The Department of Transportation’s  reauthorization proposal suggests changing the source of program funding  to a mandatory appropriation of $50 million per year from the Airport and  Airway Trust Fund. The EAS Program Provides Service to Small Communities While Increasing EAS Subsidies Raise Concerns about the Cost and Efficiency of the EAS Program and Its Service Providers

Mr. Chairman, as you know EAS provides service to many communities  that otherwise would not receive air service. Furthermore,  the federal median subsidy for providing air service to EAS communities is  about $98 per passenger; the subsidies varied among communities from  about $13 to over $677 per passenger in 2006. Finally, the number of air  carriers flying smaller aircraft suitable for EAS communities may decrease  and some industry officials are beginning to voice concerns about the  availability of appropriate planes to provide small community air service  in the future. As we have noted in  past reports, if EAS subsidies were removed, air service might end at many  small communities. The funding for EAS has also grown  from $25.9 million in 1997 to $109.4 million in 2007. The Small Community Grant Program Has Funded Some Successful Projects

Mr. Chairman, we found that SCASDP grantees pursued several goals and  strategies to improve air service, and that air service was sustained after  the grant expired in a little less than half of the 23 completed projects in  2005—the time of our initial review. Although the program has seen some  success, the number of applications for SCASDP grants has declined for a  variety of reasons. The outcomes of the grants may be  affected by broader industry factors that are independent of the grant  itself, such as a decision on the part of an airline to reduce the number of  flights at a hub. Several of these options formed  the basis for reforms passed as part of Vision-100. Regionalizing service to some communities could generate federal savings. Options to Enhance the Long-term Viability of the Essential Air Service  Program.
Why GAO Did This Study

Congress established two key programs to help support air service to small communities--the Essential Air Service (EAS) providing about $100 million in subsidies per year and the Small Community Air Service Development Program (SCASDP) that provides about $20 million per year in grants. As part of its reauthorization of the Federal Aviation Administration (FAA), the Congress is examining the status and outcomes of these programs. This testimony discusses (1) the history and challenges of the EAS program, (2) the implementation and outcomes of the SCASDP and (3) options for reforming EAS and SCASDP. The testimony is based on previous GAO reports, interviews with Department of Transportation officials and industry representatives as well as program updates.

What GAO Found

EAS subsidies support air service to many small communities that would likely not have service if EAS subsidies are discontinued. Since 1997, funding for EAS has increased from $25.9 million in 1997 to $109.4 million in 2007 and the number of communities has generally increased. The federal government is spending a median of about $98 per passenger, with subsidies ranging from about $13 to $677 per passenger. Concerns exist about the costs of the program, particularly given the federal government's long-term structural fiscal imbalance. In addition, according to industry representatives, the number of air carriers flying aircraft suitable for EAS communities may decrease, raising concerns about the availability of appropriate aircraft to provide small community air service in the future. SCASDP grantees have used their grants to pursue a variety of goals and have used a variety of strategies, including marketing and revenue guarantees, to improve air service. Our analysis of the 23 grants completed by October 1, 2005, found that air service was sustained after the grant expired in a little less than half of the projects. Finally, although the program has seen some success, the number of applications for SCASDP grants has declined--from 179 in 2002 to 75 in 2006. As we have reported, options for reforming EAS, such as consolidating service into regional airports might make the program more efficient, but also could reduce service to some communities. Further, Congress may be able to use some "lessons learned" from marketing and other successful SCASDP strategies that may help it make the current programs more effective.