By Rob Stapleton
Alaska Journal of Commerce

An Interior airline operator said people are leaving Alaska villages, and that outward migration to urban areas is adding new business challenges in an already tough economy that is bringing more competition from larger companies.

Art Warbelow, president of Warbelow's Air Ventures Inc. said populations in Interior villages off the road systems are dwindling as young people and families move into the Fairbanks and Anchorage areas.

Two of his service areas, Rampart and Fort Yukon, are good examples, he said.

Rampart, located on the Yukon River northwest of Fairbanks, has seen a steady drop in the number of residents. In 1990, some 68 people lived in the community, according to state demographer Gregory Williams. The Yukon-Koyukuk Census showed that 40 people lived there in 2007.

In Fort Yukon, state records based on permanent fund dividends in 2007 indicate that community had 569 residents, Williams said. That's down from 580 in 1990.

With fewer people flying out of his rural service areas, Warbelow is growing concerned that he won't be able to afford a planned change in his company's certifications that would allow him to increase some of his services.

Warbelow had hoped his company would be able to transition to becoming a Part 121 airline after the company purchased a 19-passenger Beechcraft 1900 in 2007. He had originally predicted the company would achieve the move by the summer of 2008.

Federal Aviation Regulation Part 121 is a standard that allows scheduled air carriers to use aircraft with seating for 10 passengers and larger. Industry leaders estimate that the cost of obtaining the certification can exceed $2 million.

Warbelow's is currently a Part 135 scheduled and on-demand charter operator that serves 20 villages with 14 aircraft that offer fewer than 10 seats.

"We are still working on the 121 certification but it is going much slower than we anticipated," said Warbelow. "We may be the only carrier to fully achieve the 121 certification from scratch after the commuter rule passed."

The commuter rule, which was passed by Congress in December 1995, required air carriers flying aircraft with more than 10 seats to operate as a Part 121, or as an airline, with higher standards for operations, aircraft certification and safety standards.

An additional factor to Warbelow's decision to obtain the 1900 Beechcraft and get the 121 certification was the Rural Services Improvement Act, which passed in 2002. RISA required the U.S. Post Office to tender bypass mail to air carriers that offered passenger services in rural Alaska, thus eliminating many all-freight operations.

The act was later amended to include Part 121 carriers, allowing new carriers to receive some bypass mail. The change was intended to improve safety to bring in the larger aircraft.

Warbelow's is seeing higher competition for mail services in select markets from Frontier Flying Service. Frontier is using the larger-sized, Part 121 aircraft in some of the same markets as Warbelow's, still flying the smaller, Part 135-certified planes.

The postal service prefers the larger aircraft for bypass mail because they get a lower rate when compared to the smaller craft.

"Now we are seeing less mail volume due to out-migration, and we are receiving a lower rate for those volumes, necessitating additional adjustments to our business model," said Warbelow.

Warbelow said that while the consolidation of Cape Smythe, Hageland and Era Aviation into the Frontier Alaska air group has created additional stress on a diminishing market that is mutually served by his business, that Warbelow's Air Ventures is meeting the challenge.

"We are switching from the use of the Piper Navajo Chieftains into using the turbo prop Cessna Caravan allowing us better efficiencies, and we are also using the Beechcraft in a nine passenger/cargo configuration allowing for more mail with the same amount of passengers," he said. "This is not rocket science, just market economics."

Rob Stapleton can be reached at rob.stapleton@alaskajounal.com.