Higher Fuel Costs Cause Woes for Regional Airports
July 29, 2009
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  • Rising expenses, most notably for fuel, are putting the squeeze on the Mid-Ohio Valley Regional Airport’s finances, manager Terry Moore said.

    Story By Linda Harris

    May 8, 2008

    Rising expenses, most notably for fuel, are putting the squeeze on the Mid-Ohio Valley Regional Airport’s finances, manager Terry Moore said.

    “Financially, we’re not in that great of shape anyway,” he said. “The increase is a bit staggering. But it’s not just gas, all our utilities have gone up.”

    And it couldn’t come at a worse time: The airport is just starting to regain its business footing after a tumultuous relationship with its previous regional carrier, RegionsAir, was cancelled and a new one begun with Colgan, a Virginia-based company.

    Colgan, which won the contract to serve MOVRA, Morgantown Municipal Airport and North Central West Virginia Regional Airport in Bridgeport in 2007, has since switched its carrier hub from Pittsburgh, where it had been a US Airways Express affiliate, to Dulles International outside of Washington, D.C. It now flies under the United Airlines Express banner.

    The hub change took place in January, and since then Moore said passenger counts have been on the rise — hitting 500 in February and again in March, a marked increase but still short of the 1,000 per month Moore is hoping to reach.

    “Every time you turn around it’s something else,” he said. “We need a period where it’s nice and stable in order to recover” from lingering after-effects of frequent flight delays and cancellations by Regions Air. “We just haven’t had that stability, and now gas prices keep escalating.”

    Adding to the concern: Earlier this year Colgan gave notice of its intent to terminate its contract — not necessarily because it wants to sever its relationship with MOVRA, but because it’s the only way to recover any of the escalating fuel costs under its Essential Air Services contract. EAS is a government program providing a subsidy to carriers serving small communities that otherwise would lose their commercial air service. It’s paid at a fixed rate per completed flight.

    “It was basically a procedural move on their part,” Moore said. “They don’t intend to cancel our service and they didn’t just do it for us or just for the airports they serve in West Virginia. They did it for everybody in their system in an effort to increase their EAS (for all of them). Their hope is they’ll get a higher EAS rate from the government.”

    Though there is some risk — theoretically at least, it’s possible they may not get any bids, the U.S. Department of Transportation may not grant Colgan the higher rate, or they could get other, unexpected bidders — Moore says he doesn’t expect any surprises: Given the deteriorating aviation market, he doesn’t expect many, if any, other bidders to surface. He also said it’s likely Colgan will bid again and said they have “a high expectation” the government will accept the higher bid rate and air service through MOVRA will continue without interruption.

    “Basically, it’s just a paper trail,” he said, noting Colgan’s overriding concern is the fast-rising price of aviation fuel.

    “Over one six-week period prices went up over $1 a gallon — that $1 equated to almost a 50 percent increase in the price. The Essential Air Service program doesn’t allow for that kind of cost escalation over the life of a bid … normally, you can absorb a (small) increase but when it goes up that much they can’t.”

    He also said Colgan isn’t the only carrier affected, “and figuring out how to pass it on to passengers is part of the problem” for the industry as a whole.

    But MOVRA’s concern is that higher prices might discourage people from traveling at a time when more are needed.

    “We definitely need passengers, we definitely need general aviation to continue flying,” he said. “We aren’t doing the business we did a couple years ago, and we have already taken basic measures — we’ve reduced staff, we’ve cut back just about everywhere we can cut back in order to make up the difference. So, if the trend continues in this direction, I would say more dramatic action would need to be taken.”

    Date: 2008-05-08