I'm not sure if it is granted for life or not. If they do get it, it basically says they will get air service because the area has to have it. The government will then open the routes up for bid and the low one gets to do the flying. They aren't even guaranteed to make a profit.
Somewhat correct...
The Airline Deregulation Act, passed in 1978, gave airlines almost total freedom to determine which markets to serve domestically and what fares to charge for that service. The Essential Air Service (EAS) program was put into place to guarantee that small communities that were served by certificated air carriers before deregulation maintain a minimal level of scheduled air service. The Department currently subsidizes commuter airlines to serve approximately 100 rural communities across the country that otherwise would not receive any scheduled air service.
As the poster above mentioned, bids are placed for EAS service, and the length of that service, or contract, is up to each city/state to determine. The low bidder does NOT always get the award. Once the bidding is complete, the state recommends to the committee which bid they would like, and why. As an example, Cape Air outbid both Colgan and Commutair for the RUT-BOS run by a great deal. The city of Rutland wanted Commutair, and the committee accepted their recommendation even though Cape Air was over 500K cheaper per year.
The dollar figure given to the carrier is also negotiable, and at the least gives the carrier a slight profit. The contract generally also provides for a minimum completion factor that if not achieved per month, year, term of contract, provides a payment penalty.
There is much more that could be discussed about EAS but this stuff is so boring, it's putting me to sleep.
