Kenmore Air Express’ reported struggle to turn a profit in Oak Harbor provided the necessary impetus Tuesday night for the City Council to approve entering into a federal grant agreement designed to inject life into struggling rural airports.

Craig O’Neill, Kenmore Air director of marketing and services, said three years into its Oak Harbor operations, the airline has had a “tough go.”

“We have yet to make any money in Oak Harbor,” he said.

Without an upturn in business, which O’Neill said the grant funds could help create through marketing and promotion dollars in support of the airport, Kenmore-provided air travel could cease to exist.

Emphasizing that the possibility of Kenmore leaving is not a threat but a question of financial viability, O’Neill pointed to the company’s inability to “get over the hump.” The grant could do just that, he added.

City Administrator Paul Schmidt said the extremely tight timeline for accepting the U.S. Department of Transportation grant funds required the council’s approval Tuesday night. Oak Harbor was one of only 26 recipients of the Small Community Service Development Grant Program worth $180,000. The grant is designed to reimburse the city as it expends funds. To fulfill the matching requirement, Oak Harbor pledged $3,000 to add to Island County’s $8,000, the Greater Oak Harbor Chamber of Commerce’s $7,000 and $3,500 from the Island County Tourism Committee.

The council approved the grant agreement despite vehement opposition from Mike Lauver, co-owner of Whidbey-SeaTac Shuttle, which competes with Kenmore Air for passengers going to the regional airport. He called the grant application “flawed,” and said the DOT accepts documents at face value, regardless of their validity.

“They assume it’s OK,” Lauver said.

The grant application questioned by Lauver was prepared by Bucher, Willis & Ratliff, a consultant that specializes in aviation grants. Lauver took exception with the consultant’s data used in the application.

Schmidt said Thursday that the consultant had the application and subsequent response to Whidbey-SeaTac Shuttle’s comments reviewed by its legal department before responding to the city.

He said a small airline in 1999 comparable in size to Kenmore Air was unable to stay in business even with less expensive fuel, additional flights and a lack of security costs and complications caused by 9/11.

“That market has been divided,” Lauver said. “Those people don’t exist anymore.”

The shuttle co-owner also claimed Kenmore is selling $100 tickets for $50, an unwise profit-generating strategy.

“If you think that’s a good business plan, see me after the meeting and I’ll make you a great deal on the Deception Pass Bridge,” he said facetiously.

Councilman Rick Almberg asked O’Neill if Kenmore had any contractual obligations with Oak Harbor. The airline representative said no contract exists, but Kenmore has no intention of leaving Whidbey if business improves.

“I’d be happy to book Mr. Lauver’s first $100 ticket if that would help,” O’Neill said.

The bulk of the money would be used for promotion and marketing, Schmidt said, but it would also supplement a free shuttle service from Whidbey Island Naval Air Station, to Harbor Station, to the airport.

If Kenmore were to close shop, the balance of structured grant would simply go unused and the contract with the federal government would be dissolved, Schmidt assured the council members.

Schmidt’s assurances sufficed, as the council unanimously voted to approve entering into the contract.