Essential Air Service FAQ
Frequently Asked Question Topics
- Hold-In Authority
- How Much Service?
- Eligibility Standards
- Subsidy Rate Negotiations
- Size of the Program
- Subsidy Amounts
- Selecting an Essential Air Service Carrier
- Paying an EAS Carrier
EAS Hold-In Authority
QUESTION: What happens when the last carrier serving a community subsidy-free wants to leave that community?
ANSWER: That carrier must first file a notice of its intent to suspend service -- a 90-day notice under the EAS statutes. During that 90-day period, we try to find a carrier willing to enter the market on a subsidy-free basis. If successful, we issue a decision allowing the incumbent to suspend service, which it may do as soon as the incoming carrier begins service. If we are not able to secure subsidy-free replacement service, we issue a request for proposals (RFP) to all scheduled carriers and institute a carrier-selection proceeding. Again, the incumbent could not suspend service until a replacement carrier actually begins service. Under both scenarios, the incumbent carrier is eligible for compensation for being held in after the end of its original 90-day notice period.
QUESTION: What happens when the last carrier serving a community with subsidy wants to leave that community?
ANSWER: Again, that carrier must first file a notice of its intent to suspend service -- a 90-day notice under the EAS statutes. We follow the same drill as we do in the subsidy-free example, although the likelihood of securing subsidy-free replacement service is much less. We hold the incumbent in and issue an RFP. In this case, however, the incumbent carrier continues to receive the same subsidy rate for six months, at which time it is eligible for a rate increase. The six-month period discourages carriers from deliberately submitting below-cost proposals to get selected and immediately coming back to the Department hoping to get a higher subsidy rate. Eligible communities are guaranteed to receive at least a minimum level of air service; thus, absent a carrier’s going out of business, there should not be a service hiatus at any EAS community. In the unlikely event that a subsidy-free carrier begins providing competing service at a subsidized community, we do not unilaterally terminate the contract. However, if the subsidized carrier files to suspend service, we allow the suspension and rely on the remaining carrier’s subsidy-free service to meet the community’s EAS.
How Much Service?
QUESTION: How much service does the government provide for EAS communities?
ANSWER: The Department’s mandate is to provide the EAS communities with access to the national air transportation system. As a general matter, this is accomplished by subsidizing two to four round trips a day -- with three being the norm -- with 19-seat aircraft to a major hub airport.
Eligibility Standards
QUESTION: How is it determined which communities are guaranteed EAS and which are not?
ANSWER: The Airline Deregulation Act of October 24, 1978, simply said that any community receiving scheduled air service from a certificated carrier on that date (746 in total, with approximately 200 in Alaska) was eligible, and instructed the Civil Aeronautics Board, now the Department of Transportation, to implement procedures to guarantee each community’s EAS. Even the very largest cities, such as New York and Los Angeles are technically EAS communities. However, Congress created the program to ensure only a safety-net level of access to the national transportation system for communities that would otherwise receive no schedules air service, so as a practical matter, New York and Los Angeles would never receive subsidy support.
Over the years the Congress and the Department have worked to streamline the EAS program and increase its efficiency, mostly by eliminating subsidy support for communities that are within a reasonable drive of a major hub airport. Currently, communities are not eligible to received subsidized air service if they are within 70 driving miles of an FAA-designated Large or Medium Hub airport, or if their subsidy per passenger exceeds $200 (annual subsidy level divided by annual passengers generated). Communities more than 210 highway miles from the nearest Medium or Large Hub are exempt from the $200-per-passenger standard.
Subsidy Rate Negotiations
QUESTION: How often does the Department renegotiate subsidy rates with the carriers providing the service?
ANSWER: We generally establish two-year contracts. This allows for the competitive bidding process to keep subsidy costs in check and to give communities and the Department opportunities to switch carriers if appropriate. By design, the contracts for carriers to provide EAS across the nation expire on a staggered basis throughout the year. Thus the Department is continually establishing subsidy rates for new, two-year contracts.
Size of the Program
QUESTION: How many EAS communities are currently subsidized and how much does it cost?
ANSWER: As of April 1, 2009, we subsidized 45 communities in Alaska and 108 in the rest of the United States and Puerto Rico. The EAS budget jumped from $50 million on FY 2001 to $113 million in FY 2002 after the attacks of September 11. The FY 2009 budget is $123 million.
Subsidy Amounts
QUESTION: How do you determine how much subsidy to pay for any individual community’s service?
ANSWER: Carriers submit service and subsidy proposals in response to our RFPs. Those RFPs advise the applicants that their proposals should be submitted on a sealed bid, “best and final” basis, and set forth the level of service -- frequency, aircraft size, and hubs -- that would be appropriate for the community given its location and traffic history.
SELECTING AN EAS CARRIER
QUESTION: How do you select an EAS carrier, i.e., is it a low-bid system?
ANSWER: While we use a bid system, it is not low-bid system, because the governing statutes require us to consider four carrier-selection criteria, and subsidy is not one. Nonetheless, we may consider the relative subsidy requirements of the various options, and we have since the inception of the program. In selecting a carrier, the law directs us to consider four factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views. After we receive proposals, we formally solicit the views of the communities as to which carrier and option they prefer. After receiving the communities’ views, we issue a decision designating the successful air carrier and specifying the specific service pattern (routing, frequency and aircraft type), subsidy rate, and effective period of the rate. It is possible to change the terms of the contract during the two-year period if the carrier and community agree and the carrier agrees to the same or lower subsidy rate.
PAYING AN EAS CARRIER QUESTION: How do you pay the EAS carriers?
ANSWER: We pay the carriers in arrears on a per-flight-completed basis. At the end of each month, carriers submit claims for the prior month based on the number of flights that it actually completed in conformance with the contract. Carriers submit invoices, detailing the service actually completed, including date of service, aircraft type, routing, and frequency of service, and any actual variations from the service contemplated by the contract. When a carrier is forced by operational exigencies to make ad hoc service adjustments to its service -- aircraft type or routing -- the carrier reports those deviations on its invoice and appropriate adjustments are made. For instance, if the carrier substituted a smaller, less expensive aircraft type than agreed to, perhaps because the larger aircraft had a mechanical problem, the subsidy rate would be reduced accordingly. On the other hand, we typically pay carriers for flights that could not be completed because of weather conditions.