National Transportation System:

Options and Analytical Tools to Strengthen DOT's Approach to Supporting Communities' Access to the System

GAO-09-753: Published: Jul 17, 2009. Publicly Released: Jul 24, 2009.

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Since 1978, the Essential Air Service (EAS) program has subsidized air service to eligible communities that would otherwise not have scheduled service. The cost of this program has risen as the number of communities being served and subsidies to air carriers have increased. At the same time, the number of carriers providing EAS service has declined. Given continuing concerns over the EAS program's long-term prospects, GAO was asked to review the program. GAO reviewed (1) the characteristics and current status of the EAS program, (2) factors affecting the program's ability to provide air service, (3) options for revising the program, and (4) tools for assessing the program, the options for its revision, and the program's performance. GAO interviewed stakeholders and reviewed the results of an expert panel convened by GAO, Department of Transportation (DOT) data and program documentation, and potential methodologies for assessing federal programs.

The EAS program has changed relatively little in 30 years, but current conditions raise concerns about whether the program can continue to operate as it has. Over the past 2 years subsidies to carriers have been increasing, along with EAS program obligations to fund those subsidies. In response, the administration is requesting $175 million for the EAS program in fiscal year 2010, a $50 million increase over recent funding levels. At the same time, the number of carriers providing subsidized air service is declining, from 34 in 1987 to 10 in 2009. More than one-third of the EAS-supported communities temporarily lost service in 2008, when 3 carriers ceased operations. Several factors contribute to the increasing difficulty in providing subsidized air service. The EAS program has statutory requirements for minimum aircraft size and frequency of flights, effectively requiring carriers to provide service that may not be "right-sized" for some small markets. Also, the growth of air service especially by low-cost carriers--which today serve most U.S. hub airports---weighed against the relatively high fares and inconvenience of EAS flights, can lead people to bypass EAS flights and drive to hub airports. Moreover, the continued urbanization of the United States may have eroded the potential passenger base in some small and rural EAS communities. While Congress, DOT, GAO, and others have proposed various revisions to the EAS program, Congress has not authorized many changes to program requirements. Proposed Federal Aviation Administration reauthorization legislation would include performance-based incentives, among other changes. GAO and others have suggested increasing flexibility and other changes that could make EAS service more sustainable for smaller communities. Finally, members of an expert panel organized by GAO all believed that small and rural communities would benefit from a multimodal approach to transportation. Generally they believed that other modes of transportation could be more responsive to communities' transportation needs in some cases. Although it is difficult to select options for the EAS program since stakeholders do not always agree on program objectives, certain analytical tools can help policymakers assess the EAS program. Tools include a re-examination framework to revisit the program's objectives, and help evaluate options to make the program more effective. Other analytical tools include an analytical approach GAO developed that, for a sample of small and rural communities, identified their access to different modes of transportation. This approach has the potential for broader application to examinations of communities' access to the national transportation network. Finally, once a change is implemented, performance measures can be used to periodically evaluate program effectiveness.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: In 2009, GAO reported that the Essential Air Service (EAS) program had changed relatively little in 30 years, but current conditions raise concerns about whether the program can continue to operate as it has. Over the prior 2 years, subsidies to carriers had been increasing, along with EAS program obligations to fund those subsidies. At the same time, the number of carriers providing subsidized air service declined, from 34 in 1987 to 10 in 2009. Several factors contributed to the increasing difficulty in providing subsidized air service. The EAS program has statutory requirements for minimum aircraft size and frequency of flights, which effectively required carriers to provide service that may not be "right-sized" for some small markets. Also, the growth of air service especially by low-cost carriers--which today serve most U.S. hub airports--weighed against the relatively high fares and inconvenience of EAS flights, which can lead people to bypass EAS flights and drive to hub airports. Moreover, the continued urbanization of the United States may have eroded the potential passenger base in some small and rural EAS communities. While Congress, DOT, GAO, and others have proposed various revisions to the EAS program, Congress had not authorized many changes to program requirements. GAO and others have suggested increasing flexibility and other changes that could make EAS service more sustainable for smaller communities. Therefore, GAO suggested that Congress consider re-examining the program's objectives and related statutory requirements. In response, Congress passed the FAA Modernization and Reform Act of 2012 (the Act) that among other things revised the eligibility requirements for EAS subsidies. One revision was that to be eligible to receive EAS subsidies, a community must have had an average subsidy per passenger of less than $1,000 during the most recent fiscal year. The Act also revised eligibility requirements so that locations with fewer than an average of 10 enplanements per service day (except in Alaska and Hawaii) and that are less than 175 driving miles from the nearest large or medium airport would not be eligible for EAS subsidies after fiscal year 2012. According to DOT, this revision will most likely result in some communities no longer receiving EAS subsidies. In addition, Congress also eliminated the minimum 15-seat passenger capacity for fiscal year 2012 through the Consolidated and Further Continuing Appropriations Act, 2012 [Pub. L. No. 112-55 (2011)]. This provision was continued for fiscal year 2013 in the Consolidated and Further Continuing Appropriations Act, 2013 [Pub. L. No. 113-6 (2013).] The elimination of this requirement will allow carriers to "right size" or better match the services they provide with the communities' demand. Collectively, these legislative revisions have the potential of reducing carrier operating costs, subsidies and total federal program costs. And, these revisions could help DOT better maintain service at the remaining EAS-eligible airports.

    Matter: In light of developments related to population shifts, the aviation industry, and the national transportation infrastructure, Congress may wish to consider re-examining the program's objectives and related statutory requirements and seek information from DOT as needed to support this effort. Such a re-examination could include (1) consideration of the rationale behind existing statutory requirements, such as those for 15-seat, 2-engine, 2-pilot aircraft in EAS service; (2) the possibility of providing greater flexibility as to plane size, frequency of service, eligible communities, or regionalization of service; and (3) the possibility of assessing multimodal solutions for communities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In 2009, we reported that the Essential Air Service (EAS) program has changed relatively little since the program was implemented 30 years ago, but current conditions raised concerns about whether the program could continue to operate as it had. While Congress, DOT, GAO, and others have proposed various revisions to the EAS program, Congress had not authorized many changes to program requirements. GAO and others have suggested increasing flexibility and other changes that could make EAS service more sustainable for smaller communities. A re-examination of the EAS program, assessing options to make the program more sustainable and effective, may be warranted. Many options to help address the problems and limitations that the program faced existed. However, determining which option or suite of options to select is difficult, since stakeholders had different opinions on the program's objectives. One suggested option was to study air taxi and multi-modal approaches in some locations to ensure small and rural communities are connected to the national transportation network. Another option included awarding EAS agreements to airlines for longer than 2 years because carriers must often lease aircraft used to serve EAS routes for a longer period of time, such as five years. Therefore, we recommended that DOT evaluate the reasonableness of providing (1) transportation service, whether through unscheduled air service or surface modes of transportation, when these alternatives might better serve communities than current scheduled EAS service and (2) the agency's current practices for carrier agreements, including the 2-year duration of agreements, and not renegotiating subsidy amounts in response to quantifiable cost increases. Before DOT could conduct its reasonableness assessments, the agency took action to implement the options we identified and achieved the essence of our recommendation which was for the agency to consider whether other modes of transportation might better serve communities than current scheduled EAS service. First, DOT received, reviewed and approved an application for an air carrier to provide scheduled EAS service that could be adjusted based on seasonal tourist demand, which better met the community's demands for air service. No community had ever applied for nor had DOT considered such service. Second, DOT began awarding EAS agreements that exceeded 2-years to carriers, and as of February 2013, had awarded a total of 16 such agreements. By awarding longer-term agreements, DOT can help provide these carriers flexibility in their efforts to lease the equipment necessary to serve EAS routes and potentially attract more carriers willing to participate in the program.

    Recommendation: The Secretary of Transportation should evaluate the reasonableness of (1) providing transportation service, whether through unscheduled air service or surface modes of transportation, when these alternatives might better serve communities than current scheduled EAS service; and (2) DOT's current practices for carrier agreements, including the 2-year duration of agreements, and not renegotiating subsidy amounts in response to quantifiable cost increases.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: In 2009, we reported that the Essential Air Service (EAS) program performance was difficult to assess beyond providing air service to eligible communities because the Department of Transportation (DOT) did not have performance measures that demonstrated the extent to which the program was contributing toward DOT's strategic goals of connectivity or congestion reduction--the strategic goal where the EAS program was located. Further, the Office of Management and Budget evaluated the EAS program and found that it did not have enough long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program. We reported that the EAS program's current annual performance measures include one long-term measure that addresses program performance in a specific way--maintaining continuous air service at 98 percent of eligible communities. This single long-term performance measure reflects an important aspect of program operations. But additional performance measures, addressing other aspects of program performance, could provide a broader perspective on how the EAS program contributes to DOT's strategic goals. As a result, we recommended that once Congress and DOT make decisions about any changes to the EAS program, DOT should determine whether additional performance measures are needed to evaluate program outcomes. In 2012, DOT determined that it would not implement additional performance measures because DOT's existing performance measures addressed the revisions Congress recently made to the EAS program. For example, Congress revised the allowable subsidies per passenger and DOT monitors EAS communities' subsidy per passenger--a program eligibility criteria--and provides this performance measure information to Congress. As a result, DOT determined their performance measures are sufficient to meet DOT and Congress' needs for program.

    Recommendation: Once decisions are made about any changes to the EAS program, DOT should determine whether additional performance measures are needed to evaluate program outcomes.

    Agency Affected: Department of Transportation

 

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