Cost of keeping Delta in Pierre, South Dakota: nearly $500,000

The U.S. Department of Transportation paid Delta Air Lines nearly $500,000 to compensate for the extra time the company served at the Pierre Regional Airport in late 2011 and early 2012 after its planned pullout date.

The DOT also paid Delta for staying longer in 13 other communities the company planned to pull out of in 2011 and 2012, according to DOT documents.

In late 2011, Delta announced its intent to end service at airports in Iowa, Minnesota, North Dakota and South Dakota.

Delta’s service to the Pierre airport was originally intended to end Nov. 20, 2011.

“The suspension notices were precipitated by Delta planning to and ultimately disposing of its fleet of 34-seat Saab 340 aircraft,” the order notice says.

The DOT then required Delta to continue service at the airports for a set time. In Pierre’s case, Delta continued service for about two months until Great Lakes took over on Feb. 1. For staying longer in Pierre, the DOT paid Delta a subsidy of $473,114, which was almost $4,000 for each departure, the documents say.

There were two other South Dakota airports that were affected by the Delta pullout, Aberdeen and Watertown. Delta received a subsidy of $178,137 for staying roughly an extra five months in Aberdeen and $1,034,083 for staying about five more months in Watertown.

In total, Delta was paid $12,884,006 to temporarily continue service at all the airports.

The subsidy made up the difference between the company’s expenses and revenue with a little extra money added, said Bill Mosley, with the U.S. Department of Transportation.

“The idea is, we make up their losses plus a margin of profit,” he said.

Mike Isaacs, Pierre Regional Airport manager, said the subsidy agreement is between Delta Air Lines and DOT. The city of Pierre and the airport have nothing to do with it.

Robert Herbst, an airline analyst who follows Delta and other major carriers, said the exodus of major carriers from small and regional airports is nothing new.

Airlines have really focused on repairing their balance sheets and trying to turn a profit, he said. One way to save money is to do what Delta did and phase out the smaller 40-50 passenger jets used at some airports.

“In order to make a profit they have to charge such high fares because the price of fuel has gone from 10-11 percent of the average ticket cost up to 35-45 percent and airfares just can’t keep up,” he said. “If they charge what they need to they can’t get enough passengers to fill up these planes to places like Pierre and Fargo and Hibbing and Thief River Falls and that is the problem.”

Herbst said the smaller jets are being phased out across the industry because carriers are struggling to make money with them.

“When they built them the price of fuel was 65 cents a gallon for jet fuel and now jet fuel is up to $3.25, $3.45 a gallon,” he said.

The final order by the DOT that set compensation was posted in October, about nine months after Delta pulled out of the Pierre airport. However, it is around the same time that the hold-in period was expiring for Delta at the other affected airports. The eligible hold-in period for two airports lasted until December 2012.

The difference between what Delta asked for in subsidy and what the DOT gave the airline is $4,279,486, according to the documents.

Mosley said is common for the DOT to negotiate with the airlines to save money.

“We want to try to stay within budget and save the taxpayers money as much as possible,” he said.

An email to a public relations official with Delta seeking comment from the airline was not returned by deadline.

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