"Many small cities in danger of losing air service"

Tuesday, August 16, 2011

Many small cities in danger of losing air service
By Charisse Jones
USA TODAY


With its three flights that take off each day, Delta Air Lines has given the
26,000 residents of Aberdeen, S.D., a fast connection to the rest of the
nation and world.

"We are about 75 miles from an interstate," says Mike Wilson, the city's
transportation director, "so we're fairly secluded here."

But starting today, Delta is offering only two daily flights from Aberdeen.
And the world's second-biggest airline, which is the lone carrier flying in
and out of the city, says it needs a subsidy from the federal government to
keep flying there at all.

The prospect of Aberdeen being without air service - and the economic
lifeblood it carries - is hard for Wilson to fathom. "It could definitely
have some far-reaching effects for our community," he says.

In a time of mergers, fluctuating fuel prices and economic turbulence,
airlines are pulling out of many small cities such as Aberdeen because they
say it no longer makes financial sense. And the federal program that has
subsidized air service to many of them is in jeopardy as Congress must cut
$1.5 trillion from the nation's debt in the next decade.

Delta seeks to exit 15 small cities such as Thief River Falls, Minn., and
get federal subsidies or increased government assistance to continue flying
to nine others such as Aberdeen, Sioux City, Iowa, and Butte, Mont. Of the
24 cities, Delta is the sole carrier for all but one, the South Dakota
capital of Pierre.

AirTran, which is merging with Southwest, earlier this month announced it
would stop flying to four small-city airports next year: Asheville (N.C.)
Regional; Atlantic City International; Quad City International in Moline,
Ill; and Newport News/Williamsburg International in Virginia.

"This is a trend in the last couple of years . and that trend may continue,"
Bijan Vasigh, a professor of air transport finance at Embry-Riddle
Aeronautical University, says of the withdrawals.

Lower profits for an industry hard hit during the recession and higher fuel
costs are among the reasons for service cuts to small cities, he says.

"Another reason is the amount of mergers in the U.S. airline industry,"
Vasigh says. "We have (fewer) airlines, therefore, they don't need to really
compete with each other. They don't need to have frequent flights servicing
different destinations."

AirTran says it began considering not flying to the four airports it wants
to pull out of before its merger with Southwest, though its every move now
is viewed with regard to what's best for the new low-cost megacarrier.

"While the primary reasons for this decision are the current economic
reality and high fuel prices, we must also take into account the long-term
effect of these types of decisions on the newly combined company," says
AirTran spokesman Christopher White.

Safety net in place, for now 

Air service to roughly 700 communities, many of them rural, is protected by
the federal Essential Air Service (EAS) program, which provides subsidies to
airlines when necessary to make sure places that might otherwise be bypassed
remain connected to the nation's flight network.

EAS, which was created after the airline industry was deregulated in 1978
and has a current annual budget of $200 million, is subsidizing service to
153 communities, according to the Transportation Department.

But that safety net is shrinking. The EAS program has been criticized as
spending too much money to ferry too few passengers. Legislation passed
earlier this month to extend the operating authority of the Federal Aviation
Administration included new criteria that would eliminate flight subsidies
for 13 airports, such as Morgantown, W.Va., Jonesboro, Ark., and Jackson,
Tenn.

Yet, increasingly, airlines say they need government assistance to continue
flying to some small cities.

"We have seen an increase in instances where carriers are unable to maintain
subsidy-free service at rural communities," says Bill Mosley, a spokesman
for the Transportation Department, which runs the EAS program. "Fuel prices
and general economic conditions have had an impact on carriers, particularly
in rural markets."

Delta says it had to take a hard look at 24 communities served by its
34-seat Saab turboprop, which it will stop flying by the end of the year.
"We're getting to that window where we need to make a decision about what
we're going to do in markets that are served by that fleet type," Delta
spokeswoman Kristin Baur says.

Because it's more expensive to fly a 50-seat jet - Delta's next-biggest
aircraft - the airline wants a subsidy or increase in EAS program assistance
to keep flying to nine cities such as Aberdeen.

"We have to make sure we have the right aircraft for the right market and
that it makes sense in today's economic market to continue operating there,"
Baur says.

Baur points out that a turboprop flight to Thief River Falls, which Delta
plans to leave, is only 12% full, on average, compared with a systemwide
domestic flight average of 83%.

Cities eligible for subsidized service aren't supposed to be abandoned.
Federal transport officials require the last airline serving such
communities to keep flying until a new carrier is found.

For communities scheduled to lose Delta flights, the Transportation
Department plans to solicit bids from other carriers in the next few weeks,
Mosley says. And Delta is talking with Great Lakes Airlines about possibly
taking over service to six of the cities.

"We recognize the special role air service plays in these smaller
communities," Baur says. "And we'll continue to provide service to some of
these markets under the EAS program, and in others, we're looking to
facilitate other airlines who may be interested to provide a seamless
transition."

Mixed feelings 

Aberdeen is a city Delta wants to continue serving. Still, the city's
transportation director would rather not depend on government help to keep
flights.

"I'm not thrilled about becoming a subsidized airport . and taking dollars
that could be used elsewhere," Wilson says.

It's not that Aberdeen's airport doesn't have passengers. With students at
Northern State University and Presentation College and members of the local
business community traveling frequently, Aberdeen's airport had 20,000
passengers in 2010. Traffic is up 24% so far this year, Wilson says.

"I would think it would be profitable (for Delta)," Wilson says. "But . if
the airline isn't making money, I guess they have to do something about it."

To try to keep air service and without a federal subsidy, Aberdeen city
officials are distributing fliers and devising radio and TV ads to boost the
number of passengers. The aim is to attract a carrier that sees the market
as profitable.

"We're doing our part to try and increase our numbers," Wilson says. "That
would be my ultimate goal, to not be subsidized anymore."

Embry-Riddle's Vasigh says what's going on in cities such as Aberdeen isn't
extraordinary. The entrance and exit of airlines from cities ebbs and flows
according to demand and costs, he says.

"I don't say that it's a crisis," he says. "I think it is simply (the)
evolution of air transportation. Some areas will gain traffic. Some areas
will lose traffic. Some airlines are going out. Some are coming in. If cost
of fuel goes (down), or demand for air transportation goes up, naturally, an
airline will introduce more flights and service and more destinations."

Not too far from a hub 

Vasigh and others say that many small cities facing the loss of an airline
are within 70 to 80 miles of a larger hub airport, where people can catch
numerous flights.

AirTran, for instance, points out that Southwest serves Norfolk, 29 miles
from Newport News, Va., while AirTran flies to Richmond, which is 60 miles
away.

But Jessica Wharton, director of marketing and public affairs for the
Newport News/Williamsburg International Airport, says a person could spend
35 minutes to three hours driving to Norfolk.

"It varies that much," she says. "And Richmond International is about an
hour or hour, 15 (minutes), depending on traffic."

AirTran, which will pull out of Newport News after March 9, is that
airport's biggest carrier. It flew 43%, or about 480,000, of the airport's
passengers last year.

"The community is rightfully so upset about this," Wharton says of AirTran's
decision to leave. The airline flies "a large chunk of our travelers. But
that's also a lot of passengers for Southwest to be walking away from, and
there are certainly other airlines out there . who are interested in coming
in and wanting to scoop up those passengers."

Though the Newport News airport is currently served by Delta, US Airways and
Frontier, Wharton says the airport hopes to attract two or three more
airlines - to not only take over AirTran's former routes but also to fly to
new destinations.

Newport News is home to a large number of military personnel and government
workers, as well as close to tourist attractions such as Colonial
Williamsburg. Last year, it served a record 1.06 million passengers. As of
July, the number of fliers was up 4.5% over the same time last year, she
says.

Despite passenger numbers, Wharton acknowledges fewer carriers are left to
woo to Newport News.

"There's less and less airlines out there these days than there have been in
the past," she says. "We've assured our community we are talking to
everyone, and we have done that over the last several months, and I feel we
have very good prospects."

Where Delta may drop flights 

The 24 cities where Delta says it may drop service, by average occupancy
from lowest to highest. 
 
City  Avg. flight occupancy  Federal subsidy  
 
Thief River Falls, Minn. 12% Yes 
 
Greenville, Miss. 28% Yes 
 
Devils Lake, N.D. 30% Yes 
 
Watertown, S.D. 35% Yes 
 
Muscle Shoals, Miss. Ala. 36% Yes 
 
Fort Dodge, Iowa 39% Yes 
 
Hibbing, Minn. 39% Yes 
 
Alpena, Mich. 40% Yes 
 
Tupelo, Miss. 41% Yes 
 
Jamestown, N.D. 42% Yes 
 
Mason City, Iowa 46% Yes 
 
Pierre, S.D. 47% No 
 
Iron Mountain, Mich. 49% Yes 
 
Sioux City, Iowa 51% No 
 
International Falls, Minn. 53% Yes 
 
Brainerd, Minn. 53% No 
 
Hattiesburg, Miss. 54% Yes 
 
Escanaba, Mich. 55% Yes 
 
Aberdeen, S.D. 56% No 
 
Pellston, Mich. 59% No 
 
Bemidji, Minn. 59% No 
 
Sault Ste. Marie, Mich. 60% Yes 
 
Waterloo, Iowa 61% No 
 
Butte, Mont. 65% No 
 
Source: The Associated Press

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