Wednesday, December 27, 2017

Air service subsidies expected to continue in Cody and Laramie, Wyoming: But larger questions loom

Despite President Donald Trump’s budget request last spring to eliminate subsidized air service to Cody and Laramie, it appears that both airports will continue to have the cost of commercial flights covered in part by the federal government. 

U.S. Department of Transportation announced last week that United Airlines had won a bid to provide winter flights to Cody under the Essential Air Service program, and Laramie airport manager Jack Skinner said he expects Laramie to continuing receiving subsidized service when its contract comes up for renewal, likely in the spring.

“We’re always leery and trying to stay on top of what’s happening back there in Washington,” Skinner said. “But we believe they’re going to continue it because it’s been a good program for rural communities like Laramie.”

Trump’s budget request to Congress last March sought to eliminate the Essential Air Service program, which subsidizes commercial flights to rural communities across the United States. But Congress has final say over federal spending and did not choose to eliminate the program.

That’s good news for Laramie, which has all of its flights subsidized, as well as Cody, which requires a subsidy only for commercial flights during winter months when the tourism industry slows.

“There’s always proposed reductions or cuts to the Essential Air Service but Cody has performed exceptionally well,” said Bob Hooper, manager of the Yellowstone Regional Airport.

He cited the airport’s relatively low per-passenger subsidy, saying that it hovered in the $20 to $40 range, whereas some Wyoming airports, like Worland, are theoretically eligible for subsidies of up to $1,000 per passenger.

Only Cody and Laramie are currently served by the EAS program.

United’s new contract to provide service to Cody guarantees the airline an annual payment of $850,000 to provide 14 nonstop trips each week from Cody to Denver between October and May.

Hooper said the federal transportation department handles EAS contract renewals so he did not know when Laramie’s contract would be put out to bid or what the terms would be. SkyWest currently serves the university town for $2.18 million per year.
Economic benefit

While year-round commercial air services is an obvious boon to Cody and Laramie — Hooper said an official estimate pegged the benefit to Cody at $40 million per year — it also ties into Wyoming’s larger efforts to diversify its economy.

Gov. Matt Mead’s Endow economic diversification initiative has identified reliable air service throughout the state to be an important foundation for moving Wyoming away from a natural resource-focused economy.

“Commercial air service is a significantly limiting factor,” Endow’s Jerimiah Reiman said earlier this year. “There’s a lack of air service particularly to global destinations.”

The Wyoming Department of Transportation presented an ambitious fix to the state’s reliance on commercial air carriers, who can currently decide whether and when to provide service — allowing the fortune’s of Cowboy State communities to rise and fall based on the whims of national corporations.

WYDOT proposed effectively creating its own airline, determining which communities would receive service as well as schedules, ensuring, for example, that it was possible for business people to catch an early morning flight into Casper or Rock Springs.

The state would contract with the same regional providers, like SkyWest or GoJet, that United and Delta Air Lines use on branded flights to connect relatively small communities, like those in Wyoming, with major hubs in Denver and Salt Lake City. These arrangements are known as capacity purchase agreements.

“This idea of capacity purchase agreements, for decades, has worked very well for airlines,” WYDOT director Bill Panos told lawmakers last summer.
Air service obstacles

Commercial air service in Wyoming has been battered over the last decade as federal safety regulations have starved regional carriers of pilots and shattered historic business models. More, as airlines phase out older and generally smaller jets, they are replacing them with larger planes that are harder to fill on flights to and from small communities.

Lawmakers decided in October not to move forward with WYDOT’s air service proposal, choosing to maintain the current system under which all air service in Wyoming outside of Casper is subsidized either by the federal government or by the state.

Wyoming offers revenue guarantees to several airlines flying in and out of some smaller cities such as Riverton.

WYDOT had requested $29.5 million to $37.2 million over 10 years to implement the new air service program, according to the Wyoming Tribune Eagle.

Transportation committee co-chair Rep. Mike Greear, R-Worland, said at the time that while the proposal was not ready for approval he remained interested in the issue.

“The issue is not dead, and I think it’s going to keep coming up,” Greear said.

Original article can be found here ➤

Changes may be coming to a Wyoming Department of Transportation program that this year disbursed just under $34,000 to keep the wheels of United Airlines jets hitting Yellowstone Regional Airport tarmac at a brisk pace over the summer.

Airports in Rock Springs, Sheridan and Riverton are in danger of losing service, WYDOT’s Aeronautics Division says, and an expansive, if tentative, plan is in the works to help those facilities maintain commercial flights.

On Jan. 8, WYDOT Aeronautics program manager Amy Surdam will be visiting Cody as part of a statewide tour to explain modifications that may be coming to WYDOT’s Air Service Enhancement Program. 

At the Dec. 13 meeting of the YRA board, several members said the plan could face headwinds amid concerns it is overly ambitious.


Since 2004, ASEP has provided nine airports around the Cowboy State with $35 million in state funds for “improving or retaining air service,” according to a WYDOT website.

Currently, five airports participate in the program. Cody’s YRA and the Jackson Hole Airport, considered “growth markets,” get funding to support additional seasonal service. 

Airports in Rock Springs, Riverton and Sheridan, meanwhile, depend on ASEP to get commercial service at all, and are thus judged “critical need” by WYDOT.

ASEP funds finance minimum revenue guarantees that act as hedges for carriers when they make bets about the profitability of serving small markets.

When the nonprofit Cody Yellowstone Air Improvement Resources signed such a minimum revenue guarantee with United for the carrier to provide this year’s summer service from Cody to Chicago, for example, ASEP agreed to pay 40 percent of a $320,000 minimum revenue guarantee. 

That route pulled in $235,340, so United was owed an additional $84,660. ASEP covered $33,864, and CYAIR provided the 60 percent local match, or $50,796.

For “critical need” airports like Sheridan, Riverton and Rock Springs that are more dependent on the program, only a 40 percent local match is required, with ASEP picking up 60 percent of the tab.

Budgets, rules crunch

ASEP has struggled to keep providing that financial backstop as state budgets have faltered and the cost of serving small-market airports has risen, however.

Following a fatal crash, the U.S. Congress passed a law requiring commercial co-pilots to have at least 1,500 hours at the throttle, a six-fold increase from previous requirements that WYDOT says has led to a shortage of pilots for the small craft that serve Wyoming airports.

Riverton-area resident and president of the Wyoming Senate Eli Bebout said in an interview Dec. 18, “That [rule] just killed our small airlines.”

On the other side of the vise, there are state budget constraints. According to WYDOT figures, ASEP funding is now less than half of what it was at the program’s 2004 inception, even as carriers make bigger asks to provide service.

In the most recent biennium, roll-over funding was used to plug gaps left in ASEP by cuts, but money for the program is expected to run out by July 2019, Bebout said.

WYDOT Aeronautics is proposing to change how the system works for critical need airports by handling negotiations with the airlines at the state level rather than piecemeal for those facilities. 

WYDOT would find one carrier to fly to Denver from all three airports.

“They’ve got the expertise and they can do it,” Bebout said of WYDOT negotiating on behalf of airports like Riverton’s. “We’ve got to get some side boards and parameters for WYDOT to negotiate with [carriers],” he added. “[A conclusive proposal] hasn’t been formulated.”

WYDOT Aeronautics is also looking to Gov. Matt Mead’s Economically Needed Diversity Options for Wyoming Council for assistance.

“The ENDOW Council has elected to approve $15 million in their budget request for Air Service Initiatives,” YRA member Bucky Hall informed the board Dec. 13.

Calling any ENDOW funding “one-time money,” Bebout said, “Ultimately what you want to do is not have any government funding for the program.” 

He said he hopes with increased competition, Riverton’s airport can return to boarding 15,000-passengers per year as it has in the past. Currently, the airport serves about 5,000 people per year, with many would-be travelers leaving the state to fly – a “leakage” problem Bebout said takes away revenue from Wyoming.

“When you talk about diversifying our economy, air service is critical,” he said.

YRA reactions

Details have yet to be fully released to the public, but at the Dec. 13 YRA meeting, airport manager Bob Hooper said the current WYDOT proposal calls for an agreement to serve the three critical need airports. “Growth market” airports such as those in Cody, Jackson, Gillette and Casper could also be included at a later date, he continued.

At that meeting, Hall called the idea “pie in the sky” on several occasions, questioning whether critical-need airports could produce enough demand to provide profitable service.

“Those three airports aren’t filling the airplanes right now and they’re going to get a 50-passenger [plane] instead of a 30-passenger [model currently used],” Hall said.

“[The plan] will also increase frequency from two flights a day to three,” Hooper added.

“The legislative team is convinced that we – we being the State – won’t have to write a check to the airlines. I personally am quite skeptical about that,” Hall said.

“They’re just sucking all the money out of the ASEP program,” Hall said of the struggling airports.

After the meeting, Hall said “[Mead] has identified, and correctly so, that to get businesses like Cody Labs, you’ve got to have a good commercial airport.”

But he said localities have to do their part as well. “Jackson, us, Casper and Gillette have all managed to make things work [without extensive state support],” Hall said.

Cody Sen. Hank Coe, the Cody City Council, the Park County Commissioners and members of CYAIR and YRA have all been invited to the Jan. 8 WYDOT presentation, Hooper told the board. Two days later, YRA will be asked to consider a resolution supporting the plan Surdam lays out, he continued.

After the meeting, Hall explained his view of the initiative’s prospects.

“[WYDOT Aeronautics] want letters of support to go to the legislators with,” he said. “I think most of the airport [boards around the state] are going to do it, but they’re going to do it with their fingers crossed behind their backs.”

Original article can be found here ➤

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