Rural Air Travel Economics Prove Challenging To All

I cant go home, its too expensive! Ask most all people that originate from one of Alaskas many rural communities and you will most likely get this as an answer. Air travel has been a part of Alaska history since the early 1920s. Today it is still the only means of transportation in an estimated 158 rural Alaska communities. In 1978 the Airlines Deregulation Act radically changed the U.S. air travel industry. Air carriers could now choose where and when they wanted to fly based on demand, and for what price. As a result airfare prices have decreased an estimated 44% in the continental U.S. since 1978. The same cant be said for most of rural Alaska. Airfare prices are reaching record highs in all corners of Alaska. Several factors contribute to the unfavorable conditions: Long distances separate most rural Alaska communities from the major hubs (Anchorage, Fairbanks) and also smaller regional hubs (Dillingham, Bethel, Nome, Kotzebue, Barrow). Small community populations mean limited demand (low demand results in higher prices charged). Extreme temperatures and rugged terrain make travel challenging, to say the least. Increasing government regulation on airlines, in addition to increasing jet fuel prices and 100 LL aviation fuel (avgas) High barriers to entry in the airline industry (the high costs of buying and maintaining planes, regulation, costs of fuel, etc.) means there will always be a limited number of airlines. Aging plane fleets and high costs of upgrading to new planes. All these lead to high operating costs for airlines which result in low profit margins, or losses. Eventually low profit margins, or losses, cause airlines to either reduce the number of villages served or go out of business. In 2012 Warbelows Air Ventures, after decades of service, quit flying to all villages in the Yukon-Koyukuk region. Most can remember the 90s when airlines such as Mark Air, Larrys Flying Service and Tanana Air Service also served the Yukon-Koyukuk region. None do today. Only Wright Air Service and Era Alaska serve the nine communities of the YK region. In late 2012 Era Alaska was highly criticized for increased prices to all YK villages, with prices reaching over $600 (they have since gone down to $560 or lower). Prices in the rest of rural Alaska don't appear much better, and in many cases are significantly higher. Flights from the North Slope community of Nuiqsut to Fairbanks (382 miles by air) cost $1,112 roundtrip with Era. Kotzebue to Kobuk (155 miles) cost $504 with Bering Air. Hooper Bay to Bethel (152 miles) cost $536 with Era. Most communities in western Alaska within a 100 mile radius of Bethel can travel there for prices between $80-$300, but Bethel to Anchorage (397 miles) is an additional $407. The high prices result in an increased cost of living throughout rural Alaska. Diesel, gasoline, household grocery items and other goods must all be flown in either as freight or by-pass. A 2011 Alaska Bureau of Labor statistics report showed that groceries in most communities off the road system were at least double the cost of Anchorage or Fairbanks. The same can be said for fuel and gasoline. Despite the high prices, the airlines industry still provides a strong economic boost to the state. A 2009 DOT study estimated that the airlines industry provided 47,000 jobs, both direct and in-direct, or 10% of all the jobs in Alaska. Total contributions to the Alaska economy, both direct and in-direct, were $3.5 billion or 8% of the gross state product. A person in Alaska boards a plane an average of 8 times more than a person in other western U.S. states, and the amount of freight delivered by plane is 40 times higher per capita. This proves that air travel contributes substantially to the Alaska economy. Air travel isn't just a bush Alaska thing. The entire Alaska economy depends on air travel, but it still remains one of the most costly and inefficient industries of all. The state of Alaska spends a great deal of time and money addressing other critical

industries (oil & gas, mining, military, tourism, govt., etc.), but little attention is given to air travel. It seems to have become accepted that the airlines industry is a lost cause. Relief, in my opinion, will only happen with a concerted effort from ALL of Alaska. Cooperation. Cooperation and discussion between all stakeholders that live and work in rural and urban Alaska. Airlines, community residents, city and borough government, tribes, regional and village native corporations, private industry, oil & gas refineries, native non-profits and most importantly the state of Alaska. Discussion on how to cut costs for the airlines, which in turn can cut prices. Would a tax credit system (either state or federal) for rural Alaska airlines be possible? Tax credits are offered in the film industry. What about tax credits for plane purchases or repairs? How can we reduce the cost of jet fuel and avgas? If we changed the oil industry tax code (ACES), could we then somehow subsidize or reduce the costs of these fuels for rural Alaska? Could regulations be loosened, while still ensuring that travel is safe? If all parties discuss ways to decrease costs, then ideas can be generated. These ideas can be researched and tested to determine what the costs and effects would be. If they are feasible, then they can be implemented. But it begins with cooperation and discussion. The airlines industry really is too important to fail, so lets not let it fail. Alaska will always be a tough place to survive, for both people and business, regardless of the price of a ticket. But with cooperation we can ensure that all our communities are accessible and that the cost of living is reasonable.