PRESCOTT, Ariz. (AP) — The rejection from Air Midwest came swiftly on a one-page fax. The carrier couldn't afford to fly to the mountain community of Prescott anymore, officials said. The city would simply have to find a new tenant for its tiny airport.

"Everything was going fine — then, bam — the airline is gone," Mayor Jack Wilson said with a sigh. "That's just not how you do business."

It's a frustration felt across rural America.

The federal government guaranteed numerous small towns and cities air service 30 years ago when it deregulated the industry. But skyrocketing fuel prices have outpaced subsidies from the Essential Air Service program, and many carriers are either trying to re-negotiate their contracts or dropping out altogether.

According to the Department of Transportation, which administers the program, airlines have asked to opt out of subsidy contracts to 20 cities so far this year. That almost matches 2007's total of 24 cities. In 2006, airlines asked to drop contracts for 15 cities.

Meanwhile, the federal government plans to slash its Essential Air Service budget for 2009 to $50 million, less than half of its program budget in each of the last seven years.

Jim Corridore, an analyst at Standard & Poor's, said rural communities should get ready for even fewer flights in the future.

"This is not a charity," Corridore said. "Airlines are in a business to make money, and they're not. In fact, they're losing billions of dollars. So something needs to be cut."

The Regional Airline Association disagrees. Rural communities could keep their air service if the federal program was tweaked and given the funding it needs, said Faye Malarkey, a lobbyist for the association.

According to airline officials, the primary flaw with Essential Air Service is that it doesn't increase subsidies to meet rising operating costs like fuel.

So as jet fuel costs jumped, more than doubling from $1.86 per gallon at the beginning of 2007 to $3.96 per gallon in May, airlines were locked into the same subsidy. Some carriers raised fares, but that couldn't keep up with the cost of fuel.

"It's been years since we turned a net profit," Air Midwest President Greg Stephens said.

Stephens said Air Midwest tried to get out of its subsidized routes on the East Coast last year to save money, but the Department of Transportation forced it to honor some of those contracts for nearly 14 months because it couldn't find a substitute carrier to take over.

The company continued to lose money. Meanwhile, parent Mesa Air Group Inc. was forced to pay $52.5 million to settle a lawsuit with Hawaiian Airlines Inc. Mesa also learned that Delta Air Lines Inc. wanted to cancel a contract worth $20 million a month.

The company couldn't wait anymore, Stephens said.