Archive for February, 2008

All the news that’s fit to fly

It’s getting to be more like “Weekly Departures,” but here’s the latest roundup of aviation policy news and links:

  • Ryanair claims that the Dutch “green” travel tax is an effective subsidy to KLM. (I explain here.) [ATW Daily News]
  • To the extent that passenger rights groups are merging their interests with other disaffected airline parties (labor, etc.), they are forming a more influential “pro-consumer” coalition, writes Mark Ashley. [Upgrade: Travel Better]
  • The Delta-Northwest merger talks, seemingly stalled, temporarily goosed their stock prices. Now the stocks are falling. (I explain this trend here.) [Aero-News.Net]
  • Minnesota offered Northwest $445 million in loans and concessions prior to its bankruptcy exit — contingent on the airline retaining a HQ in the state. It’s prepared to call those loans should a merged carrier close the Eagan, Minn., head office. [ATW Daily News]
  • The average age of a long-haul airliner in Russia is twenty years — and it’s thirty-two for a regional airliner. (Compare to the U.S.) This has some regulators worried. [RIA Novosti via Planenews]
  • Climate protesters used “broken doors” to enter the airside of London’s Heathrow airport, scale an A320, and unfurl a no-third-runway banner. Airport owner BAA is investigating. [Guardian]
  • NASA officials want to use the presidential election to raise awareness of their funding wishes and drum up political support for the Moon and Mars missions. [Aero-News.Net]
  • The IATA chief urged Asian aviation interests to avoid Europe’s aviation “mistakes,” especially in the areas of ATC restructuring and green practices. [ATW Daily News]
  • One person refraining from flying to prevent global warming won’t be effective, says Megan McArdle. But: “if you want everyone to do something, you are morally bound to do it whether or not they follow suit. . . . I have a sense that those sorts of illogical bourgeois commitments to virtue are precisely what allow us to overcome collective action problems without coercion.” [Asymmetrical Information]

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eugene.gifAir traffic control commercialization can change the incentives in the ATC system, Eugene Hoeven (pictured at right) said during a panel discussion last Wednesday, leading to dramatic improvements in the industry. Hoeven, the director for ICAO affairs of the Civil Air Navigation Services Organisation (CANSO), the trade association for air naviation service providers (ANSP), spoke at an American Enterprise Institute panel on February 20. (Here are event information and media, and here’s the speech.)

Hoeven said that today’s airline troubles are a result of bad policies, including the failure of lawmakers to recognize ATC as an integral part of the air traffic system. He said that satellite-based technologies would be the long-term operational answer. But “all this costs an awful lot of money.” Hoeven looked at the debates over FAA funding that have consumed the aviation community for the past several years, and he concluded that “the FAA, just like the airlines, is a victim of bad government policy, constant political meddling and bipartisan politics.”

So, he asked, is commercialization the answer? He flatly rejected “privatization,” the selling off of the ATC system — echoing moderator Ron Utt’s statement that privatization would be a no-go — but he said that by focusing on how to fund the FAA, we are only responding to symptoms. Commercialization might have a role in “creating the right institutional environment that will make the U.S. air traffic system more responsive to the needs of the nation.”

He pointed out that the United States is one of only a few major industrialized countries that have not commercialized their ATC systems. In Germany, Australia, and New Zealand, there are autonomous government corporations to handle ATC. In the UK, the ANSP runs ATC through a public-private partnership. NavCanada is a fully privatized, nonprofit corporation. “Where governments have ‘let go’ of ANS provision,” he said, “and granted greater autonomy for the ANSP, there has resulted a greater responsiveness to the needs of the aviation community.” (more…)

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“Higher P, lower Q.”

Hat-tip to Daniel Hall, who writes: “I think Tyler is being cheeky here.”

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The Wall Street Journal reports that the proposed Delta-Northwest merger expected to be announced any day now will not face antitrust scrutiny as significant as that which doomed previous deals “unless regulators grow uncharacteristically squeamish about the combination’s sheer size.”

The department, which would be likely to review the case before a new administration arrives in Washington in January, has been kind in the past to deals like this one that don’t involve a lot of overlap.

In assessing proposed airline mergers, the Justice Department reviews nonstop and connecting routes between cities where the two carriers overlap, as well as whether their respective hubs are close enough to make them dominant in a region. The department also weighs the likelihood of rivals starting service within two years on city-pairs where the merged airline would have increased market power, potentially reining in the new carrier’s ability to raise prices. . . .

Delta and Northwest see their proposed marriage as a merger with little overlap domestically and none on overseas routes, said people familiar with the matter. The two also don’t anticipate reducing a lot of capacity, shuttering existing hubs or laying off many front-line workers.

The Journal‘s main source for its analysis seems to be former Transportation Department assistant secretary Andrew Steinberg.

Antitrust Fears Few in Airline Deal [WSJ]

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Ben Mutzabaugh at Today in the Sky collects reports that the boards of the two airlines are meeting today . . .

Stay tuned over at his blog, and see my antitrust read on Delta-Northwest here.

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  • According to Benet Wilson, the TSA is considering implementing security lanes based on familiarity with the screening process. Their color code (what’s a Homeland Security program without a color code?) seems to be inspired by ski trail designations. Experienced travelers only in the black diamond lanes! [Towers and Tarmacs]
  • The United States and Australia have completed open skies negotiations. [ATW Daily News]
  • Should families of airplane crash victims be able to view formerly confidential employee safety reports? Trebor Banstetter has more. [Sky Talk]
  • The air traffic controllers’ union says more than six controllers are retiring per day. The FAA says it is hiring enough to fill the gap. A look at the numbers suggests that’s not true. [Get the Flick]
  • Virgin Atlantic and British Airways settled a lawsuit over price-fixing on fuel charges between 2004 and 2006 [AP/MSNBC]
  • The FAA’s funding authorization expires on February 29. The House passed a temporary extension, to June 30. No word from the Senate. [ATW Daily News]

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President Lyndon Johnson takes the oath of office aboard Air Force One on November 22, 1963.

In honor of Presidents’ Day, enjoy a little trivia. Have I missed anything interesting in this list? Add it in the comments.

  • First president to fly in an airplane: Theodore Roosevelt, who flew in a Wright bros. biplane in 1910, a year and a half after leaving office.
  • First president to fly in an airplane while president: Franklin D. Roosevelt, who made a three-day flight by Boeing 314 Clipper to Casablanca in 1943 to meet with Winston Churchill.
  • First president to fly a plane: Dwight Eisenhower learned to fly in the late 1930s as a military officer, even though was never a military pilot. The George Bushes were also pilots.
  • First president to fly on “Air Force One”: Eisenhower, for whom the designation was introduced following a 1953 incident in which a civilian flight with the same number as the president’s Air Force plane entered the latter’s airspace.
  • First president to use a Boeing 707 equivalent as Air Force One: Eisenhower, in 1958.
  • First president to use a Boeing 747 equivalent as Air Force One: George H. W. Bush, in 1990. Ronald Reagan’s administration commissioned the VC-25 program.
  • First president to use an official helicopter: Eisenhower, in 1957.
  • First president to use the current SH-3 Sea King as “Marine One”: John F. Kennedy, in 1961.
  • First president to campaign by plane: Kennedy, in 1960. His campaign plane, nicknamed “The Caroline” after his daughter, was a Convair 240 that had been purchased by his father in 1959.
  • Last president to fly commercial while president: Richard Nixon, who flew United from Washington to Los Angeles in 1973 as a fuel-efficiency gimmick. The flight’s call sign was “Executive One.”
  • President who deregulated the airline industry: Jimmy Carter, who signed the Airline Deregulation Act in 1978.

Photo credit: LBJ Library Photo by Cecil Stoughton

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In a BusinessWeek op-ed, House Transportation Committee chairman James Oberstar (D-Minn.) has come out firmly against airline mergers involving the big six.

Yet this latest round of rumored mergers, which includes a United-Continental scenario, as well as a Delta-Northwest combination, is significant. It would mean further consolidation in the airline industry, further reductions in choice for consumers, and probably fewer flights, fewer jobs, and higher fares.

I think Oberstar’s jumping the gun here. The Justice Department will do a full review of any proposed merger. (See here, and see my analyses of Delta-Northwest and United-Continental.)

Deregulation held out the promise of a market-driven industry that would give rise to a host of new entrants, bringing more competition, lower fares, and better service. The immediate aftermath of deregulation saw the expected flurry of airline startups and new market service. That activity, however, was short-lived.

Actually, deregulation did bring new entrants to markets, introduce more competition, and lower fares. Service may or may not have improved (premium service certainly has), but you get what you pay for. Lower fares are a form of better service. And what does he mean by “short-lived”? Changes in the industry have been pretty much constant since 1978. There has never been any shortage of airline startups and new service. It’s a very dynamic industry, and since deregulation, that has redounded to consumers’ benefit. (more…)

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Happy Valentine’s Day!

Once upon a time, there were two airlines. Each one was happy in its own way. Each had service to most parts of the country; each enjoyed extensive international connections, the former to Asia and the latter to Europe. Each had shiny new planes and hard-working staff members. But each airline sensed a void. They were missing something. There was a void in their hearts that could only be filled by. . . .

. . . each other.

(The investors will love the romance, and the wedding will pay off in the short run, but is the marriage built to last? Alas, no one has these thoughts on Valentine’s Day.)

Enjoy this video, based on the romance between Virgin Express and SN Brussels that produced Brussels Airlines.

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If you build it, they will come.

This sort of wishful thinking too often infects policymakers seeking to improve and expand air travel systems. Sometimes, unfortunately, they choose the most expensive option: building an entirely new airport. As I’ve written earlier, this does not happen very often (at least not in developed countries, but check out all the crazy airport construction going on in the UAE). Developing a brand-new airport is a multibillion-dollar project requiring decades of planning, permissions, environmental mitigation, NIMBY lawsuits, and more. The easier course is to expand capacity at existing airports, although this is not always possible. But it is certainly cheaper in the long run than building white elephants like MidAmerica St. Louis Airport or Montreal’s ill-conceived Mirabel International Airport. Mirabel reflects many of the problems with the new-airport concept: it must be built far away from a city center to avoid extensive legal challenges; transit links are often an afterthought; the local market for and technological aspects of air travel may change dramatically; and travelers may hate the airport. A new airport may require regulatory protection, like the Wright Amendment for Dallas-Ft. Worth, the perimeter at National for Washington Dulles, and the international flight rules at Mirabel and Dorval (now Trudeau).

Against this inauspicious history comes the Times of London with a leader arguing for a new airport for London in lieu of expanding Heathrow. The paper writes that Heathrow is too central, too congested, too miserable, and that it cannot be suitably expanded.

Therefore, says the editorial: (more…)

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