State cuts lease costs at rural airports

Some operations could save as much as $10,000 thanks to rollback

Posted: Friday, June 20, 2008

ANCHORAGE - The state has withdrawn increases it made to real estate leases at rural airports.

Airlines serving rural Alaska are cutting back service and raising fares to cope with high fuel cost.

"We didn't want to be the final straw for some of the businesses that are really struggling now," said Becky Iles, aviation leasing chief for the state Department of Transportation.

Rental rates for hangars, offices and storage at rural airports have been well below market appraisals, Iles said. A four-year effort to increase them culminated in new rates earlier this year.

The state will return to previous rates, at least until the end of the year.

The annual increases ran from $100 to several thousand dollars, with a few reaching $10,000 or more, Iles said. Fuel companies, industrial users and other renters also will benefit from the rollback.

The entire aviation industry is facing a crisis, DOT officials said in their rate announcement.

"Fewer flights to our villages results in less access to food, health care, and can impact the safety of our rural communities," said deputy transportation commissioner Christine Klein. "Aviation is Alaska is critical to our economy and public welfare."

The rent cutbacks will not apply at international airports in Anchorage and Fairbanks.

The state operates 252 rural airports, 157 with leased facilities, Iles said.

The state's decision will bring a small but welcome relief to PenAir, which serves Southwest Alaska from Anchorage. The company has seen its fuel costs double in the past year, said airline president Danny Seybert.

That has led to three rate increases since the first of the year. Another increase is coming July 1, he said.

After the busy summer season, Seybert said, the airline will cut service to reduce capacity and fly fuller planes.

"All the communities that we serve are going to get less frequency than they did in the past," Seybert said. "The goal is to burn less fuel and have higher loads. I don't think we can raise prices high enough to compensate for the fuel cost."

Airlines are worried that villagers paying high costs for fuel and electricity will no longer be able to afford trips.

"I'm really concerned about next winter," he said. "Some of these communities were struggling before. People just aren't going to be able to fly."

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