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Subsidy cuts could mean 'death spiral' for small airports in upper Midwest

by Archie Ingersoll

Posted on 3/28/2017

FARGO - For nearly 40 years, the federal government has subsidized commercial passenger flights to out-of-the-way towns like Devils Lake, N.D., and Thief River Falls, Minn.

Proponents of the program, known as Essential Air Service (EAS), say it supports small airports and helps rural economies stay competitive. But it''s often criticized as congressional pork.

The EAS program, as it has in years past, landed on the chopping block this month with President Donald Trump''s budget blueprint calling for its elimination, which would save about $175 million per year.

"EAS flights are not full and have high subsidy costs per passenger," Trump''s blueprint said. "Several EAS-eligible communities are relatively close to major airports, and communities that have EAS could be served by other existing modes of transportation."

The North Dakota airports with EAS flights are in Jamestown, Devils Lake and Dickinson. In Minnesota, Thief River Falls, Bemidji, Brainerd, International Falls and Chisholm/Hibbing are also part of the program.

Airport managers say the end of EAS wouldn''t necessarily mean the closure of these local airports. But it could bring an end to commercial passenger service in these towns, or at least a reduction in service and an increase in ticket prices to compensate for the lack of federal subsidies.

Such price increases would send commercial passenger service at rural airports into a "death spiral" as travelers seek out cheaper alternatives, said Joe Hedrick, manager of the Thief River Falls airport, which has EAS flights to Minneapolis.

Hedrick said Thief River Falls was at risk of being forced out of the EAS program last year because the per-passenger subsidy there had reached $1,130, a figure that exceeded the government''s $1,000 limit. Since Boutique Air became the airport''s carrier in June, the subsidy has dropped to $277 per passenger, he said.

Hedrick said he doesn''t view the program as pork. "In the past, Congress has decided that we want rural America to be competitive," he said. "I would argue that that''s still the case today."

Over the years, the program has received bipartisan support in Congress, including from North Dakota''s delegation. U.S. Rep. Kevin Cramer, R-N.D., said Congress has had to fight for EAS funds almost every year. He noted that presidential budgets tend to set high goals, but that Congress will likely make changes.

"Essential Air Service is very important for rural areas, particularly for Jamestown, Devils Lake, and Dickinson," U.S. Sen. John Hoeven, R-N.D., said in a statement. "We maintain funding for the program in the Fiscal Year 2017 budget. While the President has proposed eliminating EAS in Fiscal Year 2018, I believe we''ll be able to sustain funding."

U.S. Sen. Heidi Heitkamp, D-N.D., also issued a statement in favor of EAS, saying it guarantees air travel in rural communities and helps keep local economies vibrant and connected. She said the program helped the Devils Lake airport set a new record for paid passenger boardings - 6,290 in 2016.

John Nord manages the Devils Lake airport where SkyWest Airlines, operating under a contract with United Airlines, has flights to Denver 12 times a week. The annual subsidy for the flights is $4 million, and the per-passenger subsidy is $363 - the highest in Minnesota or North Dakota, according to U.S. Department of Transportation records.

Nord said if EAS ended, his airport would have to negotiate with an airline to keep commercial passenger service. "It would be a struggle for us to come up with a package to maintain our air service," he said.

In a statement, SkyWest said it''s too soon to speculate whether the program will be cut, adding that "Essential Air Service is the life force of dozens of communities'' economic health and a vital link to the national transportation network." Boutique, United and Delta - all airlines with EAS flights at Minnesota or North Dakota airports - did not respond to requests for comment.

Sam Seafeldt, manager of the Jamestown airport, said the EAS program allows flyers to avoid traveling long distances to larger airports. It also keeps ticket costs down, he said.

For instance on Tuesday, March 28, a round-trip ticket to Denver leaving Jamestown on Thursday, May 4, and returning on Sunday, May 7, cost $222. Meanwhile, a similar flight from Hector International Airport in Fargo, which isn''t part of the EAS program, cost $482.

Shawn Dobberstein, executive director of Fargo''s Municipal Airport Authority, said ending EAS could send more passengers to Hector, but he doesn''t foresee any other possible effects, such as lower fares.

At the Dickinson airport, Trans States Airlines operates under a contract with United to provide EAS flights to Denver. Fred Oxley, Trans States'' chief operating officer, said cutting EAS is a concern for rural areas, but he believes a bigger issue is the nation''s growing pilot shortage.

"Even if we have an EAS, I''m not certain that we''re going to have the pilots to fly the airplanes to provide that type of service," he said.