have some less frequent commercial service. Others may not  have an airfield at all. However, because communities in this set are all  distant from the busiest air hubs, their access to air transport is vulnerable  to reductions or elimination of nearby commercial service or is precluded  by their inability to retain or to attract service at all. Relative to other  communities, then, their access to medium- and large-hub airports may be  compromised by their remoteness.
section_title: Community Access to Transportation Modes Can be Expressed by Means of an Index of Relative Access
paragraphs: While the community group of interest has been defined with respect to  access to air service, we want to describe the range of travel options  available to travelers. So, we consider community access to the interstate  highway system and to passenger rail service as well as airline travel. As  with air service, access is defined in terms of the driving distance, distance  to an on-ramp for interstate access and, for passenger rail, distance to an  Amtrak passenger station or to a bus link to a passenger station. Interstate  access may mean travel by car or by bus, but that distinction is not made  in our analysis because we did not have ready access to bus schedules for  the 727 communities. In addition, we did not make any distinctions  regarding level of service, including time of day or frequency. For  example, if Amtrak stops at a community at 3:00 am, this clearly impacts  access, but we did not consider that limitation. Similarly, service at some  medium hubs may not be considered very extensive in terms of the  number of places one can travel to on a nonstop flight.
Geospatial analysis allows us to compute distances to access points for  each community, and we can use those distances to measure and compare  communities’ access to one or multiple modes. We constructed a set of  simple indices that allow characterization of each community’s access to  air, rail, and/or train service relative to the other communities. In our  analysis, the denominator is the average distance to the transportation  mode for the 727 communities.
If a community has an index value of 100 for its access to air  transportation, it means that its distance from a medium- or large-hub  airport, among the communities evaluated, is average. A higher index  value signifies a more remote community than average, and a lower index  value signifies a community is nearer to that mode than average. Figure 9  shows the 727 communities’ access to medium- or large-hub airports as  measured by this index. Communities denoted with triangles are further  from a medium- or large-hub airport than is average for the set of  communities, and communities denoted with circles are closer to such an  airport than is average for the set of communities. We found that the  average distance from a medium- or large-hub airport was 173 miles. Of  these 727 communities, 454 were within 173 miles and 273 were farther  than 173 miles, some as much as 682 miles away. As can be seen,  communities that are more remote than the average of 170 miles from air  transportation are found mainly in the Intermountain West, the Plain  states, the Mississippi Delta, and in Appalachia. Comparing this result with  the map documenting shifts in population shows that these areas are also  the ones that generally experienced population declines between 1980 and  2007.
Figures 10 and 11 show the same communities’ relative access to highways  and passenger rail, as represented by index values.
Considering access to the interstate highway system (figure 10), for these  727 communities, the average distance to an on-ramp is 33 miles. Sixty-five  percent are within 33 miles (circles), with the other 35 percent (triangles)  more than 33 miles away, and some as many as 335 miles away. Again,  those farthest away from the interstates, in the Plains especially, are also  areas that have experienced population loss. For access to passenger rail  (figure 11), the patterns are similar to those for access to the interstate.
To obtain a perspective on communities that are the most remote, for  figure 12 the index is calculated to characterize access across modes.  Equal weight is given to access across modes, but it is clearly possible to  apply different weights to the separate modes’ index values, reflecting  greater emphasis on access to one mode (say, air) versus another. Here  again, 60 percent of the 727 communities have better-than-average access  to the transportation network (via any mode), while 40 percent are  relatively remote. The fact that some communities’ index values are very  large demonstrates the heterogeneity in access across the 727, suggesting  very different degrees of remoteness even among communities that are  distant from medium- or large-hub airports. Because both distance and  population density matter in the provision of transportation services, this  heterogeneity will figure importantly in weighing the costs and benefits of  supporting or subsidizing access to the transportation network.
Our analysis identified 727 communities within a range of population of  10,000 to less than 500,000 that are alike in that they do not have ready  access to the nation’s busiest medium- and large-air hubs. We then  calculated index values that allowed us to characterize the extent of  remoteness from interstate highways and passenger rail stops. Different  criteria will produce different groupings of communities in terms of how  connected they are to the national transportation system. Supplementing  the information provided by the index values with knowledge about actual  levels of air service (at small hubs or airfields) and about bus and rail  service would provide a frame for considering transportation policy goals.
One way this analysis can be useful in considering the EAS program  specifically is to ask which of these 727 currently are served by EAS  (defined as being located within 40 miles of an EAS airport). And, which  EAS communities are not included among the 727, that is, how many EAS  communities are in proximity to the nation’s busiest air hubs, or have  fewer than 10,000 residents? Figure 13 shows that about 17 percent (123)  of these communities have EAS service.
Recognizing the changes in the structure of the airline industry, a  community’s proximity to an airport served by a low-cost carrier might be  another way of characterizing access to the air transport network. In  Figure 14, we identify which of the 727 communities are within 150 driving  miles of such an airport. Here, we find that 92 percent have access to low- cost carrier at airports outside their communities.
With respect to the EAS program as it exists today, our analysis suggests  that there is heterogeneity across those communities that currently have  EAS service in terms of size and distance to the nation’s busiest airports or  airports served by low-cost carriers. And, it suggests that there are other  communities whose relatively limited access to the air transport network  might warrant consideration of alternatives for connection to the nation’s  transportation network, whether air or road or rail.
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the person named above, Cathy Colwell, Assistant Director;  Amy Abramowitz; Richard Brown; Colin Fallon; David Hooper; Don  Kittler; Hannah Laufe; John Mingus; Susan Offutt; and Bonnie Pignatiello  Leer made key contributions to this report.