Rural Aviation Improvement Act

Rural Aviation Improvement Act - Repeals the Essential Air Service Local Participation Program.

Prohibits the Secretary of Transportation from compensating an air carrier for providing essential air service to an eligible community in the 48 contiguous states if such community: (1) is located fewer than 70 miles from the nearest large or medium hub airport; or (2) is fewer than 210 miles from the nearest large or medium hub airport and requires a per passenger subsidy for such service in excess of $200 for calendar year 2008, including any increase for each ensuing calendar year.

Authorizes a state or local government to submit a proposal to the Secretary to: (1) compensate an air carrier for essential air service to an eligible community above the $200 per passenger subsidy cap; (2) compensate a preferred air carrier for providing such service (i.e., an air carrier preferred by the affected community although it is not the lowest bidder); and (3) restore the eligibility of a community to receive subsidized essential air service.

Requires the Secretary, in determining compensation (or eligibility for it) for essential air service based on highway mileage, to use the highway mileage of the most commonly used route between the eligible community and the nearest medium hub airport or large hub airport.

Establishes within the Office of the Secretary the Office of Rural Aviation.

Extends through FY2011 the Secretary's authority under the essential air service program to make agreements to provide assistance to underserved airports.

Requires adjustment of compensation to air carriers for providing essential air service in order to take into account significant increases in fuel costs.

Directs the Secretary to treat passenger boardings on aircraft operated by charter air carriers at airports receiving essential air service as passenger boardings for purposes of making apportionments of airport improvement grant funds.