Rural towns lose air service

As airlines withdraw from small markets, a father and son push 'SkyTaxi' as solution.

The nation's aviation crisis is taking a toll on Newport, Ore., once the home of Keiko the Killer Whale.

More than a year ago, the small tourist town 60 miles north of Portland suddenly found itself without a regularly scheduled airline. Visitors and business travelers had to drive almost two hours along windy, narrow roads to get there from the city.

As the cash-strapped major carriers and smaller regional airlines cut back service to stem their unprecedented multimillion-dollar losses, dozens of small- and medium-sized cities across America are finding themselves in Newport's position - with severely curtailed airline service, or none at all.

Since the airline industry's downturn started three years ago, service to small nonhub airports has dropped 19 percent, according to the inspector general of the Department of Transportation. The situation is worse in the Northeast and Midwest, where smaller airports have lost about one-third of their service.

"We don't have any solutions right now," says Darryl Jenkins of the George Washington University Aviation Institute. "The major airlines will continue to eliminate service [to smaller cities] because it's so expensive to operate there, and start-ups avoid them like the plague because you can't get enough people on board to become profitable."

So what's a small city or town to do? Ray Morrow and his son Neil have a vision they believe could help solve rural America's transportation problem. Imagine a "mosquito fleet" of light, high-tech airplanes that could take you where you want to go, when you want to go, and at an affordable price.

They've even got a name for it: SkyTaxi. For the past year in the Northwest, they've proven that the combination of high-tech computer scheduling and Cessnas customized with cutting -edge navigation technology can get visitors from Portland to Newport in even less time than before.

"We weren't really planning on starting this to serve rural communities," says Neil Morrow, SkyTaxi's CEO. "But they started seeking us out because they were losing their service."

Both Morrows are inventor/ entrepreneur types. In the 1970s, Ray helped bring global positioning systems to everyday sailors, and then helped develop cutting-edge fleet-tracking software that helped police departments and the UPS better coordinate their services. In college, Neil was fascinated with snowboarding and composites - extremely lightweight, extra-strong materials. He then started one of the nation's top snowboarding companies. Together, the two had a dream of creating the next generation of small plane. Made almost entirely of composites, it would be light and fuel efficient. And with the most advanced navigation equipment available, it also would be extremely safe.

But to attract investors, they needed to prove there was a market. So they devised the SkyTaxi idea. For the past year, their fleet of seven custom-fitted Cessna 414's has served more than 300 communities in seven western states. While they haven't turned a profit yet, they're convinced they will soon.

Because they use small, local airports, and don't have to go through security at larger airports, they can take people more directly to their destinations, with fewer hassles.

But there are skeptics. Aviation economist Clint Oster of Indiana University at Bloomington points out that without being able to pack lots of passengers into a plane, it's hard to turn a profit, which is exactly why so many small- and medium-sized cities are now hurting. Then there's a fear factor.

"People are nervous in a 19-seat plane, let alone an eight-seater," he says.

But Morrow has an answer for both. They're able to significantly cut fuel costs - airlines' second-largest cost next to labor - because, while jets guzzle gas, the small planes "sip fuel," even on take-off. To turn a profit, they need to fill 1.6 of every four seats on each plane.

SkyTaxi also spends $100,000 on upgrading each Cessna so that it has essentially the same safety and navigation equipment as a Boeing 737.

Aviation economists - and congressmen from rural areas - are watching the SkyTaxi experiment carefully.

The service cutbacks are exacerbating tough economic times in small-market cities and towns - a scenario that was predicted when the airlines were deregulated in 1978. Congress created a program called Essential Air Service (EAS) to subsidize service to smaller cities. The program was supposed to sunset in 10 years, but was kept alive by congressmen from rural states who fought to make sure their constituents wouldn't be left grounded. In 2003, Congress appropriated $100 million to keep planes flying to smaller cities. But President Bush proposes to cut the EAS in half next year - to $50 million - and restrict cities' eligibility.

If SkyTaxi proves successful over the next few years, it could offer a solution. "In some places, having small guys like this come in may be the only thing that gets the service back," says Richard Gritta, an aviation economist at Portland University. The Morrows are happy to help, but their real hope is that they can use their success to entice investors to help with their plane of the future.