Half-empty flights have some questioning federal subsidies

Macon TelegraphJune 2, 2009 

On most days, the main terminal at Middle Georgia Regional Airport in Macon is virtually empty.

The few people who travel on the city’s lone commercial airline, Georgia Skies, follow a sign directing passengers next door to a privately owned terminal generally used by charter planes. Once inside, those passengers use their $39 tickets to travel 81 miles on half-empty nine-seat planes to Hartsfield-Jackson Atlanta International Airport.

Georgia Skies launched its Macon service in September 2008 after receiving a $1.3 million taxpayer-funded subsidy that allows it to provide service to local travelers at a deep discount.

During the Christmas season, those subsidies helped Georgia Skies passengers travel practically for free in an effort to drum up more business.

But Scott Coffman, the regional airport’s manager, said last week that traffic “has not yet picked up,” adding, “Maybe things will.”

Beginning today, Georgia Skies hopes finally to offer its Macon passengers gate access in Atlanta. For eight months, the airline has been without such access. Travelers from Macon who had hoped to avoid long delays in Atlanta still had to take a shuttle to the main terminal and navigate security, baggage claim and crowds at one of the world’s busiest airports.

Nonetheless, taxpayer subsidies ensured that Georgia Skies remained in business even when there were few passengers willing to deal with the hassle.

During the past decade, Congress has channeled more than $1 billion into the Essential Air Service program, which since 1978 has subsidized flights to small communities that have air service. Airlines servicing Macon have netted millions in Essential Air Service subsidies during the years.

In 2007, the Department of Transportation granted one of the largest Essential Air Service subsidies in history — about $2 million a year — to Atlantic Southeast Airlines to pay 60 percent of the carrier’s costs to make two roundtrip flights a day between Macon and Atlanta. ASA ended service to Macon last fall, citing high fuel costs and few passengers.

The lack of commercial passenger traffic at the regional airport fuels criticism of the Carter-era Essential Air Service program that, thanks to strong congressional support and intense lobbying, has eluded deep cuts by every presidential administration from Ronald Reagan to George W. Bush. This year, 22 senators, among them moderate Republicans whose support has been critical to advancing President Obama’s agenda in Congress, signed a letter cautioning the administration against cutting the program.

In fact, the Obama administration’s budget for 2010 increases the program by $55 million, to $175 million, according to the Department of Transportation.

Critics of the way the Essential Air Service program is structured, including the Government Accountability Office, Congress’ investigative arm, and the White House Office of Management and Budget, question the program’s efficiency.

“The budget also acknowledges that the program design is out of date and not cost effective,” the Office of Management and Budget said in a fact sheet issued regarding the 2010 budget and its impact on rural communities. “The administration has committed to develop with Congress a more sustainable program to fix these flaws.”

Federal oversight agencies worry about the high cost of subsidies that, in Macon’s case, are about $523 per flight, regional airport officials said. Aviation consultants say communities such as Macon that are within easy driving distance of large airports can get air service elsewhere and shouldn’t rely so heavily on taxpayer-funded subsidies.

“Fifty percent of Essential Air Service is exactly that — essential,” said Michael Boyd, an aviation consultant and head of Boyd Group International in Evergreen, Colo. “The other 50 percent is squandered on things like Macon.”

Proponents, on the other hand, say the Essential Air Service program serves a critical need and helps smaller cities remain economically viable.

“Athens and Macon now have more flights to more places for less money than they ever had,” said Greg Kahlstorf, president of Pacific Wings, the Hawaii-based company that owns Georgia Skies.

Kahlstorf said some carriers using Essential Air Service subsidies treat their flights as “air taxis for the rich, subsidized by the government.”

“A lot of airlines aren’t in it to provide the service, they are in it for welfare,” he said. “The carriers that collected (Essential Air Service subsidies) had a vested interest in ensuring nothing changed. The rules were never updated because you have lobbyists telling Congress that if you change it the sky will fall.”

The issue of subsidies is so contentious that Wings Air, which lost the bid to provide service at the Middle Georgia Regional Airport before setting up shop as a non-subsidized carrier, pulled up stakes after only a few months, unable to compete, company officials said, with “predatory pricing” by Georgia Skies.

“There are other non-subsidized markets that we will now focus on that are in need of our type of service and provide a level playing field,” Wings Air President Charlie Mintz said in a February news release. “It is unfortunate that the DOT failed to see the illogic in subsidizing a carrier that was providing inferior service. It’s just not possible for us to compete against pricing that has no other purpose than to drive us from the market while they exist on federal funds.”

AN ALTERNATIVE TO HARTSFIELD?

Macon officials have long envisioned a day when the regional airport will serve as an alternative to the crowded Atlanta airport.

“If you look at major cities, they all are served by two airports. Miami and Fort Lauderdale, Chicago has O’Hare and Midway, New York has LaGuardia and JFK. D.C. has Dulles and Reagan,” said Coffman, the regional airport’s manager. “It makes sense that the busiest airport in the country needs two airports.”

For more than a decade, Macon officials have pinned their hopes on the idea that air service would bolster the area’s economic development efforts by better connecting the city to Atlanta, their booming neighbor to the north.

Officials were thrilled when Atlantic Southeast Airlines began offering twice-daily service on jets that could seat more than 50 passengers.

But the flights were rarely full, city officials complained of inconsistent service and in 2007 ASA announced it was pulling out of the Macon market as soon as a replacement carrier could be found.

In the meantime, the Athens-Ben Epps Airport, which is about 70 miles north of Atlanta and also relies heavily on Essential Air Service subsidies, was also looking for air service.

Because of their relatively close proximity to Atlanta, the Department of Transportation put out a bid request for carriers that could offer both airports service to Atlanta. Not a single carrier responded to the agency’s first three requests.

Finally, three carriers answered the call: New Smyrna Beach, Fla.-based Vintage Props and Jets, which eventually filed for bankruptcy; Lawrenceville-based Wings Air, which had a letter of support from Rep. John Linder, R-Lawrenceville, to then Secretary of Transportation Mary Peters; and Georgia Skies, the first choice of Macon Mayor Robert Reichert and Athens Mayor Heidi Davison.

Reichert did not return calls for comment.

Ultimately, Georgia Skies won the bid to receive the $1.3 million subsidy to service Macon and a $1 million subsidy to service Athens.

Since then it’s been a bumpy ride.

Georgia Skies has worked for months to lease a gate at the Atlanta airport, which would spare customers the cumbersome trek across the airport by shuttle to check in and go through security to catch connecting flights. The carrier is slated to use the Atlanta airport’s international terminal in the coming weeks, Kahlstorf said.

AIRPORT GENERATES $1.3M IN REVENUE

The Middle Georgia Regional Airport in Macon generates about $1.3 million a year in revenue through renting areas on the grounds to Boeing, TIMCO Aviation Services and ASA for maintenance space.

In turn, that money, which under federal guidelines can only be used to sustain the airport, pays for such operational costs as salaries, supplies and utilities.

But beyond that, the future of Macon’s air service is uncertain.

“We’re trying to build up the passenger side of the business,” said Tom Barber, Macon’s finance director. “We’re not quite far enough for people to fly to Hartsfield and then fly out of Hartsfield. That’s our challenge, and we haven’t generated enough passenger business to make it viable over the long haul.”

While Georgia Skies officials declined to give figures on the number of passengers who travel on the airline’s 26 flights a week, they said the number is in line with passenger loads for other carriers using Essential Air Service subsidies.

Acccording to DOT figures, those carriers often fly nine-seat planes with three to five passengers per flight.

Georgia Skies officials say they’ve noticed that some of their Macon and Athens passengers work for Atlanta companies such as TBS and Coca-Cola and use the air service to commute to their jobs.

Kahlstorf says he hopes to capitalize on this type of commuter pattern as well as traffic from military personnel at the Robins Air Force Base who route through Atlanta.

“Instead of people kind of looking at us going ‘Huh?’ you’ll see a major advertising push in Macon and things should increase exponentially,” Kahlstorf said.

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