FAA: AirTran Wichita Subsidy is 'Unjust'

The Federal Aviation Administration has called Wichita's subsidies to AirTran Airways "unjust economic discrimination" against another airline and given the city 30 days to say how it will remedy the situation.

AirTran and Delta Air Lines provide daily service from Wichita to Atlanta.

"Treating these two similarly situated air carriers differently could constitute a violation," said an April 6 letter from the FAA to the city.

Delta said it had asked the FAA to look into the subsidy and gave The Eagle a copy of the FAA response Friday. Representatives of the FAA could not be reached for comment late Friday.

At stake in the dispute are millions of dollars in future federal grant money for Wichita Mid-Continent Airport. Airports must agree to certain conditions to receive FAA grants for airport development. One of the conditions, spelled out in the FAA's Grant Assurance 22, is that the grant recipient not engage in "economic discrimination." Doing so jeopardizes access to FAA grants.

The city has maintained that the airport and the city are separate entities, so the city's subsidies should not affect the airport's grants. The subsidies are paid with city tax money. The airport does not receive city taxes for support.

"We still are of the opinion that the airport and the city are different," said City Manager George Kolb. "They have two different funding sources, and the funds do not mingle."

Kolb and Mayor Carlos Mayans said they had yet to see the letter and do not know how the city will respond.

The FAA letter, noting it was not a final order, rejected the contention that the city and airport are separate.

Delta, which plans to address the City Council on Tuesday, wants equal access to subsidies.

"We want to see a level playing field," said Delta spokeswoman Benet Wilson. "We're just saying we want to get what AirTran is getting."

Delta has asked the city for subsidies twice and has not received any, she said.

Kolb said he has repeatedly tried to get in touch with Delta officials, but has not received a response. "We're willing to talk, and we're willing to sit down and figure this out."

AirTran has received revenue guarantees from the city since it began business here May 8, 2002. The city offered $4.5 million for AirTran's first two years of service and another $2.5 million for its third year.

City officials say keeping the discount carrier in Wichita helps reduce airfares, which they say are crucial to the city's efforts to retain and attract companies.

Earlier this month, the city agreed to provide $2.5 million to underwrite losses for a fourth year of AirTran service. Sedgwick County has promised another $1 million.

The City Council and County Commission must still vote on the measures. AirTran's current contract with the city expires May 7.

Before AirTran began service in Wichita, all the airlines were asked if they would help to lower airfares, Mayans said.

"They said 'no,' " Mayans said. "Now that we're doing it, they don't like it."

In its letter, the FAA said airports are prohibited from committing "economic discrimination" by favoring one airline over another when both make similar use of the facilities.

The letter said that because Mid-Continent Airport is controlled by the city, the city government is bound by that restriction.

A lawyer for the city argued to the FAA last year that the city government and Airport Authority are separate entities. He also said the City Council acted within its powers as the city government -- not as an airport board -- when it approved the subsidy agreement with AirTran.

But the FAA noted that the City Council serves as the Airport Authority board, the city manager supervises the airport director, and the mayor or city manager signs federal grant agreements -- which include the nondiscrimination clause -- on behalf of the airport.

"You (Wichita) provide minutes from the Aug. 10 City Council meeting purporting to show a separate City Council agenda and airport agenda," the FAA letter said. "Both agendas, however, are included under the broad title of 'City Council proceedings.'

"In addition, a notice immediately following the heading for the airport agenda states, 'The City Council is meeting as the governing body of the airport.' In our view, this statement supports our contention that the City Council is the governing body of the airport."

Until 1999, the Airport Authority was mostly independent of city government.

Although the city owns the airport, the authority had its own board and broad decision-making powers.

The board supervised the airport director, and he signed grant agreements for the airport.

But the council disbanded the authority and took control of the airport after authority members signaled they planned to fire then-airport director Bailis Bell. Council members also were dissatisfied with the airport board's efforts to find ways to reduce airfares.

Bell remained in the job another five years, until reaching his mandatory retirement date last year.

Former Mayor Bob Knight led the efforts to bring AirTran to town and to bring the airport under tight City Hall control.

Before AirTran came to Wichita, he said, he heard constant complaints from residents, and businesses were moving out of the city, because of the high cost of flying in and out.

He said AirTran's presence has saved residents and businesses tens of millions of dollars.

And, he added, if he were still mayor, he'd do whatever he could to protect the AirTran deal.

If restoring independent control of the airport would satisfy the FAA, "That's what I would do in a heartbeat," he said.

Kolb said he hasn't given much thought about changing the situation.

"I haven't seen where the current system is broken," he said. "There are advantages for an authority, and there's advantages to keeping it the way it is."

Bob Martz, the only council member in office when the Airport Authority board was disbanded, said he would lean toward keeping things the way they are for now.

"I don't see any reason to change it back," he said.

When dealing with AirTran subsidies, "we always ask our legal staff whether we're doing it right," Martz said. "The last time we had a discussion on it, I was told it was OK."

Boyd Group airport consultant Mike Boyd said the point of the city subsidies was not to get service to Atlanta. It was to lower fares.

"This is called competition," Boyd said. "It's hands-off, bare-knuckles competition."

In the grand scheme of things, he added, "this is really positive news that the airlines want to fight over Wichita."