Congress Criticizes DOT on EAS

The Senate Commerce Committee severely criticized Transportation Secretary Mary Peters during a recent hearing on the department’s FY09 budget, when individual members fired complaints about cuts to the Essential Air Service program which the White House funded at the $50 million provided by foreign...

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The Senate Commerce Committee severely criticized Transportation Secretary Mary Peters during a recent hearing on the department’s FY09 budget, when individual members fired complaints about cuts to the Essential Air Service program which the White House funded at the $50 million provided by foreign over-flight fees rather than the $110 million it should be. With the controversy over budgetary earmarks, such short falls are difficult to restore, according to a recent Regional Aviation Partners (RAP) report. The sharpest criticism came from Senator Ted Stevens who said the department must tell him which Alaskan villages will lose there access to the outside world and, along with it, access to vital supplies and medical services. He ordered Peters to fight for the program at the White House and said, otherwise, he would find it difficult to support the Administration in its efforts. $3.9 billion over Bush's request for transportation programs.
Meanwhile, Senator Jay Rockefeller (D-WV), who has cooled in his support of EAS in the last year, blamed the general aviation community for stalling progress on the proposed $25 user fee that would fund NextGen. The proposed fee has failed in the House largely because it would raise less money for modernization. Related Story
The Senate Finance Committee passed a funding bill retaining the current ticket tax funding mechanism and increasing existing taxes. The Senate Aviation Operations Safety and Security Subcommittee, including Rockefeller, was wedded to the proposed $25 fees favored by the Air Transport Association but opposed by the Regional Airline Association. However, they may change with the succession of Kay Bailey Hutchison (R, TX) as ranking member, replacing Trent Lott (R-Miss.). RAP also reported leaders in the Senate Appropriations Committee are concerned about whether revenues from a any new system would be subject to annual appropriations or designated as mandatory spending as favored by the Senate Finance Committee.
RAP reported Senator Hutchison opposes the user fee concept and in her new capacity could swing subcommittee support behind the Finance Committee proposal.
While critics charge that passengers pay more than their fair share, commercial aviation makes up the vast majority of air traffic control operations and, indeed, the ATC system gives priority to airlines based on the maximizing throughput. Airlines themselves are guilty of this giving priority to mainline, over regional, jets based on the larger number of passengers that would be inconvenienced with a mainline jet delay. Related Story
RAP had expected such severe efforts to reduce EAS to come in four year’s time, but now thinks this reauthorization cycle is do or die for the program. However, the organization indicated the host of anti-EAS articles in recent months seemed to be part of an orchestrated effort to eliminate the program. Related Story
RAP also indicated that along with the service and local jobs, primary airports would lose $850,000 annually in Airport Improvement Program funding and Passenger Facility Charge revenues. RAP noted that the treasury contribution to the program is not $110 million as reported in most press stories, but is much less given the fact that the first $50 million comes from foreign-carrier over-flight fees which funds nearly half of the subsidy program. The organization also corrected assertions that federal subsidies for commercial air service to rural communities started with deregulation. Federal subsidies have been a part of airline service in the United States since they were established by DOT’s predecessor agency the Civil Aeronautics Board in the 1940s. The subsidies totaling more than $2 billion were $72 million in 1976 alone and were granted to “further commerce, postal service, and national defense, according to a 1977 General Accountability Office report on the program.
“Interestingly, when adjusted for inflation the $72 million in subsidies paid in 1976 to provide air service to 200 communities translates into $266 million in 2007 dollars, some $156 million more than is provided to the EAS program currently,” RAP noted in its report.
RAP also explained the huge gap between Congressional intent and Department of Transportation practices, including failure to implement a cost escalator clause which has since driven many EAS carriers to cease operations completely as in the case of Big Sky or spin off such as Mesa’s efforts with Air Midwest’s EAS operations for lack of profitability.
In response to USA Today’s most ludicrous assertion that EAS carriers make money regardless of whether they carry passengers or not, RAP said that once marginally profitable operations have become money losing ventures, thanks to DOT’s failure to implement Congressional initiatives such as Section 402 which would cover increasing costs outside of the carrier’s control, such as fuel.
“Because costs are higher than revenues, the federal government must pay the carrier so it does not lose money while including a minimal five percent return on the carrier’s investment,” said RAP. “When, as has occurred in the past several years, costs increase during the contract period well beyond those contained in the carriers bid, carriers end up losing money and the government fails to carry out its end of the deal by protecting airlines from losing money.”
As the result of the spate of negative EAS stories, RAP also put EAS in perspective with other federal transportation subsidies including Amtrak and mass transit, as well as the post-9/11 direct subsidies to airlines.
“Following the tragic events of 9/11, Congress sprung into action to protect and stabilize this nation’s aviation system,” said RAP. “On September 22, 2001, the president signed into law the Air Transportation Safety and System Stabilization Act (H.R. 2926) which authorized $10 billion to be made available to air carriers in the form of loan guarantees and an additional $5 billion in grants as a direct result of the losses incurred following September 11th.” While passed in a bid to save airline industry jobs, airlines still shucked hundreds of thousands of jobs and a few entered bankruptcy despite the federal help.
Amtrak, said RAP, has also come under fire from the media. “Despite attempts to reform AMTRAK the system has failed to support itself,” said RAP. “The costs involved in providing this service may never see AMTRAK in a position to be self supporting; yet the government continues to support it. Since 2000, according to the National Association of Railroad Passengers (NARP), AMTRAK has received nearly $9.3 billion in federal funding. In recent years funding of the program has grown going from $1.207 billion in Fiscal Year 2005, $1.294 in FY06, $1.294 billion in FY07, and $1.332 billion in FY08.
“Billions in federal funds are spent each year to support urban transit projects to keep them up and running,” RAP continued. “As it relates to the Washington DC metro system for example, the Washington Metropolitan Transit Authority reports that since the inception of the metro the federal government has paid for 65 percent of capital costs. Furthermore, they report that revenues from fares and other sources account for only 57 percent of the daily costs of operating the system with state and local governments subsidizing the remaining 43 percent of daily operating costs. In Fiscal Year 2005 alone, the federal government provided the metro with $259 million in funds for new-start projects and to purchase new passenger cars. The financial condition of the DC metro system has gotten so bad that in recent years, federal legislators have proposed to provide the system with an infusion of cash to the tune of $1.5 billion over 10 years.”