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 and encompassing 68 communities as part of the 2005 Small Community Air Service Development Program.

However, at least one consultant believes that DOT lost its "focus" in selecting the 37 2005 winning applications. DOT did not place as much emphasis on materially improving air service, this consultant says.

DOT received 84 applications in April for $19.8 million in available grant money. This is the fourth year of this grant program. Collectively, the 84 applicants asked for more than double that amount - nearly $51 million - in federal funds to jump-start or expand air service in small communities. In many cases, these communities have not had scheduled air service since the terrorist attacks of Sept. 11, 2001, when many carriers reduced their networks. In some cases, communities have not had service since the 1978 deregulation of the airline industry.

Of the 84 applicants, only 15 were from first-time applicants. The rest were past winners as well as repeat losers applying for the funds.

Although Congress had authorized up to $20 million to be split among up to 40 projects, the number of applicants were down from 120 last year to 84 this year, even though the program has proved to be "wildly successful," said Michael Boyd, of the Denver-based Boyd Consulting Group. "When you cull out the fruitcake ones, they were down to 65 good ones [of the 84 applications]," he said.

Of the winning applications, Boyd's firm advised 20 percent of them. Over the past three years, 25 percent of all the funds allocated have been awarded to Boyd clients.

"Overall, I think they got a little off focus," Boyd told Regional Aviation News. "In the last three years, they have been laser-focused on awards that lead to material improvements in air service." But this year DOT skewed some of the awards to the politically connected, Boyd said. At the same time, DOT seems to have avoided awards that would underwrite a new low-fare airline in a market only served by a legacy carriers, he added.

The political payoffs, in Boyd's calculations, are grants of $1 million to Northwest Chicagoland International Airport in Rockford, Ill., and $242,000 for an intrastate air service feasibility study for 15 California airports. The Rockford grant was the largest one awarded by DOT. Boyd also calls into question the wisdom the $950,000 grant to Somerset, Ky.; $936,400 to Poplar Bluff, Mo.; and a $587,000 grant to Sault Ste. Marie, Mich.:

* Rockford had originally sought $3 million to provide airlines with revenue guarantees to fly to seven different locations with scheduled service. Only charter carriers now serve the airport. Its local match will be $1 million.

* Somerset has secured a preliminary pact with RegionsAir to provide three daily flights to Cincinnati in exchange for a revenue guarantee. The community had originally sought a $1.08 million grant. The local community has promised a $100,000 cash match.

* In a joint application, Poplar Bluff and Farmington, sought $936,000 to underwrite new air service to be provided by Air Choice One to St. Louis. The carrier would use a nine-passenger Cessna Caravan. The grant would provide a gradually reducing subsidy to the carrier for three years.

* Chippewa County International Airport in Sault St. Marie sought a $987,000 grant to increase its base service provided by Mesaba from two daily flights to three to Detroit. The money would also be used to underwrite an equipment upgrade from a Saab 340 to a regional jet. DOT awarded a $587,000 grant and the local community has promised an $113,000 local match.

The DOT awards appeared to avoid underwriting new low-fare service from communities served only by legacy carriers, he said. "I do believe the complaints by Delta [DAL] and United [UALAQ] did skew the awards. I think the strong-arming has some effect."

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.

29 States Win Federal Grants To Improve Air Service Airport: Northwest Chicagoland International, Rockford, Ill. Phone: (815) 969-2902 Grant Award*: $1,000,000, $3,000,000* Cash Match: $1,000,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: 3 charter carriers Target Carrier: -- Airport: Somerset-Pulaski County Airport Somerset, Ky. Phone: (606) 679- 6366 Grant Award*: $950,000, $1,187,000* Cash Match: $100,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: none Target Carrier: RegionsAir Airport: Farmington and Poplar Bluff, Mo. Phone: (573) 756-1701 Grant Award*: $936,404 Cash Match: $210,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: Grant Application Goals: Upgrade Aircraft: Current Carriers: none Target Carrier: Air Choice One Airport: Wyoming Aeronautics Commission, 10 airports Phone: (307) 777-3952 Grant Award*: $800,000 Cash Match: $3,425,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: Grant Application Goals: New Route: Grant Application Goals: Revenue Guarantee: Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: 2 carriers Target Carrier: -- Airport: Durango/La Plata County Airport Durango, Colo. Phone: (970) 382-6069 Grant Award*: $750,000 Cash Match: $150,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: 2 carriers Target Carrier: -- Airport: Florida Keys Marathon Airport Marathon, Fla. Phone: (305) 292-3518 Grant Award*: $750,000 Cash Match: $490,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: Florida Coastal Target Carrier: -- Airport: Gulfport-Biloxi Regional Airport Gulfport, Miss. Phone: (228) 868-5810 Grant Award*: $750,000 Cash Match: $275,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: 4 carriers Target Carrier: Delta Airport: Hector International Airport, Fargo, N.D. Phone: (701) 241-1501 Grant Award*: $675,000 Cash Match: $100,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: 5 carriers Target Carrier: America West Airport: Montgomery Regional Airport Montgomery, Ala. Phone: (334) 281-5040 Grant Award*: $600,000 Cash Match: $120,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: 3 carriers Target Carrier: Northwest Airport: Sierra Blanca Regional Airport Ruidoso, N.M. Phone: (505) 258-4343 Grant Award*: $600,000 Cash Match: $500,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: none Target Carrier: American Eagle Airport: Chippewa County International, Sault Ste. Marie, Mich. Phone: (906) 495-5631 Grant Award*: $587,000, $987,000* Cash Match: $113,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: Grant Application Goals: New Route: Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: Grant Application Goals: Upgrade Aircraft: X Current Carriers: Mesaba Target Carrier: -- Airport: Lawton Metropolitan Area Airport Lawton, Okla. Phone: (580) 353-4869 Grant Award*: $570,000 Cash Match: $100,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: American Eagle Target Carrier: Delta Airport: Knox County Regional Airport Vinalhaven, Maine Phone: (207) 593-9323 Grant Award*: $555,000 Cash Match: $35,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: Grant Application Goals: New Route: Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: Grant Application Goals: Upgrade Aircraft: X Current Carriers: Penobscot Island Air Target Carrier: -- Airport: Modesto City-County Airport, Modesto, Calif. Phone: (209) 577-53 19 Grant Award*: $550,000 Cash Match: $100,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: X Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: United Express Target Carrier: Horizon Airport: Houghton County Memorial Airport Calumet, Mich. Phone: (906) 482-3970 Grant Award*: $516,000 Cash Match: $105,000 Grant Application Goals: Study: Grant Application Goals: New Carrier: Grant Application Goals: New Route: X Grant Application Goals: Revenue Guarantee: X Grant Application Goals: Marketing: X Grant Application Goals: Upgrade Aircraft: Current Carriers: Mesaba Target Carrier: -- Airport: Middle Georgia Regional Airport Macon, Ga.

** NOTE: This story has been truncated from its original size in order to facilitate transmission. If you need more information about this story, please contact NewsEdge Corporation at 1-800-766-4224. **

>