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Great Lakes Ending Dickinson, ND EAS Subsidy  
User currently offlineiowaman From United States of America, joined May 2004, 4431 posts, RR: 6
Posted (2 years 1 month 3 weeks 3 days 6 hours ago) and read 2496 times:
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And ending for a good reason. The airport had just 3,722 boardings in 1993, but recorded 19,000 last year and was already at 17,000 through August of this year. Traffic is up 120% since August 2010, largely related to the oil boom. The subsidy of about $2,000,000 will end February 1, 2013, with ZK operating at-risk there after. Currently there are four daily flights to DEN from DIK, with the fourth daily EMB-120 flight added last summer. It appears one flight each way routes through ISN (Williston, ND). The airport also completed a terminal expansion in November of 2011, allowing for Hertz to become the second car rental option in DIK besides Budget.

I thought this was of interest as well:

DOT's Mosely said Dickinson would be only the fourth contract to be dropped under the program since 2010. The others were for Manhattan, Kan., Akhiok, Alaska and a combined contract for Columbia and Jefferson City, Mo., he said.

Full article:

http://bismarcktribune.com/bakken/ai...a-0c04-11e2-ba44-001a4bcf887a.html

[Edited 2012-10-03 15:40:36]

10 replies: All unread, jump to last
 
User currently offlinemtnwest1979 From United States of America, joined Nov 2005, 2481 posts, RR: 1
Reply 1, posted (2 years 1 month 3 weeks 3 days 6 hours ago) and read 2426 times:
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I am amazed that they would precipitate this and not keep sucking the free money until someone else decided to end the subsidy.
I applaud them for doing do and am glad to see such an increase in activities in most ND airports.



"If it ain't broke, don't fix it!"
User currently offlineridgid727 From United States of America, joined Jul 2008, 1231 posts, RR: 0
Reply 2, posted (2 years 1 month 3 weeks 3 days 5 hours ago) and read 2369 times:

Quoting mtnwest1979 (Reply 1):
am amazed that they would precipitate this and not keep sucking the free money until someone else decided to end the subsidy.
I applaud them for doing do and am glad to see such an increase in activities in most ND airports.

I suppose they believe that it will stave off someone like UA or DL starting express service, but I think you will see both of those airlines jump into Dickinson just like they are doing in Williston.


User currently offlinemtnwest1979 From United States of America, joined Nov 2005, 2481 posts, RR: 1
Reply 3, posted (2 years 1 month 3 weeks 3 days 4 hours ago) and read 2270 times:
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That could be. Makes it less attractive to jump in.
Certainly beats the old Realwest Airlines 402s into DIK.



"If it ain't broke, don't fix it!"
User currently offlineBobloblaw From United States of America, joined Jan 2012, 1725 posts, RR: 1
Reply 4, posted (2 years 1 month 3 weeks 3 days 1 hour ago) and read 2146 times:

Just an aside. I saw some stats yesterday. In 1990 ND was number 38 in per capital income in the USA, now it's number 8.

User currently offlineScottB From United States of America, joined Jul 2000, 6808 posts, RR: 32
Reply 5, posted (2 years 1 month 3 weeks 2 days 13 hours ago) and read 1951 times:

Quoting mtnwest1979 (Reply 1):
I am amazed that they would precipitate this and not keep sucking the free money until someone else decided to end the subsidy.

IIRC they have to report their fare revenue and costs to the government as part of the program, and the subsidy is only paid if the route produces less revenue than costs plus margin -- so if the route is profitable, the subsidy would end in any event.


User currently offlineiowaman From United States of America, joined May 2004, 4431 posts, RR: 6
Reply 6, posted (2 years 1 month 3 weeks 2 days 11 hours ago) and read 1882 times:
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Quoting ridgid727 (Reply 2):
I suppose they believe that it will stave off someone like UA or DL starting express service, but I think you will see both of those airlines jump into Dickinson just like they are doing in Williston.

I wouldn't be surprised to see either as well.

Quoting mtnwest1979 (Reply 3):
That could be. Makes it less attractive to jump in.
Certainly beats the old Realwest Airlines 402s into DIK.

Hadn't even heard of such an airline until you mentioned it! I did some research and it looks like they served quite a few airports in ND. A flight schedule from the Summer of 1979 shows they served BIS, BPP (Bowman which is now unserved), DVL, DIK, FAR, MOT, and ISN. RAP was also served from BIS, BPP, and DIK, and allowed for connections to Western and the old Frontier. BIS offered connections on Frontier, Republic and Northwest. Thanks for bringing it up!

Quoting mtnwest1979 (Reply 3):
In 1990 ND was number 38 in per capital income in the USA, now it's number 8.

Higher incomes are certainly related to more traveling, both business and leisure.


User currently offlineMountainFlyer From United States of America, joined Jul 2005, 477 posts, RR: 0
Reply 7, posted (2 years 1 month 3 weeks 2 days 11 hours ago) and read 1850 times:

Quoting Bobloblaw (Reply 4):
Just an aside. I saw some stats yesterday. In 1990 ND was number 38 in per capital income in the USA, now it's number 8.

When McDonald's and Wal Mart are paying $15/hr starting wage there, it's no wonder. I think you will find the cost of living there has also risen dramatically as well if not proportionally. $2000+/month for a two bedroom apartment in what used to be a sleepy little farm town of 12,000 people in the middle of nowhere (Williston).

As far as the air traffic goes, I believe a lot of it is driven by the fact that many of the oil field workers are not permanent residents there. Many work there three to four weeks at a shot and then go home to their families in other parts of the country for a week or two.



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User currently offlinemtnwest1979 From United States of America, joined Nov 2005, 2481 posts, RR: 1
Reply 8, posted (2 years 1 month 3 weeks 2 days 10 hours ago) and read 1819 times:
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Quoting MountainFlyer (Reply 7):
As far as the air traffic goes, I believe a lot of it is driven by the fact that many of the oil field workers are not permanent residents there. Many work there three to four weeks at a shot and then go home to their families in other parts of the country for a week or two.

Like the North Slope of Alaska. Except this area is easier to get to  

I am curious as to how the long time locals look at this invasion of their towns. Higher paying and more jobs, but most filled with out of towners, so all they get are higher property tax, more traffic, and higher prices to counter balance above $15 wage at McD's.
Certainly hope it doesn't disappear as fast as it came.



"If it ain't broke, don't fix it!"
User currently offlineknope2001 From United States of America, joined May 2005, 2985 posts, RR: 31
Reply 9, posted (2 years 1 month 3 weeks 2 days 5 hours ago) and read 1668 times:

Quoting ScottB (Reply 5):
IIRC they have to report their fare revenue and costs to the government as part of the program, and the subsidy is only paid if the route produces less revenue than costs plus margin -- so if the route is profitable, the subsidy would end in any event.

Actually that's not quite how it works.

Airlines must submit their projected revenues and costs for the two-year contract period. That includes projected traffic, projected fare, and projected costs...everything from fuel costs to employee costs to ownership cost. Then they tack on a 5% profit margin, and the shortfall is the amount they submit as their subsidy bid.

If they are awarded the bid, they receive the subsidy. Doesn't matter how much their actual revenues or costs are...they get what they bid for. The only reason they may receive less is if they operate significantly fewer flights than the bid dictates.

You can easily lose money flying EAS if your bid is faulty compared to your actual results. It's one of the reasons (not the only one) why so many airlines which used to fly EAS are either out of the EAS business or out of business completely. On a number of occasions when fuel has spiked in previous years, some EAS airlines in the lower 48 have gone to the DoT for relief, but I don't think has been successful.

The one place where EAS airlines do sometimes submit actual cost/revenue data and the DoT adjusts is for a "hold-in" situation. When an airline is stuck serving a city until an EAS awardee starts up, the held-in airline is entitled to subsidy to cover losses until they are relieved from their obligation. That can involve the held-in airline submitting actual costs and the DoT using those to determine the subisdy for the hold-in period.

But other than that, when your EAS bid is accepted, essentially you're stuck with it no matter if you made or lost money.

As for Great Lakes offering to fly DIK without subsidy, I suspect they are betting that DIK isn't big enough to support someone like DL or UA coming in without subisidy. If ZK messed with their numbers to day they needed $350,000 for 4x EM2 to DEN, maybe Skywest comes in and says they'll fly 3 RJ's to MSP or DEN for $475,000 and the DoT might give it to them based on community support and higher traffic totals. This way, if ZK says they can make it with *zero* subsidy, neither UA* nor DL* is likely to come in and claim they can make a buck with no subsidy.


User currently offlineBobloblaw From United States of America, joined Jan 2012, 1725 posts, RR: 1
Reply 10, posted (2 years 1 month 3 weeks 1 day 17 hours ago) and read 1515 times:

Quoting knope2001 (Reply 9):

Very good and informative post. However this strategy only works for ZK so long as they expect DIK to be fully profitable one day, which they probably do. I think it might be no coincidence that they are doing this after both DL and UA announced ISN.


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