Local business leaders bent Gov. Ted Kulongoski's ear Monday over changes in the transportation industry that are hurting their ability to stay competitive.

Local business leaders bent Gov. Ted Kulongoski's ear Monday over changes in the transportation industry that are hurting their ability to stay competitive.

"If you go back, particularly over the last 20 years, we've seen Amtrak cutting, Greyhound dropping small communities, UPS delivery leaving and now the same thing happening with air service," Kulongoski told a roundtable forum sponsored by the Chamber of Medford/Jackson County.

He said the Oregon Commercial Air Service Coalition, made up of local airports, business leaders and governments, was formed to help retain air service in towns where it is threatened.

Commercial airports in Portland, Redmond, Klamath Falls, North Bend, Medford, Eugene, Salem and Pendleton have agreed to help find ways to restore air service to smaller Oregon communities.

Medford Airport Director Bern case said high fuel prices have created a more dire situation for the airline industry than the 9/11 terrorist attacks. Kulongoski noted subsidies may be needed to help regional air carriers cope with high operating costs. Case said he knows of maybe a half-dozen markets where subsidies proved a long-term solution.

"Half the time, (the airlines) go away when the subsidies go away," Case said. "If the market is there before and you help them, then maybe there's a chance."

Kulongoski said it was essential for the business community to buy in to the need for air transportation as a partner.

Harry & David, one of the Rogue Valley's top employers, spends $300,000 annually for air travel out of Medford.

Peter Kratz, Harry & David's senior vice president and general manager for product supply, said the scope of the gift and gourmet food's business requires getting to the eastern part of the country quickly.

"We also utilize air service for expedited packages," Kratz said. "Plus, we depend on the highway system getting to our partner UPS's hub in Portland on time. Delays make us less competitive."

Representatives of the Coos-Siskiyou Shippers Coalition, including Eric Vos of Timber Products, Mark McLean of Roseburg Forest Products and Bob Ragon, executive director of Douglas Timber Operators, told the governor about the thousands of additional truck trips needed to maintain operations in recent months. Central Oregon & Pacific Railroad shut down the Coos Line last September and reached an impasse with shippers earlier this year over rates.

McLean said his firm has spent $2.5 million to $3 million dollars to compensate for the lost rail option.

"There is a domino effect that ripples through the company," said McLean, pointing out those dollars could have been spent in more efficient ways.

"Our coalition is looking for solutions," he said.

Federal funds may help the Port of Coos Bay obtain the Coos Line as far as Noti, but the shippers are hoping the Surface Transportation Board will force CORP to seed the final few miles of track to Eugene as well.

Even if another operator ran from Weed, Calif., to Ashland, Timber Products isn't sure it would be able to deal with CORP's rate demands, Vos said.

Combined Transport President Mike Card, whose firm operates 500 trucks nationwide, said the highway system continually creates challenges.

"When we send a truck to Portland, is it going to take five, seven or 10 hours?" Card asked. "It's a crap shoot. It forces us to put more trucks on the road."

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com.