Options in the air: Subsidy or not, airport expects service to continue

By Dennis Seid/NEMS Daily Journal

TUPELO – By an 87-8 vote, the U.S. Senate two weeks ago reauthorized the Federal Aviation Administration, which oversees the nation’s airports and airlines.
But the vote also was important in that it killed an effort by Sen. John McCain, R-Ariz., to eliminate the $200 million Essential Air Service program.
EAS, established in 1979, provides subsidized air service to some 150 rural communities in the U.S. and has been the target of proposed cuts for years.
Tupelo Regional Airport is among four airports in Mississippi receiving an EAS subsidy. The others are Greenville, Hattiesburg and Meridian.
While McCain’s amendment was tabled, Sen. Tom Coburn, R-Okla., successfully lobbied to get an amendment passed that limits EAS to locations 90 or more miles away from the nearest medium or large airport.
Coburn’s amendment allows Mississippi’s EAS participants to stay in the program.
Mississippi’s two Republican Senators, Roger Wicker and Thad Cochran, voted with the majority to table McCain’s amendment. Both said the airports were important to job creation and economic development.
Even though the program was saved, Tupelo Regional Executive Director Josh Abramson says it is only a short-term solution.
“The FAA reauthorization does not change our plans,” he said. “In my opinion, Essential Air Service is a temporary fix while times are tough. My goal has been to get away from EAS as soon as we can.”
Tupelo is in the program for the first time, having been put under the EAS wing in May after Delta Airlines decided in late 2009 to end commercial air service in Tupelo and several other cities in the U.S.
Eventually, the Transportation Department opted to subsidize Delta with more than $974,000 a year for two years to continue providing service though Tupelo. Delta now provides 15 weekly flights from Tupelo to Memphis.
But Abramson said that level of service, subsidized or not, isn’t sufficient.
“In Tupelo’s prime, it was served by two airlines that supplied flight frequency and competitive prices,” he added. “Since the merger, both of those conveniences have dwindled.”
In 2006, Northwest and Delta each provided up to seven daily flights to Memphis and Atlanta. A record 31,000 passengers boarded flights at Tupelo Regional. The two airlines completed their merger in 2009.
Last year, boardings fell to a little more than 12,000, although through January boardings have risen year-over-year for seven consecutive months.
For now, Delta flies Saab 340 turboprop planes that seat up to 34 people. But last year, Delta said it would eliminate that fleet by the end of this year, replacing them with larger regional jets. A key measurement is the “load factor,” the percentage of seats filled. And for Tupelo, the load factor has been “weak,” Abramson acknowledged.
“We are challenged in that we have weak load factors,” he said. “Understand that Delta hasn’t been doing Tupelo any favors when it comes to pricing. Memphis is an expensive market and the high rates make a challenge when a flyer can drive to Golden Triangle (in Columbus) for the cheaper Atlanta connection or skip Tupelo and drive to Memphis. I don’t see Tupelo being able to move more people under the current conditions.”
Abramson said he expects Delta to request an end to its current EAS contract in conjunction with the reduction of its Saab fleet.
By law, Delta would have to file a notice with the Transportation Department with a 90-day notice. During that period, the agency would attempt to find a carrier willing to enter the market on a subsidy-free basis.
If it can do so, the carrier, in this case Delta, could suspend service as soon as the new carrier begins service.
If the Transportation Department isn’t able to find subsidy-free service, it would issue a request for proposal for carriers to provide service. Delta would not be able to suspend service until a replacement service began.
According to the agency, “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.”
The airport also might be able to use incentive money promised to Toyota by the state when it successfully recruited the automaker four years ago. The Japanese automaker’s plant in nearby Blue Springs will be opening this fall.
As part of a $324 million incentives package to lure Toyota, the state offered $1 million a year in air service subsidy for three years to help provide service from Tupelo to an airport near Toyota’s North American manufacturing operations near Cincinnati.
“There is good news,” Abramson said. “We have Toyota and international connectivity. Low load factors with the high ticket prices to travel internationally can still make a flight profitable.”
Abramson said that no matter how the situation plays out, potential passengers out of Tupelo should “plan for service,” but that he didn’t know “who the service provider will be at this time.”
Asked if those passengers need to worry about the future of Tupelo Regional, he said, “No.”
Contact Dennis Seid at (662) 678-1578 or dennis.seid@journalinc.com.

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