MoDOT study recommends overhaul of airport subsidy program

The federal program that subsidizes commercial passenger service for Cape Girardeau and four other airports in Missouri should be overhauled to give communities more stable and flexible service, a consultant told the city Airport Advisory Board on Thursday.

Tim Sieber, vice president of the Colorado-based consultants Boyd Group International, reported on the findings of a study commissioned by the Missouri Department of Transportation and the five cities served by the Essential Air Service program. That program, begun in 1978 as part of airline deregulation, is designed to help smaller communities maintain service to larger airports.

Cape Air, a Hyannis, Mass.-based company, began serving Cape Girardeau in November. It is the fourth airline to operate here since 2006 and has a two-year contract that will pay the company $1.47 million, or $1,177.66 per flight, to provide the service. Its immediate predecessor, Great Lakes Airlines, carried 833 passengers in 19 months at the airport. With lower fares, Cape Air has attracted 735 passengers in three months, airport manager Bruce Loy said.

The Essential Air Service program costs about $175 million annually, Sieber said, and is regularly targeted for cuts. Eliminating the program would eliminate service to too many rural communities to be politically practical, he said, but several steps could make it more efficient for airlines, airports and passengers.

"They are working in the confines of an outdated program that doesn't effectively address today's airline industry," he said.

Longer contracts would be a good start, Sieber said. Airlines are reluctant to make an investment in expensive airplanes if they are not assured of being able to pay the long-term costs, he said. A more reasonable length, he said, would be five to seven years.

But board member John Dissauer, reflecting on the failure of Great Lakes to attract passengers, said he worries about that idea. "If we'd had a five- to seven-year contract, we'd be stuck," he said.

That problem could be solved by including rules allowing communities to ask for a new round of bids if service isn't provided as promised, Sieber said.

The process for selecting carriers is geared to accepting the lowest bid, which means airlines don't set money aside for marketing and tend to underestimate fuel costs, Sieber said. While he said Cape Air is a strong company that understands the need to market itself, many others are unwilling to spend money on advertising and generally include a token $5,000 marketing budget in their proposals.

With volatile fuel prices, the bidding procedure should be changed to either add fuel costs in later, reflecting the market during operations, or with a range of subsidy amounts based on varying prices, he said.

"If we can make changes that reduce the risk, we can get the right carriers into the Essential Air Service program," he said.

Sieber and other consultants with Boyd Group have been meeting with airport managers and boards in all five cities, which include Joplin, Kirksville, Columbia and Fort Leonard Wood. Those meetings will be followed by a conference call next week, then a "pilgrimage to Washington" to talk to the Missouri congressional delegation about the report, Sieber said.

"This is an opportunity to effect some real change," he said.

rkeller@semissourian.com

388-3642

Pertinent address:

Cape Girardeau Regional Airport, Cape Girardeau, MO