How We Pay $3,700 Per Passenger to Subsidize Airline Tickets

Every day in 22 cities around the country, commuter planes take off with so few passengers that the pilots and crew outnumber the passengers. Each passenger pays a fare that's less than $100. However, the federal government subsidizes the rest of the cost and pays airlines as much as $3,700 for each person on board.

The controversial subsidy program is called Essential Air Services.  It was enacted by Congress in 1978 as a "temporary" measure to help rural communities that were facing the loss of air travel when small airports were to be closed due to airline deregulation.

Instead, Congress has temporarily extended the program 21 times over the last 33 years. The 22nd extension, lasting to January, was passed last week by the Senate.

Most importantly, the EAS program has mushroomed into a airline routing program based on political favors. And the subsidy doesn't go to the traveling public; it goes to the air carriers. The $3,700 per passenger subsidy, for example, has been championed by Senate Majority Leader Harry Reid (D-NV), who fought and won the earmark for keeping open air service for Ely, Nevada (population: 4,000).

How inefficient is the EAS program? While the Feds pay out $3,700 per passenger to airlines to fly from Ely to Las Vegas, Southwest Airlines sells tickets for Las Vegas to Chicago nonstop for as little as $153 one-way — about 10 cents per mile.

Airline columnist Joe Brancatelli, writing in the business journal, says the EAS program is

fast becoming the metaphoric poster boy for wasteful government spending, entrenched interests, political gridlock.

House Republicans have vowed to kill the program, but its supporters, largely Democrats and the Obama administration, are keeping the program alive. The administration pushed and won another short-term extension through January 2012.

In the latest temporary approval, federal subsidies will now be limited to $1,000 per passenger and the program will be offered to those airports that are at least 90 miles from a large or medium airport hub.

Rep. John Mica (R-FL), the chairman of the House Transportation Committee accepted the latest extension but is still leading the fight to curtail large parts of the program. On September 13, he said,

While this legislation signifies a bipartisan, bicameral agreement to move forward, it must not be just a temporary band-aid.

The reforms are considered small given the extraordinary growth of the program. Over the last ten years, EAS subsidies have grown by 300% while most planes still take off and land with few passengers. In 2001, the temporary program cost $50 million to operate. Now it has ballooned to $200 million.