More Flexible Eligibility Criteria Could Enhance the Small Communities Essential Air Service Subsidy Program

RCED-83-97: Published: May 18, 1983. Publicly Released: May 18, 1983.

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Pursuant to a congressional request, GAO provided its views on: (1) whether the essential air service subsidy program's eligibility criteria contained in the Airline Deregulation Act of 1978 should be changed; and (2) alternatives available to administer the program after the Civil Aeronautics Board (CAB) ceases to exist in 1985.

Under the Airline Deregulation Act, communities are guaranteed essential air service if they were listed on the routes of CAB certified air carriers on the date of the act. As of October 1982, CAB was paying airlines to provide service to 85 communities that would otherwise have had all service canceled. CAB cannot discontinue subsidies to any of the communities with an air service guarantee, even where a community cannot realistically be expected to support air service when the subsidy program expires. GAO believes that the essential air service program could be more cost effective and have more long-term value if CAB were authorized to give communities the opportunity to develop an economically sound market during the remaining transition period. If the act's eligibility criteria were more flexible, CAB could discontinue subsidies to communities that probably will not be able to retain service after the subsidies end. If the community has the potential to be a viable self-supporting market, but poor air service in the past has discouraged passengers, CAB could improve a community's competitive position with temporary subsidy increases to improve flight scheduling, services, and promotion. Additionally, GAO found no overriding reasons why the program should not be transferred to the Department of Transportation, as provided in the act, when CAB ceases to exist.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Testimony at oversight hearings indicated little support for adjusting the terms of the service guarantee as embodied in the Airline Deregulation Act of 1978. Congress is likely to consider the recommendation in 1986 when it considers whether to extend the service guarantee beyond the scheduled 1988 termination date.

    Matter: Congress should consider permitting CAB to allow communities with greater demonstrated air service needs to replace lower priority essential air service communities if states propose such replacement.

  2. Status: Closed - Not Implemented

    Comments: Testimony at oversight hearings indicated little support for adjusting the terms of the service guarantee as embodied in the Airline Deregulation Act of 1978. Congress is likely to consider the recommendations on 1986 when it considers whether to extend the service guarantee beyond the scheduled 1988 termination date.

    Matter: Congress should consider changing the program's eligibility criteria to allow CAB greater flexibility to increase or decrease subsidies to selected communities. It should be recognized that discontinuing subsidies to these communities during the 10-year transition period would represent a change in the guarantee provided by the 1978 act. CAB should be given authority to: (1) temporarily increase some subsidies to improve flight scheduling, services, and promotion where this can help a community's air service market to where it will no longer require subsidies; and (2) discontinue subsidies to communities that are unlikely to be able to support air services after 1988 because they are close enough to larger airports offering better air service or are too small and isolated to generate enough traffic for self-sufficient service.

 

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