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Posts Tagged ‘delays’

Tom Parsons, Randy Petersen, Terry Trippler, Peter Greenberg, and Rick Seaney

From left: Tom Parsons, Randy Petersen, Terry Trippler, Peter Greenberg, and Rick Seaney

DALLAS — Our lunchtime entertainment here at Southwest headquarters was provided by a panel of five airline industry thought leaders who offered their thoughts on the future of the industry. Rick Seaney of FareCompare.com kicked off the discussion. Some of the trends he noted include a “decline in human interaction” through the increasing utility of technology. He also expected “advertising in aircraft like in a subway car” and “a la carte aviation pricing” (the latter I think is a good thing, as regular readers will know). Seaney also announced that he expects to see an airline passengers’ bill of rights soon (PBOR), a theme echoed by other panelists.

Peter Greenberg, the travel editor for the Today show, said that most airlines are adopting an attitude of “we’re not happy till you’re not happy,” and added that it will be hard for airlines to improve customer service with so many unhappy employees. With respect to delays, he said that there will be no meaningful delay reductions until local airport authorities cap operations on their runways to what those runways can actually handle. And he cautioned U.S. airlines to prepare for foreign ownership and even cabotage: “it’s going to happen. Get ready for it.”

On the merits of a PBOR, Terry Trippler of Trippler and Associates said, “Once the government gets involved, they will not stop.” He recounted experience working with the Civil Aeronautics Board in regulation days and said it was not consumer-friendly. The reason airlines offered such extraordinary service (compared to today) is that they could compete only on service — not on fares. Instead of a PBOR, he said, “I want the free-enterprise system to work it out . . . and I think it will. . . . I want the Southwests of the world to be free to go where they want to go, be what they want to be, and charge what they want to charge.”

Frequent-flier-mile guru Randy Petersen of Inside Flyer and Boarding Area contested Trippler’s faith in the private sector to work out the issue: “Free enterprise hasn’t proven to work.” He discussed trends in frequent flier miles, arguing that some of the more negative pronouncements going around today are exaggerated. Finally, BestFares.com’s Tom Parsons talked about how with fares rising, “best fares” will be thought of as “reasonable fares,” and he commented that Southwest is leadeing fare increases, much to the delight of the legacy carriers.

During the Q&A period, friend of this blog and Jetwhine editor Rob Mark called attention to the issue of people being kept on planes for hours on the ramp. Greenberg suggested a renewed appreciation for the virtues of airstairs. Then, he said to my amusement, “Let’s talk about the history of denied boarding. It starts with Ralph Nader being thrown off an Allegheny flight.” More seriously, he said that if airlines don’t embrace common-sense measures like deplaning passengers on long delays, they will get a PBOR. Parsons said that we need a PBOR “with meat on it,” because to date the private sector hasn’t been successful.

Photo by Evan Sparks

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Welcome, new readers! For more blogging on aviation politics, click here.

First of all, big props to Obama and his campaign team for actually having a transportation agenda [PDF]. The McCain campaign devotes a whole section to manned space exploration but can’t spare a word for aviation. So, to Obama, an A for effort.

Now let’s dig into the plan:

As our society becomes more mobile and interconnected, the need for 21st-century transportation networks has never been greater. However, too many of our nation’s railways, highways, bridges, airports, and neighborhood streets are slowly decaying due to lack of investment and strategic long-term planning. Barack Obama believes that America’s long-term competitiveness depends on the stability of our critical infrastructure. As president, Obama will make strengthening our transportation systems, including our roads and bridges, a top priority.

Barack Obama believes that it is critically important for the United States to rebuild its national transportation infrastructure — its highways, bridges, roads, ports, air, and train systems — to strengthen user safety, bolster our long-term competitiveness and ensure our economy continues to grow. Investing in national infrastructure is especially important in our efforts to bolster our homeland security to meet international terrorism and natural disaster threats. . . .  Barack Obama will address the infrastructure challenge by creating a National Infrastructure Reinvestment Bank to expand and enhance, not supplant, existing federal transportation investments. This independent entity will be directed to invest in our nation’s most challenging transportation infrastructure needs. The Bank will receive an infusion of federal money, $60 billion over 10 years, to provide financing to transportation infrastructure projects across the nation.

Worthy goals. One of the core functions of government is to provide for infrastructure development and maintenance. How will this money be allocated? By DOT, or by Congress? Political realities mandate, for example, that Airport Improvement Fund monies go disproportionately to airports that do not need them as much as the highly trafficked and congested commercial hubs. How it gets allocated is key. (more…)

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Transportation Secretary Mary Peters usually gets a bad rap in aviation policy circles. Even though her professional background is in highways, she ought to be better versed in aviation than this or this suggests. But I am very unimpressed with her latest initiative, announced Tuesday in Atlanta: a comprehensive national transportation policy. It is based on reducing gridlock and includes several market-oriented, incentive-shaping changes. I haven’t read the full plan yet, and I will soon engage with the aviation section, but the timing of this is ridiculous. Five months before the end of an administration is not the time to announce a “complete overhaul” of U.S. transportation policy. Her tone seems to believe she is working in 2001; she speaks of “unveiling” a Bush administration plan. Um, didn’t we have seven and a half years to do this? Peters herself has been secretary for almost two years; surely we could have seen a national plan before now.

The likelihood, therefore, of this transportation agenda being enacted is slim to none. Barack Obama’s transportation plan has some different objectives than the president’s, including more density and more federal-level involvement in planning. John McCain doesn’t seem to have much of a transportation policy apart from opposing porcine transportation earmarks. Either will likely diverge from the just-proposed plan. This plan, which I’m looking forward to reading, is years overdue and now arrives too late to be useful.

But now it’s time to pivot and praise Secretary Peters. Her transportation department has often advocated introducing market forces into the U.S. transportation infrastructure, and her July 22 op-ed in the New York Times defending the FAA’s peak pricing plan is good. She opens with a discussion of slot pricing that echoes what most economists say is wrong about landing fees: that they are weight-based. She also exposes the airlines’ inconsistency in opposing congestion pricing:

The airlines prefer the status quo, which is simply not working. Americans deserve better.

At a recent Congressional hearing, the head of the airlines’ primary lobbying organization, the Air Transport Association, asserted that pricing is not an effective mechanism for balancing supply and demand for landing slots. When lobbyists argue that basic economic principles do not apply to the industry they represent, a red flag should go up.

After all, the airlines themselves lower ticket prices to attract passengers when demand is low and then raise prices to maximize revenues when demand is high. What would happen if airlines were required by the government to charge the same ticket price for travel on Dec. 24 as they charge in the middle of September? There would either be rationing of extremely scarce seats on Dec. 24 or exorbitantly high prices for widely available seats in the middle of September. In either case, this inefficient outcome would damage the economy broadly and the aviation sector specifically.

Peters conveniently neglects to mention the FAA’s failure to make technological improvements that would have permitted airlines to meet demand, but she does explain part of the reason why: there’s a disconnect between the funding for those improvements and use of the system.

The argument championed by airline lobbyists and some of their Congressional supporters that “we just need more capacity and technology, not pricing” incorrectly assumes that these are competing concepts. But the main reason we have failed to add capacity and modernize our air traffic control system is that our approach to paying for aviation infrastructure completely disconnects the price of using capacity from its true costs and thus promotes overuse at popular airports and during popular flying times. . . . Independent economic experts of all political backgrounds agree that either auctions or congestion pricing is far preferable to the failed experiment we have now.

Congestion pricing is the most rational and efficient way to allocate congested and in-demand runways and airspace. This is part of Deregulation 2.0, the unfinished work of airline deregulation. We (successfully) deregulated the industry three decades ago; it’s now time to unleash competition in the aviation infrastructure sector. Peters agrees:

In the 1970s, many of the industry’s lobbyists took the position being espoused today — that basic economic principles could not be applied to commercial aviation, that competition would not work and that consumers would be harmed if airlines were given the freedom to design their own networks and to set prices based on market forces.

The lobbyists were wrong then. They are wrong today.

What can I say? When you’re right, you’re right.

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Over lunch today with Daniel Hall, we talked about the nation’s chronic underinvestment in infrastructure (and infrastructure maintenance). One of the key problems is what to do in the in-between time between our current system and our hypothetical, complete infrastructure Nirvana. The best way of allocating scarce transportation space — from highways to runways — is to charge users for the negative externalities caused by their presence at a given point in the transportation system. That is, we need to use congestion pricing.

A rule proposed in the winter by the FAA to permit a sort-of congestion pricing mechanism has just become a regulation “intended to provide greater flexibility to operators of congested airports to use landing fees to provide incentives to air carriers to use the airport at less congested times or to use alternate airports to meet regional air service needs.” So let’s look at the text: (more…)

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Congestion at major airports at peak travel times (and the consequent inability of passengers to whom time is very valuable to get the delay-free travel they would willingly pay for) obviously means to an economist that the pertinent government authorities have on the one hand failed efficiently to expand airport and air traffic control capacity and, on the other, to price those scarce facilities at their marginal opportunity costs. No wonder there are shortages.

Alfred Kahn, “Surprises of Airline Deregulation,” American Economic Review 78, no. 2 (May 1988).

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When stories like this come through my reader, I tend to ignore them — after all, opening military airspace to passenger traffic has a negligible impact on congestion. The last thing I need to do is read more high-ranking officials’ vapid statements, like the president’s last fall: “We’ve got a problem. We understand there’s a problem. And we’re going to address the problem.” Thanks for clearing that up!

But I couldn’t help but chuckle at Mike Boyd’s trenchant commentary today on Transportation Secretary Mary Peters’s latest initiative:

WASHINGTON (AP) To help ease airline delays over the busy Memorial Day weekend, commercial flights off the East Coast will be able to use military airspace, Transportation Secretary Mary Peters said Thursday.

“It gives airlines a fighting chance to beat delays by allowing them to plan new routes” in one of the country’s most congested aviation corridors, Peters said

Here are a couple of facts:

Fact one: The “busy” Memorial Day weekend was no busier in the skies than any other weekend. No more flights were operated compared to any other week-end. Less, actually, as some carriers – such as Southwest – flew reduced schedules in the middle of the period. There was no more –  or less – potential for delayed flights than any other day.

Fact two: Delays are driven by Ms. Peters’ incompetently managed, understaffed, and under-planned ATC system. Delays are not the result of high passenger volumes – and it’s inexcusable for a person in her position to not know better. Or worse, try to mis-inform the public. To act as if she’s trying to help the airline industry with “their” delay problem is like Mrs. O’Leary’s cow giving lectures to the Chicago Fire Department.

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The UK Competition Commission (CC) will likely recommend that BAA Ltd., the commercial owner-operator of London’s three primary airports, be forced to sell at least two of them. The CC signals this strong leaning in its “emerging thinking” document published on April 22. The CC is in the middle of an investigation of whether BAA’s ownership of seven UK airports, including the three largest in the London area and the two largest in Scotland, creates adverse effects on competition. It took up the investigation in spring 2007 based on a referral from the Office of Fair Trading.

First, some background: several British airports were once run by the British Airports Authority. In 1986, as part of the Thatcher government’s privatization program, the agency was spun off as BAA plc (today BAA Ltd.) The government held a “golden share” in the firm until 2003, when the European Union ruled against it; in 2006, BAA was bought by Ferrovial Group, a major European airport infrastructure business. BAA both owns and operates seven British airports: Heathrow, Gatwick, and Stansted near London; Southampton; and Edinburgh, Aberdeen, and Glasgow in Scotland. It’s gotten in trouble lately for a failure to keep up with demand at Heathrow, with needed new terminals and runways decades from completion. BAA was further wounded by the Terminal 5 opening debacle at Heathrow, and it has been slowly bleeding customers–airlines and passengers–to much more up-to-date, larger, and expansible airports on the European continent. BAA’s finances are complicated by the fact that its landing fees are capped by regulation, which is why BAA invests so much in retail and other profitable commercial activity, as you’ll see if you ever wander around a BAA terminal.

BAA’s four airports in the southeast of England (especially Heathrow, Gatwick, and Stansted) account for 91 percent of traffic. In its document, the CC considers the extent to which common ownership affects competition, including its affect on responsiveness to customers, infrastructure investment, substitutability of demand, regulation, and capacity constraints and development.

What follows are the highlights from the CC’s 170-page report, with special reference to the London airports:

(more…)

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