DOT’s Implementation of the Small Community Air Service Development Program Includes Awarding Grants by Using Legislatively Established Priority and Other Factors and Providing Grant Oversight

In the first 4 years of the Small Community Air Service Development  Program, DOT awarded a total of 157 grants. However, only about one-third of the  airports we surveyed that applied for but did not receive a grant expressed  satisfaction over the clarity of selection criteria. Our survey of grantee airports showed that a large majority of the directors  at these airports were satisfied with DOT’s selection criteria and process  for the program, while fewer nongrantee airport directors thought the  selection criteria were clear. Variety of Goals and Strategies to Improve Air Service are Used, but the Results to Date of Completed Projects are Mixed

The Small Community Air Service Development Program allows  communities to set a variety of goals for projects, and individual projects  have been directed at adding flights, airlines, and destinations; lowering  fares; changing the aircraft serving the community; completing a study for  planning and marketing air service; increasing enplanements; and curbing  the leakage of passengers to other airports. To achieve these goals, grant  sponsors have used a number of strategies, commonly including subsidies  and revenue guarantees to the airlines, marketing to the public and to the  airlines, hiring personnel and consultants, and establishing travel banks in  which a community guarantees to buy a certain number of tickets. In general, we found that the airport  officials reported almost all the completed projects had some positive  effect on air service during the life of the grant, but in some cases the  improvements did not remain after the initial grant period, or that the  improvements were not self-sustaining. Because a large majority of Small Community Air Service Development  Project grants are not complete (127 of the 157 grants were ongoing as of  September 30, 2005), it is too soon to determine which strategies have  performed the best or assess the overall effectiveness of this program to  improve air service to small communities. DOT has designated one  airport each year of the program as an Air Service Development Zone— Augusta, GA (2002); Dothan, AL (2003); Waterloo, IA (2004); and Hibbing,  MN (2005). This may be particularly important since our work on  the limited number of completed projects found that only about half of the  grantees reported that the improvements were self-sustaining after the  grant was complete. We are sending copies of this report to appropriate congressional  committees and the Secretary of Transportation. Objectives, Scope, and Methodology

To determine how the Department of Transportation (DOT) has  implemented the Small Community Air Service Development Grant  Program, we obtained and reviewed legislation authorizing and funding the  program as well as related orders and guidelines. To determine what strategies have been used and what results have been  obtained, we reviewed the grant applications and agreements for all 157  grants awarded from 2002 through 2005. Low-cost carriers provide a challenge to small communities. DOT Additional Selection Factors

How many carriers are serving the community?
Why GAO Did This Study

Over the last decade significant changes have occurred in the airline industry. Many legacy carriers are facing challenging financial conditions and low cost carriers are attracting passengers away from some small community airports. These changes, and others, have challenged small communities to attract adequate commercial air service. To help small communities improve air service, Congress established the Small Community Air Service Development Program in 2000. This study reports on (1) how the Department of Transportation (DOT) has implemented the program; and (2) what goals and strategies have been used and what results have been obtained by the grants provided under the program.

What GAO Found

The Small Community Air Service Development Program grants are awarded at the discretion of the Secretary of Transportation. GAO found that DOT considered the statutory eligibility criteria and priority factors as well as other factors in evaluating proposals and in making awards. The number of grant applications has declined since 2002. DOT officials see this as a consequence of the large number of ongoing grants and the impact of 2003 legislative changes. In surveying airport directors we found that grantee airports generally responded positively to DOT's process for awarding grants, about two-thirds were satisfied with the clarity of the selection criteria, while about one-third of directors at airports not receiving grants were satisfied with the clarity. DOT oversight is based on reviews of grantee reports and reimbursement requests, and DOT has terminated some projects and reallocated the unexpended funds to others. Individual grant projects had goals including adding flights, airlines and destinations, lowering fares, obtaining better planning data, increasing enplanements, and curbing the loss of passengers to other airports. Grantees used a number of strategies to achieve their goals, including subsidies and revenue guarantees to the airlines, marketing to the public and to the airlines, hiring personnel and consultants, and establishing travel banks. Results for the 23 projects completed by September 30, 2005 were mixed: about half of the airports reported air service improvements that were self-sustaining after the grant was over. Some projects were not successful due to factors beyond the project, such as an airline decision to reduce flights at a hub. However, it is too soon to assess the overall effectiveness of the program, because most funded projects are not complete--127 of the 157 awarded grants are ongoing. DOT designates one airport each year as an Air Service Development Zone. The communities selected in 2002, 2003, and 2004 expressed similar concerns about the usefulness of this designation. None of the communities could cite any effect the Air Service Development Zone had for them. Instead, communities expressed confusion as to what DOT's designation was supposed to provide.