Archive for June, 2008

The Dutch “green tax” on aviation, which I’ve blogged about here and here, is already negatively affecting Amsterdam’s Schiphol Airport, according to a report:

Some 50,000 fewer passengers are expected to use Amsterdam Schiphol airport, one of Europe’s busiest, this summer on account of a Dutch environmental tax on flights, it was reported Saturday.

“We’re expected zero growth in 2008, and in fact a decrease (in passenger numbers) in July and August,” an airport spokesman was quoted as saying by the domestic ANP news agency.

Tax means fewer travellers at main Dutch airport: report [AFP/Breitbart]


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  • Douglas Gawadzinski, one of the apparent problem personnel in the FAA office overseeing Southwest Airlines — and designated FAA fall guy — has “retired,” FAA official said. [Dallas Morning News] See more on this.
  • Benevolent megalomaniac Richard Branson says that airlines should willingly pay taxes on carbon emissions: “If you run a dirty business — an airline business, a shipping business . . . coal business, you should pay for the privilege because you are doing damage.” [AP]
  • China has raised its domestic jet fuel prices, cutting back its extensive subsidies on fuel purchases that have spurred excessive demand and contributed to global oil price increases. [ATW Daily News]
  • Have Delta and Northwest’s pilots unions hammered out contract agreements and a seniority list merger system? [Today in the Sky]
  • The airlines blame the Department of Homeland Security for foisting its exit process — and related costs — onto the industry. [ATW Daily News] See more at Daily Airline Filings.

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Lots of interesting testimony at today’s Senate Commerce Committee hearing on climate change and transportation. Discussion subjects ranged widely, from surface transportation to the possibility of shipping in the Arctic. “The transportation sector accounts for approximately one-third of U.S. greenhouse gas emissions,” announced committee chairman Daniel Inouye (D-Hawaii). He added that GHG emissions from transportation are projected by the EPA to increase by 26 percent by 2020.

The first panel featured several government officials. Deputy Secretary of Transportation Thomas J. Barrett said that DOT is working to reduce greenhouse gas emissions — without compromising the “indispensable role” that transportation plays in the U.S. economy. He touted increased CAFE standards (only to be chided later by John Kerry [D-Mass.] for the administration’s foot-dragging on CAFE). Barrett emphasized the role of markets in the DOT’s transportation planning. “Markets provide strong incentives for improving efficiency,” he said. Market-oriented devices like runway slot auctions or highway tolling theoretically reduce congestion. Less congestion means less fuel consumed, which means fewer GHG emissions. Barrett spoke about a DOT’s across-all-modes experiments with “direct user fees and more congestion pricing.” For more information on these initiatives, along with some critical voices, see this WaPo article. “One study found that congestion pricing reduced emissions up to 10 percent in the aggregate and as much as 30 percent in high pollution areas.”

Barrett touted the airline industry’s sometimes surprising success in reducing emissions: “Aviation is a somewhat unheralded but real success story in these programs.” He urged Congress to exercise caution in “not hampering” the industry as it weighs GHG regulations. As for further improvements, Barrett claimed that the FAA is moving to accelerate its air traffic management improvements “to make it more NowGen than NextGen.” Some of these changes are already coming on line. (more…)

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As I see it, one of the problems of responding to climate change is the need for a response coordinated across industries and countries. Lots of industries like to trumpet what they are doing on their own to reduce their carbon footprints, but what if these reductions simply shift the climate change contribution onto another sector of the economy without reducing net impact? Case in point: aviation biofuels. Airbus and Boeing both affirm biofuels’ importance. Japan Airlines is running a biofuel test flight soon, and Air New Zealand will test biofuel made from jatropha, which meets its criteria of environmental sustainability without competing with food production, quality equal to today’s jet fuel, and significant cost savings. Much has been made of plans like benign megalomaniac Richard Branson’s to expand use of biofuels, not only to reduce emissions but also to save money:

Virgin’s much-ballyhood flight from London to Amsterdam used 5% coconut-oil biofuel . . . to show biofuel could take the high-altitude cold. But the test flight alone used 150,000 coconuts, Petroleum Review says—and at least 3 million would have been needed for a full biofuel flight. Multiply that by world air traffic, and the problem comes into focus.

The other options? Flavor-of-the-month jatropha biofuel would be fine—except aviation would require a land area twice the size of France to grow the stuff. . . . How about biomass, like bits of wood and useless plants? Well, they still need to grow somewhere—and commercial aviation would need to harvest an area three times the size of Germany.

My question: if aviation washes its hands of its climate change impact (estimated to be 2-3 percent) with biofuels, and since biofuels require more arable land and lead to the clearing of forested areas, how much does that add to deforestation’s estimated 25 percent contribution to anthropogenic climate change? The airline sector currently has no incentive to worry about this transfer of emissions, and every incentive (financial, PR, etc.) to just do it.

I’ve written before about a similar but not identical problem in “green taxation,” in which one country’s aviation taxes reduce one country’s aviation carbon footprint but not the world’s, because the flights shift to other countries’ airports. In the case of biofuels, will the airline industry be able to “greenwash” away its climate sins without actually making a difference in manmade CO2 emissions?

As for the extent to which widespread use of aviation biofuels will mitigate climate change, or what kind of policies or institutional structures can prevent this problem, I will leave further discussion up to those much better versed in this subject than I. Ahem, ahem.

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One of the most-voiced complaints about deregulation is that airlines have been consistently unprofitable since deregulation. That’s not true, according to this handy chart from a 2006 Government Accountability Office report [PDF].

As you can see, airlines were only narrowly profitable in the era of regulation. After regulation, they became exposed to economic forces, making them — like most other industries — profitable during good economic times and less so during recessions. The airline bottom line was hit by the 1980, 1981-82, 1990-91, and 2001 recessions. The final one’s impact was exacerbated by 9/11. Even with the current challenges of the industry, it’s not possible to say that airlines simply can’t make money in a deregulated environment. Those who propose some measure of reregulation should make clear what they want: for airlines to be protected from the economic cycles and competitive pressures that almost every other industry faces.

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Doing something, anything

  • The airline lobby is urging Congress to “do something” about the price of oil — namely, to interfere in commodity futures markets. “If Congress does not act soon, this country will not have a viable airline industry,” says Jim May of the Air Transport Association. Watch out for ill effects if Congress acts on the Caplan Syllogism: “Something must be done. This is something. Therefore, this must be done.” [Today in the Sky]
  • Transportation Security Officers just can’t get no respect. What will change that? New uniforms that make them look more like law enforcement officers, of course! Real airport police: not so thrilled. [Aero-News.Net]
  • Now that capacity increases at Chicago O’Hare International Airport are coming on line, the FAA is lifting flight caps there. [ATW Daily News]
  • Nigeria has received a World Bank grant to update its aviation infrastructure and make it ICAO-compliant. [Aviation Safety Network]

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  • In one of the first signs of the slightly warming relationship of China and Taiwan under new Taiwanese president Ma Ying-jeou, Beijing and Taipei have reached a bilateral aviation agreement to take effect July 4. Passengers who take one of the newly offered flights will be able to save up to five hours in travel time, as travelers formerly had to transfer through Hong Kong. [ATW Daily News]
  • Jim Manzi asks why Air Force One had to stop at Heathrow during President Bush’s trip to Europe last week, snarling traffic at Europe’s busiest airport. Wasn’t there a military airfield available? [The American Scene]
  • The European Union is investigating Italy’s $465 million “bridging loan” to Alitalia as illegal state aid. [ATW Daily News]
  • Two FAA aircraft inspectors who reported on lapses in safety inspections at Southwest Airlines (see here) have been given the Public Servant Award by the Office of Special Counsel, the federal agency that protects whistleblowers. [OSC via Get the Flick]
  • The Department of Homeland Security is modifying its visa waiver program and photo-ID rules to make it more inconvenient to travel. [The Cranky Flier]

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The Government Accountability Office is expected to rule by Thursday on Boeing’s protest over the Air Force’s decision to go with the Northrop Grumman/EADS tanker. Boeing is desperate for the $40 billion contract, but the Air Force insists that the Northrop Grumman proposal is superior.

But Congressman Norm Dicks had the best line of the day: “No matter what happens with the GAO . . . I think Congress has to step in to this and do what the Air Force didn’t do, and that is to have a real independent look at this thing.” Wait a second: Congress is independent? The same body whose members routinely intervene in government decisions and market forces to achieve outcomes narrowly beneficial to their districts (and top donors)? Moreover, is a congressman who represents Washington state, home to Boeing’s primary aircraft assembly plants and a large share of Boeing’s jobs, really qualified to take a “real independent look” at this issue?

Washington Ruling Expected on $40 Billion Aerial-Refueling Contract [W$J]

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Yesterday, several outlets reported on former American Airlines CEO Robert Crandall’s speech at the Wings Club (full text here). Crandall, who ran AA during the process of deregulation and made it an industry leader in the post-deregulation era, opposed deregulation in the late 1970s, and his opinions haven’t changed: “We have failed to confront the reality that unfettered competition just doesn’t work very well in certain industries, as aptly demonstrated by our airline experience and by the adverse outcomes associated with various state efforts to deregulate electricity rates. It’s time to acknowledge that airlines look and are more like utilities than ordinary businesses.”

Because Crandall is such a legend in the airline world, I’d like to go through his remarks seriously and respectfully. The key question: should airlines be operated like public utilities? Public utilities arise from natural monopolies, in which it is most efficient for a single firm than multiple, competitive firms to provide a service. Natural monopolies usually result in infrastructure- and capital-intensive industries. Classic examples include electricity transmission or public transportation: it’s too costly for competing firms to maintain multiple networks of power lines or subway tunnels. A utility is often created because it is the only way to ensure crucial infrastructure investments are made; if multiple firms are competing, they may not be able to afford to upgrade their systems over time. Economists have been doing important work exploring whether such utilities are really natural monopolies. Back in the 1970s, a consensus was reached that airlines did not constitute such a monopoly.

Indeed, certain elements of the infrastructure of the airline industry may be natural monopolies. Would it be more efficient to have multiple air traffic control firms competing? Not likely. And communities in which there is one major airport may find that a natural monopoly. (But regions with multiple, competitive airports, like London or New York, have great potential for airline competition. BAA, the owner/operator of London’s three largest airports, was set up as a sort of private utility with so much market power because only such a structure was thought to allow sufficient investment in infrastructure. As it turns out, BAA’s common ownership in a competitive environment has retarded investment.)

But airlines themselves are no longer thought of as a utility. Why were they ever? (more…)

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The House aviation subcommittee is holding a hearing today on air traffic control facility staffing, “including concerns about staffing alignment and training at such facilities.” Here is the subcommittee’s background paper. Here’s what happened today:

Panel I

Hank Krakowski, the COO of the FAA’s Air Traffic Organization (ATO) is the first witness. He first emphasizes the agency’s safety record in light of steep challenges. “Combination of training, teamwork, and technology” is the cause. FAA is convening a fatigue safety summit next week to address fatigue on the part of pilots and controllers. “We plan to hire 2000 controllers this year.” ATO is deploying more high-powered training simulators for controllers. ATO is also offering incentives to retain controllers eligible for retirement. He also says he is working with the National Air Traffic Controllers Association (NATCA) on hammering out a new contract.

Department of Transportation inspector general Calvin L. Scovel speaks next. The IG’s office has just complete a report on the issue of ATC staffing. See the inspector general’s report here [PDF]. FAA sees more controllers retiring than projected, but it is hiring more than projected. This is producing an overall less experienced workforce. Scovel’s recommendations: (1) FAA must improve control facility training. Must set standards for how much of a share of all controllers “developmental controllers” (i.e., trainees) may make up at a facility. It must clarify and centralize the organizational structure of the training process. (2) “FAA must address controller human factors” — situational awareness, fatigue, etc. Especially important with the influx of new controllers. (3) FAA must ensure “consistency and accuracy” in reporting controllers’ operational errors with respect to runway incursions, etc. The agency has in the past relied on self-reporting, which has not been sufficiently successful.

Next up: Gerald Dillingham of the Government Accountability Office. (more…)

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