Politics & Government

Audit: Airfare subsidies' impact was overstated

TOPEKA — A program that subsidizes low-cost airline service to Wichita Mid-Continent Airport generates only about a third as many jobs as regional officials have claimed, according to a state audit.

The Legislative Division of Post Audit report also said that the Affordable Airfares Fund generates less than half as much overall economic benefit as was estimated in a 2008 Wichita State University study commissioned by the Airport Authority.

"Overall, the economic impact of the state Affordable Airfares Fund has been significantly overstated," the report said.

The audit did credit the program with helping to increase traffic at Mid-Continent and reduce the cost of flights in and out of Wichita.

Officials of the Regional Economic Area Partnership, which administers the program, immediately questioned the audit findings, claiming that the auditors had made errors in methodology that understated both jobs and economic impact.

Even the lower level of benefits found by the audit is still enough to justify continuing the program, said a spokesman for the city of Wichita, which owns the airport and launched low-fare service with its Fair Fares program.

The audit was presented Wednesday to the joint House-Senate Legislative Post Audit Committee, as the Legislature prepares to decide whether to continue contributing $5 million a year to the program.

The average price of a

round-trip ticket from Mid-Continent dropped from about $390 to about $325 between 2006, when the state funding began, and 2009, the most recent year studied, the audit said.

In 2006, Wichita airfares were more than 20 percent above the national average. By 2009, that gap had been trimmed to 5 percent, the audit said.

The audit also said passenger traffic at Mid-Continent increased 30 percent from 2000 to 2007 — a substantial number but less than the WSU study showed for the same years.

The differences

The audit criticized REAP for "numerous inconsistencies and inaccuracies" in reporting program results to the state.

Almost all the money in the Affordable Airfares program goes to a single airline, AirTran Airways, which was allocated $4.88 million in the latest round of annual funding, said Dale Goter, the city of Wichita's lobbyist. Frontier Airlines got $125,000.

The state's $5 million contribution is matched by $1 million each from the city and Sedgwick County.

The WSU study had estimated that AirTran's presence at Mid-Continent accounts for an average 9,720 jobs in Wichita. That includes direct jobs, such as the airline's employees, plus indirect jobs attributed to increased airport traffic.

The audit said that only 3,178 direct and indirect jobs were created.

The biggest factor in the difference, according to the auditors, was that WSU incorrectly applied a formula for calculating jobs that was derived from a study by University of Illinois economist Jan Brueckner.

In addition, the WSU study understated the airport's passenger count in 2000, the base year it used for comparisons, thus inflating growth in passenger traffic for each subsequent year, the audit said.

The inflated passenger traffic number also affected the calculation of overall economic benefits, the audit said.

REAP, a consortium of south-central Kansas cities and counties, had calculated the state got back $5.25 in additional revenue for every dollar invested.

The audit estimated that the real impact is about $2.32 per dollar invested.

Program's fate

Jeremy Hill, director of the WSU economic research center, said there are "a lot of incorrect assertions in the post audit."

For one thing, he said, the auditors used an unjustifiably low figure to calculate how increased airport activity translates into jobs created.

He said using the state's methodology with a more reasonable figure would have shown about 5,700 jobs were created — about midway between the original WSU study and the new audit.

Rep. John Grange, R-El Dorado and chairman of the audit committee, said he thinks the Affordable Airfares program will survive this session.

"I'm sure we'll go ahead and authorize it for one year," while working to resolve issues of oversight and evaluation of the program, he said.

Augusta Mayor Kristey Williams, the president of REAP, said she thinks it would be disastrous for the region to cut the program during the current economic slump. In the past, the high cost of air travel depressed Wichita's convention business and forced local corporations to move headquarters elsewhere.

"It's going to take everything to hold what we have in place," she said.

Additionally, she said, AirTran is in the process of merging with Southwest Airlines and ending the subsidy would virtually guarantee Wichita wouldn't be served by Southwest once the deal is finalized.

Despite the audit, "the important thing to remember is that there are still positive economic outcomes," Goter said. "There's still a positive job-creation number ... and tremendous convenience and value to the people who fly out of Mid-Continent Airport. That ought to be enough to sustain it."

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