There are many reasons for the loss of community air service, and, as reported in Part I of this series, they include fares and passenger leakage to more reliable and comfortable service. But all pale in comparison to the damage done by government initiatives that conspired to kill community air service and preclude any replacement service that might develop. Perhaps the greatest tragedy in this story is loss of air service to many points that were not only self-sustaining but profitable.

 

Last week, we examined the players and whether or not they really care and found that, while a handful do, their collective voices are drowned out as more powerful interests seek to further erode community air service. We also examined what has happened to the passengers who once were able to use their local airport to access the national air transportation system. Part I

 

This week, with the help of Regional Aviation Partners (RAP), Part II will examine the federal initiatives that conspire against community air service. Those who really care about community air service – airports, EAS carriers, communities and their congressional representatives, face huge barriers in not only trying to arrest the erosion of community air service, much of which is beyond an airline’s control, but to build back service.

An Unnecessary Rule

 

While marketing partnerships and other practices play their part in this story, there is one over-riding factor that changed the face of the airline industry and made it impossible for a new generation of airlines to do what airlines have always done in the wake of massive abandonment by larger carriers – replace them. Worse, that factor – the commuter rule calling for a single level of safety for all commercial airlines – has not achieved the goals of reducing the accident rate in the decade since it was mandated. In fact it has done just the opposite while costing airlines millions in increased operating costs and communities billions in lost economic activity. Related Story

 

Statistics reveal the single-level-of-safety rule was a rulemaking that never needed to happen and begs the question as to whether it can be eased in the name of community air service, which has been unsuccessfully tried in the past.
Ironically, in addressing what can be done , the General Accountability Office supported controlling escalating operating costs by better matching capacity with community use by increasing use of smaller aircraft; i.e., aircraft with less than 10 seats, which would, of course, represent a return to FAR Part 135.
DOT concurred since its analysis revealed that most EAS aircraft fly largely empty. In an incredible display of crosswise logic, DOT suggested using smaller aircraft, despite the fact it acknowledged the Commuter Safety Initiative was the primary cause of the increase in operating expenses for small commuter carriers. The wildly escalating costs wrought by the commuter rule, eliminated their ability to serve these points as well as a host of points that had enjoyed unsubsidized service.

The fact is; regionals operating under both Parts 121 and 135 did a remarkable job of improving safety during the 1980s and early 1990s. According to FAA, the accident rate per 100,000 departures was one-fourth the accident rate in 1980. From 1991 to 1996, the accident rate for 10- to 30-seat airplanes fell precipitously, by more than 85 percent, providing clear proof that the safety standards under FAR Part 135 provided more than an equivalent level of safety, according to a 2002 petition to ease the commuter rule, filed by RAP.
Based on NTSB statistics, after the rule change, 1996 – 2001, the accident rate for 10- to 30-seat airliners under the more restrictive rules of FAR Part 121 saw that rate escalate to 5.83 accidents annually, while the accident rate for one-to-nine-seat aircraft operating under FAR Part 135 during this period was 6.0 accidents, which, according to RAP, is statistically identical to the rate before the rule change.
“Clearly, operating under a more strenuous rule was not the solution” said RAP. “The accident rate per 100,000 departures under FAR Part 121 has seen a sharp increase exceeding 250 percent. The improvement in the safety record of Part 135 operations is not a statistical fluke. To the contrary, this improvement has been significant in its magnitude and long-term in its duration.”
FAA said the rule would prevent 94 accidents and estimated a benefit of $393 million versus a cost of $275 million over 10 years. Ninety four accidents? Even in its worst period, regional airlines never approached that accident rate. In computing the need for this initiative, the FAA failed to use its standard methodology and, instead, relied on a broad-based accident rate rather than calculations based on specific types of preventable accidents, according to RAP.

The Real Story
The fact is; the commuter rule was the typical knee-jerk, political reaction to a particularly lethal time in the aviation industry, all of which resulted from Part 121 operators using largely Part 25 certificated aircraft, not the smaller airlines the rule sought to bring up to the standards of their larger counterparts. Even the FAA acknowledged it was redundant and done only to assuage “media attention to [several] commuter-type accidents.”
“The FAA expressed obvious reservations about imposing FAR Part 121 on commuter aircraft,” said RAP. “The agency acknowledged that ‘the differences between Parts 121 and 135 reflect differences in the size of the aircraft and the scope of the operations,’ and further said ‘most passengers probably do not realize that some differences in standards are necessary because of differences in the airplane and operation and that some of the accidents that are categorized by the media as ‘commuter’ accidents occurred in flights that were being conducted under Part 121.’ Since the rule change, it has become increasingly clear that commuter aircraft, in general, and 10- to 30-seat aircraft in particular, are over-regulated under FAR Part 121.”
In fact, it was not the commuter accidents alone, but a string of four major-carrier accidents in a single year, that spawned an atmosphere for increased regulations. The commuter rule was the typical window-dressing, using the less-powerful regionals as scapegoats in a year that was clearly a fluke in the scheme of aviation safety. This, then, was compounded by the creative calculations by the FAA in its rulemaking in a perfect example of making statistics support what you want to do.
In 1994, USAirways (LCC) had two horrendous accidents followed by the largest accident in regional history. The year was capped off when an American Eagle Jetstream 31 – operated under Part 121 – crashed at Raleigh which revealed that, like students in the public school system, problem pilots are passed along.
However, it was the American Eagle ATR-72 accident on Halloween 1994, that caused the greatest furor, one that even overshadowed the serious rudder problems with the Boeing 737, which caused two accidents. First, it was a surprise to the public – especially the national news media – that, what was perceived as little, puddle-jumper airlines, could kill 70 people at a pop. Second, with the help of pilots, who, according to the public and media, are the final arbiters of safety, the design of the aircraft was unnecessarily brought into question. Indeed, the Air Line Pilots Association pressured regulatory and legislative factions for a rule change. Finally, a media-seeking insurance company, put the entire regional airline industry in the spotlight, when it recommended its members avoid regionals. The press never questioned the company, despite the fact that all four accidents where at major carriers, operating under Part 121. As a result, surveys indicated that passengers preferred to wait for hours for a jet rather than fly a turboprop and passenger counts dropped through the floor in the wake of the publicity. Great Lakes suffered an almost loss in traffic. All this had absolutely nothing to do with the industry’s highly respectable safety record, but prompted the greatest fleet changeover in regional history that further contributed to the decline of community air service.
In fact, the ATR accident discovered, as in never known prior to the event, a new icing phenomenon and spawned a new level of icing testing for airliners. The fact that airliners had all already passed the Part 25 certification standards with flying colors did not matter. Because of the media furor, it is believed in some quarters, that the National Transportation Safety Board issued its first politically motivated findings. Indeed, icing remains a huge aviation problem, bringing into sharp focus any initiatives to mitigate this lethal condition. Related Story

Only two safety initiatives resulting from these accidents made sense, besides, of course, the new certification standards covering the previously unknown icing phenomenon. The first was the necessity for severe upset training, which taught pilots how to cope with sudden rollovers and other upsets in flight. After all it was not just the ATR pilots who could have used severe upset training, but the USAirways 737 pilots that experienced a rudder problem, causing the plane to crash at Pittsburgh, just as a United (UAUA) 737 did earlier in Colorado Springs. The second addressed pilots being passed along.

The Impact
Beginning in 1997, the entire regional airline industry began to comply with the new single level of safety standards which, above all else, increased the cost of doing business and drove a number of airlines, and a manufacturer, from the field. As a result of high operating costs small carriers withdrew from serving unsubsidized rural markets previously served by 10- to 30- seat airliners.
Great Lakes Aviation’s costs in 1994 were 14.5 cents per available seat mile. The costs loaded on by the commuter rule and other federal mandates drove them up to over 30 cents per available seat mile, according to President Doug Voss.
Pilot training costs alone increased 593 percent for a Beech 1900D captain and, for a first officer, it was 824 percent, to $2 million, according to statistics provided by Mesa Air Group (MESA) in a 2002 RAP petition to the FAA, calling for the easing of the commuter rule. Colgan officials said that training costs increased by an additional $27,000 per month and Mesa was forced to hire additional pilots to ensure that it could fully staff its operations. RAP suggested training costs alone would far exceed the FAA’s projected cost of $275 million over a decade.
As for subsidized service, between 1995 and 1999, the number of air carriers serving subsidized EAS communities decreased from 17 to 11, RAP reported. In 1995, eight airlines carried about 80 percent of the passengers in EAS communities in the lower 48. In 1999, 80 percent of the EAS subsidized passengers in the continental United States were carried by only four airlines.
“Commuter carriers cannot operate these aircraft profitably under the stringent regulations,” said RAP in its filing. “This hard economic reality led to the only U.S. manufacturer of these aircraft – Raytheon’s Beech program – being forced to prematurely stop production of its aircraft, many years ahead of its useful life. Ten to 19-seat and 20- to 30-seat aircraft are virtually unusable in a climate where their use would otherwise have extensive benefit. The negative impact of the rule change on the Essential Air Service program, airline manufacturers and rural communities was clearly not anticipated in the FAA’s cost/benefit projections in the commuter rule.”
Indeed, there are now no manufacturers in the field, although Arizona-based Commuter Air Technology, founded in 1986 to transform the King Air 200 into a commuter aircraft, is perhaps the only group that has been trying to address the problem. Its modification kits have been well received worldwide. Its CATPASS system (Commuter Air Technology Passenger and Safety Systems) developed a 13-seat King Air and, although little used in the U.S., is now with 60 airlines around the world, operating under a combination of Part 135/121 operations. CATPASS is designed to make the King Air safer and more reliable. The company has delivered more than 100 CATPASS 250 kits, which include 18 enhancements ranging from cargo pods, to new interiors, to engine improvements and to heavier tires. The plane is being sold to operators in Central and South America, Africa and Asia and is popular for island hopping either as a commuter, charter or corporate shuttle aircraft. Related Story So, even if airlines wanted to serve these markets, availability of cost-efficient turboprops to do so is limited and constitutes the last-generation technology, approaching aging aircraft status. Regional Aviation News will examine the Eclipse and other microjets later in the series. However, regional airline passengers are extremely price sensitive and thus may not gravitate to this new transportation system in lieu of driving to a hub with low-cost carrier service.
While the impact of the commuter rule was greatest on regional airlines, it was not limited to them as evidenced by new Part 139 rules covering runways, facility improvements, additional fire equipment and personnel. “The requirements for serving FAR Part 121 aircraft far exceeded the budget capabilities of many rural airport authorities,” noted RAP. “Many small airports cannot accommodate regional jets or afford the additional financial burden of the FAR Part 139 requirements. For these communities, the 10- to 19/20- to 30-seat aircraft operating in a FAR Part 135 environment provide the only viable access to the national air transportation system.”
The costs for bringing airports up to Part 139-ARFF standards has been assumed by some carriers, further exacerbating their cost problems and bringing into sharp question as to whether the service is worth it. Related Story While very difficult to estimate the loss in landing fees and passenger facility charges wrought by the loss of service, estimates show $11.25 million in lost PFCs ($4.50) for non-hub airports just between Calendar Third Quarter 2005 and 2006. Landings fees (CRJ200 with a max landing weight of 47,000lbs and a landing fee of $1.25 per 1000lbs.) dropped $3.84 million during the period. That means a loss of $10.16 million in landing fees between 2001 and 2006.

Compounding all this are the security requirements imposed in the wake of 9/11. While it is impossible to quantify the increased costs these rules imposed on airlines, it is often cited in quarterly reports as costs with which regionals struggle as they try to maintain their low-cost-producer status. In addition, proposals to increase fees to passengers have a disproportionate impact of regional passengers since the vast majority of their trips include two or more legs costing at least $16 one way. The ultimate fare increase results in a further erosion of air service from rural travelers.
Finally, the new high-density rules surrounding Chicago and LaGuardia seek to cut back regional aircraft flights that use small aircraft, 50-seat or below. While Congress and FAA profess to want to protect small communities, the reality is these points are little protected. Today, only one small community is connected to these airports – Colgan’s Lebanon, N.H.-LGA flight. In October, 2001 three EAS communities – Iron Mountain and Manistee, MI, and Oshkosh, WI – had service into O'Hare on Great Lakes. In 2003, the DOT issued its final order terminating subsidized air service at Oshkosh for exceeding the $200 cap. In late 2002, the DOT awarded the contract to serve Iron Mountain and Manistee to Skyway Airlines with service to Milwaukee. No EAS communities currently connect to O'Hare.
As far as LGA goes, in 2000, Colgan initiated unsubsidized air service between Lebanon, N.H. and LGA. Three years later, it was forced to file a 90 notice to terminate the unsubsidized service, citingincreased fuel and insurance costs. In July of that year, DOT issued an order, providing subsidy to Colgan. Any language in these congestion rules that purports to protect small communities, is merely pro-forma, indicating what should happen, not what does happen.
“Slot restrictions have served to further exacerbate the growing divide in commercial aviation between the quality of commercial air service provided by small airports and that provided by the nation’s largest airports,” said RAP. “By limiting small aircraft access to these airports, small communities are instead forced to turn to other, less desirable hubs as a means of connecting their passengers to the air transportation system.”

Subsidy Issues
While FAA safety mandates may have had the largest impact on community air service, other DOT initiatives constitute nail after nail in the community air service coffin. For years, its changing rules regarding a community’s EAS eligibility have exacerbated the problem.
While much focus today is placed on retaining the essential air service program, what is lost is what happened to many unsubsidized communities in the wake of the commuter rule. The increased cost caused regionals who could no longer afford to serve them to abandon them, driving them on to the Essential Air Service roles and escalating its costs. Subsidized points in the lower 48 rose from 86 in 2000 to 115 in 2007 with a consequent increase in subsidy costs, even as DOT was trying, year after year, to kill it.

Ironically, DOT cites dwindling interest for the lack of airlines willing to serve EAS routes, but really, its own actions are to blame. A critical problem is its refusal to invoke a provision in the last reauthorization legislation to cover cost increases beyond the airline’s control such as last year’s fuel increases. At the same time, it strictly enforces the $200-per-passenger subsidy cap. Worse, in order to change the subsidy rate, a carrier must file a termination notice, a protracted process resulting in further losses while the DOT decides what to do and puts the bid out again. If the carrier loses the market, it loses the investment made. Related Story

In addition, DOT consistently rearranges EAS geography, increasing the mileage passengers must travel to access flights and using distances almost as the crow flies instead of the most frequently traveled route. So, while DOT admits the commuter rule is largely to blame, its actions are very much part of the problem, even as it blames the airlines for not creating efficient and profitable service.
Statistics suggest that there are markets that would be profitable were it not for the commuter rule. The question remains, however, whether changes in the marketplace preclude a resumption of service.

Next Week – Barriers to Entry