DOT Less Daring With Small Airport Grant Awards

The U.S. Department of Transportation (DOT) has awarded $18.9 million in federal grants to 37 regional airport projects in 29 states.

As part of its charge from Congress to implement the program, DOT was to consider applications from communities with higher-than-average fares that attempted to secure new service that promised lower fares. In early grant rounds, Akron, Ohio, and Sarasota, Fla., used grant money to lure AirTran [AAI] to their communities. Boyd noted that the $1.5 million grant to Sarasota has resulted in a 30-percent increase in enplanements as AirTran has continued to expand its destination offerings (Sarasota is a Boyd client).

"The program is supposed to subsidize competition," Boyd noted. "Many communities could not get their initial service from Frontier [FRNT] or AirTran without it."

In this latest round, DOT has provided $675,000 to Fargo, N.D., which hopes to use the funds to underwrite service by America West [AWAC]. Mesa Air Group [MESA] would provide the service on its RJ fleet. Stewart International Airport in Newburgh, N.Y., won a $250,000 grant to be used in its attempt to secure JetBlue [JBLU].

In a letter to the program administrators, United objected to a grant application from Moline, Ill. The city was seeking $850,000 to subsidize two daily flights by Frontier, using regional jets flown by Horizon Air [ALK], to Denver. Denver is a hub for both United and Frontier. United has been offering RJ service from Moline to Denver for several years.

If Moline secured the grant, United claimed that "this is not how a deregulated marketplace should work. DOT has been asked to place the heavy hand of the federal government on one side of the competitive balance," said Julie Oettinger, the carrier's director of regulatory affairs.

United's filing took exception to previous awards to Fresno, Calif.; Lincoln, Neb.; Knoxville, Tenn.; and Charleston., S.C.

Delta attorney Robert E. Cohn of Washington's Hogan & Hartson urged DOT to establish a policy so that the funds "may not be used to support or subsidize service on routes that already receive nonstop service."

On the other hand, both Delta and United joined other airlines in submitting letters supporting a variety of applications.

DOT's list of approved applications includes funds for air service feasibility studies, marketing efforts, enticements for RJ service and revenue guarantees. Not on this year's list were those proposals that suggested creative ways to underwrite the costs of air service.

In an earlier grant award, DOT provided funds to Mobile, Ala., to start a ground service unit, which relieved the airlines of the need for their own baggage handling crews and gate staff. Inspired by the success of Mobile and Branson, Mo., the Savannah., Ga., and Springfield, Ill., airports sought funds to start their own ground services divisions. Mobile also asked for new funds to expand its operation (RAN, June 27). Savannah wanted $732,000 and Springfield wanted $486,000. None of the three applications were funded.

DOT said several of the awards involved communities that are participating in the Essential Air Service program: Vernal, Utah; Hibbing, Minn.; Bradford, Pa.; Cedar City, Utah; and several members of the Wyoming consortium.

Last year, DOT scraped together unspent funds from earlier grant rounds to go beyond the $20 million allocated for the 2004 awards. This year, the agency has taken a different approach. In the end it had about $888,000 that it did not award, but has instead transferred the funds to the EAS program. The funds will be used to cover a projected shortfall in the current fiscal year for the EAS program.

In shifting some of the funds to EAS, the department only funded 37 instead of 40 projects.

>>FAA Docket: OST-05-20127. Contact: Michael Boyd, Boyd Group, (303) 674- 2000.

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