In September 2014, Yeager Airport in Charleston, W.Va., finally made good on a promise to give its community more flights. It was bringing in People Express.
Yeager planned to do this with funds from the same federal pool of money that Newport News/Williamsburg International Airport was using to launch People Express — a program that the U.S. Government Accountability Office says has a mixed record.
Yeager received a grant of $700,000 and Newport News $950,000 through the Small Community Air Service Development program, which is run by the U.S. Department of Transportation and is meant to bring new flights to small airports.
Over the past five years, the program has failed in its goal of establishing sustainable air service at those airports more than half of the time, a Daily Press analysis found.
In West Virginia, a small amount of federal money — $18,000 in all — went to advertise People Express flights to Florida that never materialized. In Newport News, $650,000 went for start-up costs for the Nevada-based firm that actually operated People Express planes. The rest, months later, went to pay off a portion of the money People Express borrowed from TowneBank.
The bulk of that repayment came from what Virginia Secretary of Transportation Aubrey Layne has called the largest unauthorized use of state aviation funds. The Peninsula Airport Commission had put up taxpayer money to guarantee the People Express loan, an arrangement that Attorney General Mark Herring has called unconstitutional.
Two weeks after the Charleston-to-Orlando flights were announced, one of People Express’ two airplanes collided with a truck on a runway in Newport News. The airline announced on Sept. 26, 2014, that it would be canceling future service.
In West Virginia, then-Airport Director Rick Atkinson halted any more spending on the airline. The Department of Transportation didn’t make Yeager Airport recoup any of the money it spent on People Express because, according to Atkinson, it was a fairly minimal amount. The airport looked into suing the airline to get some of that cash back, but the airport’s legal counsel told Atkinson it wasn’t worth it.
“We got what we paid for,” Atkinson, now city manager of South Charleston, W.Va., said in a recent phone interview.
Auditors from the Virginia Department of Transportation who looked into the loan guarantee in Newport News said they have no clue how People Express used the money it borrowed. That public money included $3.5 million from the state, $300,000 of the $950,000 from the U.S. Department of Transportation, and $700,650 from a regional body that is funded by Peninsula cities and counties.
Layne, who froze state payments to the airport earlier this year after Daily Press reports about the loan repayment, has said the commission must recover the state funds or spend its own capital dollars before full state funding resumes. The state audit Layne ordered found the airport’s then-attorney, Herbert V. Kelly Jr. and former airport commissioner and Newport News Councilman Bert Bateman had conflicts of interest because of their roles with TowneBank. As a result of information uncovered in that audit, the commission fired executive director Ken Spirito for using airport funds to cover several thousand dollars of personal expenses.
The U.S. Department of Transportation’s Office of the Inspector General joined the Virginia State Police and an agent from the Internal Revenue Service last month in interviewing airport employees. The state police has confirmed that it is investigating the airport for past business practices, but the DOT has declined to say if it is investigating.
DOT’s small air service grant is meant to spur new service for smaller airports that might not have the resources to attract airlines. But a Daily Press analysis found that this grant hasn’t been entirely successful, and it’s not clear how closely the department monitors its use.
A Daily Press analysis of grants that were awarded for new service found that 60 of 123 airports that received grants awarded to get new air service between 2011 and 2016 don’t have service today, including Newport News. Grants for successful efforts totaled $15.5 million out of a total of $47.7 million. So far, only one of the eight grants made in 2016 has resulted in new service.
It’s not clear how much money the Department of Transportation has recouped from unused grants. In an emailed statement, a department spokeswoman said DOT collects money on an “ongoing basis” from airports.
In 2014, the same year that Newport News got its grant, the University of Illinois’ Willard Airport in Savoy, Ill. received a $500,000 grant. It’s still trying to recruit air service with that money. It received one extension from DOT and will ask for another if it can’t get anything by December.
“DOT recognizes that airlines don’t move at a pace we airports like to see,” said executive director Gene Cossey. “A decision to serve can take years.”
The airport in Topeka, Kan., ran though all of the $950,000 the Department of Transportation granted it at the same time Newport News won its funding, trying to establish service to Chicago. It used up a $1 million state grant, too, for a connection that reported on-time arrivals just 24 percent of the time. United Airlines dropped the service.
Topeka’s mayor was a big booster of the airport and tried to use the service five times. He missed connections or had his flight canceled four times.
Looking back, Metropolitan Topeka Airport Authority president Eric Johnson said he’s not convinced the DOT approach of offering to subsidize flights really works. One reason is the amount of money.
“You need $3 million to get an airline to look at you,” he said.
Johnson is working on a different strategy, getting Topeka businesses to sign contracts promising to use a new Chicago service, and connections from Chicago, rather than using other travel options. He thinks that approach offers airlines better prospects for revenue well beyond what a subsidy would. It also keeps everyone — airport, community and airline —focused on the main job: marketing the service.
“It’s like the saying, ‘give a man a fish, and you feed him for a day. Teach him to fish, and he’s set for the future,'” Johnson said.
Los Alamos, N.M., found its $272,000 grant helped for a time. But there were strains even before equipment failures grounded New Mexico Airlines’ daily service to Albuquerque, which carried 6,000 passengers on the 95-mile flight in 2013. Los Alamos County asked a different DOT program for $480,000 a year to support the service. That money never came.
The airport in Wilmington, N.C., got a one-year extension on a $750,000 grant, first awarded in 2013, to restore westbound connections. Even with the ability to offer that money as a revenue guarantee or for marketing, Airport Director Julie Wilsey said it’s not all the airlines can rely on.
“If it takes a subsidy to start service, it’s probably … it may be a temporary service,” Wilsey said. “So I don’t think (the grant) needs to be bigger; I think the airlines need more airplanes, they need more crews.”
In interviews with the Daily Press, several airport directors talked about getting multiple extensions for grants if they couldn’t successfully use their money in the time period allowed, which is often two years.
It’s different for the airport in Rochester, Minn. That airport used the grant to launch daily service to Atlanta, but it was so popular, the airport barely tapped any federal funds. This summer, Delta increased its service to twice a day, said executive director John Reed.
A tiny airport in Del Rio, Texas, had to ask for an extension on its $500,000 grant awarded in 2013. Then, this summer, a public charter service introduced new flights from the airport to Dallas. They’re using the DOT grant as a revenue guarantee.
Columbus, Ga., airport director Richard Howell said he doesn’t see a problem if the airport has to extend its 2014 $750,000 grant for help in luring service to Charlotte. He’s worked in California and dealt with a similar grant there: “They’ve always been very generous in extending grants.”
Amin can be reached by phone at 757-247-4890. Ress can be reached by phone at 757-247-4535.
