A Problem with SCASD Grants

National Air Transportation Association president James Coyne, in a June 6 letter to DOT Secretary Norman Mineta, raised concerns regarding the distribution of funds from the Small Community Air Service Development Program that it says may be putting federal dollars in competition with private enterprise. The development comes at a time when many smaller airports are scrambling to attract new air service, and seek incentives to lure the carriers — the reason the SCASDP was created. NATA is concerned that, in some cases, the matter involves a public entity trying to take over a business that a private sector company already provides.

In his letter Coyne states, "NATA remains supportive of the program's goal of increasing air service to under-serviced communities, but the recent trend of the application for funds by some airports in order to provide ground handling services to the airlines is troubling to NATA members. Airports, which are largely run by local governments, have applied for federal funds that enable them to unfairly compete with, and sometimes close, privately run companies that offer the same services."

According to Coyne, such a move runs counter to the Office of Management and Budget (OMB) Circular Number A-76 which in part states, "In the process of governing, the Government should not compete with its citizens."

How SCASDP grants are used, Coyne points out, are outlined in the original Congressional order. "It gives us as examples using funds for advertising, promotional activity, studies on the impacts of new service, financial incentives, or 'to ground service providers providing access to air transportation services,'" writes Coyne.

"The examples provided do not include the establishment of airport-owned, revenue-generating endeavors such as providing ground services to the airlines. By receiving grants for this purpose, local governments, being funded by the federal government, are directly competing with privately owned companies.

Case in Point: Mobile, AL

Eric Byer, NATA vice president for government and industry affairs, in a recent interview told AIRPORT BUSINESS that members' concerns about this issue came to light because of a grant awarded to the Mobile (AL) Airport Authority. Comments Byer, "We have concerns, especially in the case we reference in the letter [to Mineta] where you have an airport that is taking federal dollars and setting up an infrastructure to provide ground handling and fuel support services when there's already a business there that's put the time and private equity into it, and are being kicked out just because the airport wants to provide a service. "That goes against what we read from the Commerce Clause and some other areas in the federal statutes that say private business should not be in competition with the federal government.

"That's the genesis of where we have problems. It affects airline service companies, our FBO [fixed base operator] members, and we want to make sure we raise the flags with the appropriate folks at DOT and the Congress. This is one of those big no-nos, when you have the federal government getting into taking federal dollars and dumping it into investments that private business has already done. That goes against everything that we believe in. "As I understand it, grants were given to the airport. They secured dollars and were able to buy some equipment. It got one of our Airline Services Council companies pretty uptight."

According to the Mobile Airport Authority via its website, DOT via the SCASDP awarded Mobile a grant of $456,000 in 2002 for creation of its Station Services Program. The Authority defines the initiative this way: "Station Services is a unique business model created and implemented by the Mobile Airport Authority that enables carriers with limited service to overcome high entry and operating costs. The airport fully staffs, equips, and operates the local airline station, charging participating airlines a per-flight fee for their use of facilities and personnel.

The Authority cites a 2005 report by the General Accountability Office which lauds the Mobile program as "innovative" and 'self-sustaining," a central goal of the SCASDP.

For NATA, explains Byer, the key point of contention at Mobile is that there was already a private airline services provider at the airport. Byer says he recognizes that airports are being pressed to find new ways to attract air carrier service to their communities. Either through its FBO membership, which delivers such services at many smaller airports, or its Airline Services Council, NATA represents many companies who offer services to air carriers.

Says Byer, "There's a very tough line to be drawn here in terms of identifying when it's right and when it's wrong. This issues has been raised primarily from our Airline Services Council end, where it's a commercial airport. We are concerned when there's an existing infrastructure in place by one of our airline service providers. Competition is something we're in favor of.

"In our letter, we draw the line at this point to talk about [Part] 121 commercial service airports where there's an existing infrastructure in place. "We understand that there are going to be situations where the FBO is also the airport manager, or vice versa; that's a different situation."

Byer says that the association is also concerned that the ground services issue is part of larger one — namely, a move which NATA sees by airports to getting into business segments which are already being served by private companies. It was a driving reason, he says, for NATA's push last year for a Congressional mandate that hangar leaseholds be required to be written for 50 years minimum, nationwide.

"The ASC guys and some FBOs have also been pretty frustrated by the fact that they're seeing some airports, at Charlotte and a couple of others, where the airport management has essentially said, 'We want to take over some of the business that you're providing, so we're not going to negotiate on your lease agreements.' That's another area that's a sore subject around here."

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