The Essential Air Service program (EAS) was created by Congress in 1978 in response to deregulation of the airlines. It was set up to ensure that small and medium sized communities would continue to have scheduled air service; with federal subsidy, if necessary. As the title of the program indicates, Congress considered scheduled air service to be “essential” to the affected communities. The program is administered by the U.S. Department of Transportation (USDOT).
During the debate on airline deregulation, concern was expressed that, if airlines were free to enter and exit domestic markets at will, they would abandon small cities in favor of larger, more lucrative markets. This would cause smaller communities to lose access to the scheduled air transportation system. In some cases, air service was a community’s only form of public intercity transportation. Without the convenient access provided by air transportation, it is difficult for small and medium sized communities, especially those which are remote from major population centers, to compete with other cities that are more centrally located.
When an airline is the last airline serving a city, it is required to give the USDOT notice of its intent to discontinue service. If the city is eligible for EAS, the USDOT is then required to find a replacement carrier. The USDOT can require the airline serving the community to continue service until a replacement carrier is chosen.
The USDOT determines the level of service (seats per day) that it will subsidize in a community. Then, it issues a request for proposals for that level of service. The USDOT then negotiates a contract with the selected carrier for a two year period. The contract includes the amount of subsidy and the terms of service (e.g., number of flights, type of aircraft, etc.). Normally, the minimum level of service is two flights per day, six days per week, to the designated hub with a 15 passenger aircraft.
The USDOT pays the airline, in arrears, for flights it performs. If a flight is cancelled for any reason, the airline is not paid for that flight. At the end of the contract period, the USDOT issues a new request for proposals and the carrier selection process is repeated. The incumbent carrier may be a candidate and may be selected to continue its service. It is important to note that the EAS program is funded entirely by the aviation industry. As a user funded program, EAS relies on aircraft fuel taxes, aircraft registration, air-flight property tax, and fees collected from foreign air carriers traversing US airspace.
In a report dated May 1, 2010, there were 109 communities in the 48 contiguous states, Hawaii and Puerto Rico and 45 in Alaska receiving subsidized service. Two cities in Minnesota, Chisholm-Hibbing and Thief River Falls, are included in that number. International Falls was added after the report was issued and is not included in the count.