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Essential Air Service

Overview

The Airline Deregulation Act, passed in 1978, gave airlines almost total freedom to determine which markets to serve domestically and what fares to charge for that service. The Essential Air Service (EAS) program was put into place to guarantee that small communities that were served by certificated air carriers before deregulation maintain a minimal level of scheduled air service. 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.  The Department currently subsidizes commuter airlines to serve approximately 163 rural communities across the country that otherwise would not receive any scheduled air service.

History of EAS

Before deregulation, air carriers' operating certificates for most of these communities required carriers to schedule and provide two daily round trips at each point on their certificates. During the pre-ADA debates, the prospect of allowing carriers to terminate scheduled service without prior Government approval raised concern that communities with relatively lower traffic levels would lose service entirely as carriers shifted their operations to larger, potentially more lucrative markets. To address this concern, Congress added section 419 to the Federal Aviation Act, which established the EAS program to ensure that smaller communities would retain a link to the national air transportation system, with Federal subsidy where necessary. Under this program, the Department determines the minimum level of service required at each eligible community by specifying a hub through which the community is linked to the national network, a minimum number of round trips and available seats that must be provided to that hub, certain characteristics of the aircraft to be used, and the maximum permissible number of intermediate stops to the hub.

Community Eligibility

The EAS program was established as a safety net for the smaller and more isolated communities across the country that had scheduled air service at the time the ADA was passed in 1978.  For the first 12 years the sole criterion for eligibility was whether the community had received scheduled air service on October 24, 1978, the date the ADA was signed into law.  In 1990 Congress made some minor reforms by establishing both mileage and a subsidy-per-passenger standards.

Very recently, Congress passed several significant reforms to the EAS program.  On August 5, 2011, the President signed the “Airport and Airway Extension Act, Part IV” (Public Law No: 112-27).  That law contained a provision which prohibits the Department from providing EAS to communities whose annual passenger subsidies are greater than $1,000 per passenger, regardless of their distance from the nearest hub airport.  Subsequently, the “Consolidated and Further Continuing Appropriations Act, 2012” (Public Law No: 112-55, November 18, 2011) waived the requirement that communities receive EAS on 15-seat or larger aircraft.

On February 14, 2012, the President signed the “Federal Aviation Administration (FAA) Modernization and Reform Act of 2012” (Public Law No. 112-95), which contained several additional reforms. First, the law capped the communities in the 48 states plus Puerto Rico that are eligible to participate in the program.  (There were no changes in Alaska or Hawaii.)  The law states that only those communities that were receiving subsidized EAS at any time between September 30, 2010, and September 30, 2011, or that received a 90-day notice from their incumbent carrier and the Department held that carrier in, would remain eligible for the program.  Therefore, no new communities can enter the program should they lose their unsubsidized service.  Secondly, the law requires that in order to remain in the EAS program, beginning with fiscal year 2013, subsidized communities must maintain an average of ten passenger enplanements per service day.  The law provides exceptions for communities in Alaska and Hawaii, and for those that are more than 175 driving miles from the nearest large or medium hub airport.

Application Filing Instructions

When negotiating subsidy rates with carriers to provide EAS, the Department generally establishes 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.

For those carriers wishing to participate in the EAS program, the Department issues a request for proposals (RFP) 90-days prior to the expiration of the current contract to all scheduled carriers and institutes a carrier-selection proceeding.  Carriers submit service and subsidy proposals in response to our RFPs via email or docket.  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.

Selection Process

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 the Department receives proposals, we formally solicit the views of the communities as to which carrier and option they prefer.  After receiving the communities’ views, the Department issues 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.

Payment Procedures

The Department pays 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.

Reports and Publications

Note: For an accessible version of any of these documents, please contact Michael F. Martin.

Updated: Thursday, April 25, 2013