Essential Air Service:

Changes in Passenger Traffic, Subsidy Levels, and Air Carrier Costs

T-RCED-00-185: Published: May 25, 2000. Publicly Released: May 25, 2000.

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John H. Anderson, Jr
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Pursuant to a congressional request, GAO discussed the Essential Air Service (EAS) program, focusing on: (1) changes in the number of communities and passengers receiving subsidized service; (2) changes in the level of subsidies provided; and (3) reasons why the subsidy levels changed.

GAO noted that: (1) between 1995 and 1999, the overall number of communities receiving EAS-subsidized service decreased by 6, from 95 to 89; (2) in addition, the number of passengers served by the EAS program declined by 4 percent, from 617,000 to 590,000; (3) despite the decrease in number of communities and passengers served, the overall level of funding for EAS subsidies increased by 47 percent, from $31.4 to $46.3 million in constant dollars; (4) for communities within the continental United States, Hawaii, and Puerto Rico, the average subsidy per passenger increased by 47 percent, from about $56 to $82; (5) for communities in Alaska, the average subsidy per passenger increased by 23 percent, from about $25 to $30; (6) overall, the level of EAS subsidies increased because increases in air carriers' operating costs were not offset by a corresponding rise in passenger revenues; (7) the operating costs of air carriers increased as they complied with the Federal Aviation Administration's Commuter Safety Initiative, adapted to unique circumstances associated with particular markets, such as airport fees, and upgraded aging aircraft; (8) although operating costs increased, the demand for subsidized air service declined slightly, thus limiting the potential for additional revenues; and (9) in addition, some EAS carriers had difficulty competing for passengers because of the availability of low-fare jet air service at nearby airports.

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