Over two decades ago, Congress deregulated the airline industry, phasing out the federal government's control over domestic fares and routes served and allowing market forces to determine the price, quantity, and quality of service. Concerned that air service to some small communities would suffer in a deregulated environment, Congress established the Essential Air Service (EAS) program as part of the Airline Deregulation Act of 1978. The act guaranteed that communities served by air carriers before deregulation would continue to receive a certain level of scheduled air service. As of July 1, 2002, the EAS program provided subsidies to air carriers to serve 114 communities--79 in the continental United States and another 35 in Alaska, Hawaii and Puerto Rico. From 1995 to July 2002, the net member of EAS-subsidized communities increased by four in the continental United States. Several factors--including increasing carrier costs, limited passenger revenue, and increasing numbers of eligible communities requiring subsidized service--are likely to affect potential future subsidy requirements of the EAS program. GAO identified and evaluated major categories of options to enhance the long-term viability of the EAS program, each of which has associated potential effects. In no particular order, the options identified to control costs and improve the program's sustainability include (1) targeting subsidized service to more remote communities by changing eligibility criteria, (2) better matching capacity with community use by increasing the use of smaller aircraft and restricting little-used flight frequencies, (3) consolidating service to multiple communities into regional airports, and (4) changing the form of the federal assistance from carrier subsidies to local grants. Potential positive effects include decreasing federal costs, increasing passenger traffic, and creating community choice for transportation options. Potential negative effects also exist, such as increased passenger inconvenience and the potential negative effect on local economies of lost scheduled airline service.

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