South Dakota plans nation's first intrastate air service

David Fettig | Managing Editor

Published March 1, 1990  | March 1990 issue

If a business owner in Sioux Falls, S.D., needed to make a "quick" trip to the state's capital to appear before a legislative subcommittee, she would have to get in her car and drive the 230 miles in about four hours.

To make the trip by plane, the same business owner would have to fly from Sioux Falls to Minneapolis/St. Paul International Airport and catch another plane to Pierre at a cost of about $400, round trip. And it would still take about four hours to make the trip—one-way.

For business owners and government officials with interests spread across South Dakota, that's not much of a choice.

State Creates Own Airline

Likewise, for residents of many Midwestern and Western states, intrastate travel is a time-consuming affair consisting of long car trips made longer, at times, by inclement weather. To address this predicament, the South Dakota State Legislature passed a bill in late February calling for the formation of the nation's first subsidized intrastate airline service.

The new airline, which is slated to begin operation this fall, will service the cities of Rapid City, Sioux Falls, Aberdeen, Brookings, Huron, Mitchell, Watertown, Pierre and Yankton. Pierre, with six proposed flights a day, would serve as the hub.

To revisit the above example: under the proposed air service, a passenger flying from Sioux Falls to Pierre would arrive in about 90 minutes, at a cost of $169 round trip. That $169 fare would serve as the basis for all other fares, which would be pro-rated in relation to the Sioux Falls-Pierre trip.

Public funding for the service has been set at $1.2 million for the first year: $700,000 from the state's coffers and $500,000 from the participating communities. Each community's share of the cost has been determined by population, expected number of passengers and flight departures. For example, Sioux Falls will pay about $121,000, Pierre $93,000 and Rapid City about $76,000. Brookings and Yankton would owe the least: $24,000 and $23,000, respectively.

A private airline company—to be selected through a bidding process—will serve as carrier for South Dakota's new air service. The company will only be under contract for one year, at which time the program will be reviewed.

"Many of our cities are content with the essential air service they're getting into and out of South Dakota," said David Jagim, administrator of South Dakota's Office of Aeronautics. "It's just getting around in-state that's the problem."

Tim Rich, mayor of Aberdeen and vice president of Aberdeen Finance Corp. and Aberdeen Insurance Agency, has been a vocal proponent for an intrastate airline for the past few years. He said such air service is vital if South Dakota communities hope to maintain competitiveness in the expanding global economy.

"We cannot compete in the world markets if we can't move people to business centers," Rich said, adding that if many Midwestern communities don't act soon to make themselves more attractive to businesses, "the future doesn't look bright for rural America."

According to Jagim, plane size under the new service will vary from five passengers to 15, depending on need. For example, Yankton and Mitchell may be predominantly served by smaller planes, with larger planes used between the communities of Pierre, Rapid City and Sioux Falls.

Other States Will Be Watching

Most rural states would probably like to have an airline similar to South Dakota's planned intrastate service, and people from those states, like Gary Ness of North Dakota, will be monitoring the success of the program.

"God bless 'em in South Dakota," said Ness, North Dakota's director of aeronautics. "I'll be watching them. Right now, in North Dakota, we wouldn't want to bring [an intrastate airline proposal] to the legislature." North Dakota is currently working to trim its state budget following voters' recent rejection of various tax increases. (File Name "STRINDEN.EDI" in Directory #16 contains comment on North Dakota's post-referral finances.)

According to a recent survey, 72 percent of North Dakota's businesses rely on proximity to commercial airports to conduct their business, 73 percent use airports to ship cargo or documents, 34 percent charter their own aircraft and 11 percent own or lease aircraft.

Ness said North Dakota is well-served by airline carriers to points outside the state, and he hopes the federal government does not eventually phase out the Essential Air Service program (EAS). EAS was created by Congress following deregulation of the airline industry to ensure that small cities would still have air service. Federal subsidies are given to smaller airports so airlines will still find it profitable to serve those markets.

In general, while deregulation has saved billions of dollars since 1978 in air fares due to increased competition, some smaller cities have faced reduced service and higher fares—despite EAS funding. The 1990 EAS bill includes $31 million for about 100 communities across the country.

Eau Claire, Wis., which lost jet service to its airport in May 1989, is now served by Northwest Airlink, a small commuter airline with primary connections to the Twin Cities. Ridership at Eau Claire airport plummeted following the loss of jet service last year, according to Brenda Blanchard, executive vice president of the Greater Eau Claire Area Chamber of Commerce.

"Whenever you lose jet service, you lose ridership," Blanchard said, referring to the difference between jet planes and smaller aircraft. She also said that there was "little schedule integrity" when the commuter airline took over last year, but that "service has improved dramatically" in recent months.

With no connections to Chicago—and practically anywhere else—except through Minneapolis/St. Paul International Airport, Blanchard said many Eau Claire residents find it cheaper to take a two-hour car trip to the Twin Cities rather than originate their flights from Eau Claire. Blanchard, who believes strongly in the value of transportation services to stimulate economic development, said a consultant has been hired to study Eau Claire's air service, and discussions are under way with airport and airline officials to improve services.

Success May Influence Transportation's Future

In the end, the success or failure of South Dakota's intrastate airline service may have a big impact on regional transportation service. As Congress grapples with budget deficits and spending cuts, financial responsibility for essential public services is being increasingly shifted to state and local levels. And the ability to finance transportation may have far-reaching effects.

As reported in North Dakota's Aeronautics Commission's recent economic report, which has implications for all largely rural states:

"Aviation is the provider of vital facilities and services that are major factors in the location and success of major businesses and industries in the state. In short, it is a major catalyst for economic growth and development.

"...While the state is distant from major markets and centers of finance and commerce, it must attract industry through its readily available network of modern transportation facilities and services. ... Aviation will be a fundamental force in the state's growth throughout the remainder of this century."