When quiet jawboning doesn't work, ratchet up the volume. That is exactly the tactic that the Regional Airline Association (RAA) and Regional Aviation Partners (RAP) have taken as the U.S. Department of Transportation (DOT) continues to ignore new rules written for the Essential Air Service (EAS) program.

Regional carriers with EAS contracts and the two trade associations have spent months trying to get DOT to consider requests to boost EAS subsidies to counter the escalating cost of aviation fuel. The federal agency has not budged.

When Congress re-authorized the EAS program in 2002 it included language enabling the agency to pay larger EAS subsidies if unanticipated costs, such as fuel or insurance, increased by 10 percent for at least 60 consecutive days. Fuel prices have skyrocketed and stayed at a level above 10 percent for longer than 60 days.

There is money available to boost the EAS payments, said Maurice Parker, RAP executive director. DOT has about $7 million in unspent EAS funds.

The collective bill to handle the higher fuel tab will be in the $7 million range, Parker said. "Under any circumstances, if you have carryover money and money to spend on this provision, then by all means spend it. It was authorized. The carriers are having a hard time."

"They have the power to do this at any time," said Deborah McElroy, RAA president. "The carriers have been working on this individually. We feel it is important to show industry support."

Great Lakes Aviation, which flies 22 EAS routes, has seen its fuel bill shoot up from 74 cents per gallon in September 2003 to $1.52 per gallon on Oct. 1. The carrier will pay $663,000 more this month for fuel than it did a year ago, said Doug Voss, the carrier's chairman.

"It is a very significant increase on an annualized basis. It is substantially more than what we used in the bids. This rate of increase wipes out any perceived profit margin."

Great Lakes does not have the flexibility to increase its fares to cover the higher fuel prices. The carrier has imposed a $15 surcharge on fares for non-connecting passengers - those passengers not covered by either its United Airlines [UALAQ] or Frontier Airlines [FRNT] code-share agreements. However, very few passengers fly as local passengers. Furthermore, he said, when the code-share carriers have attempted to impose their own fuel surcharges, very little has filtered down to Great Lakes "because the formulas they use don't work because of our load factors."

Part of the problem for Great Lakes and other EAS carriers, such as Mesa Air Group [MESA] and Colgan Air, is that the congressional fix that was worked out in 2002 apparently was incomplete. Voss said that DOT complains that it lacks a procedure to make the adjustments. In addition, DOT lawyers contend that all collective costs need to increase by 10 percent to trigger an adjustment. Voss said that the congressional intent was clear - a line-item price surge could trigger the adjustment. However, he said this discussion is now academic because fuel prices have risen so much that they have driven up the collective costs by more than 10 percent.

In trying to resolve the matter, Great Lakes and Mesa have used two different tactics - both without any success. On June 22, Mesa petitioned the DOT to adjust its payments because fuel and maintenance expenses were up from 17 to 37 percent on six different contracts (CRAN, July 12). At the time of the filing, Mesa's expenses had exceeded the contracts' payments by more than $670,000. No action has taken place since Mesa filed its petition.

Great Lakes took a different tack. "We have been talking to them about fuel for about five months. The problem is there is no formal procedure. They really need to set some sort of procedure. They need to take the initiative as to how we should approach the process," Voss said.

The fate of the EAS program is again uncertain. Congress failed to enact an appropriation for DOT for the fiscal year that began on Oct. 1 and the agency is working off a temporary measure into November. Parker said the House approved an appropriation that funds EAS at $102 million - the same as last year. However, once the bill was passed, a legislative maneuver was used to reduce the EAS appropriation to $53 million. Parker hopes that the full funding will be restored in the Senate bill. >>Contacts: Deborah McElroy, RAA, (202) 367-1170; Maurice Parker, RAP, (602) 685-4454; Doug Voss, Great Lakes, (307) 432-7000.<<