Sunday, July 11, 2010

A Good Regulation

A new federal regulation imposing steep fines--$27,500 per passengers—on airlines that subject passengers to 3 hour or longer tarmac delays may be bearing fruit. In May, the first full month in which the regulation was in effect, only 5 flights suffered 3 hour or longer tarmac delays—compared to 34 in May 2009.

The airline industry trade group argues that the number of 3 hour or longer tarmac delays has been in decline for over year. BTS data, however, reveals a more mixed picture. April and March 2010 were likewise significantly lower than the numbers for 2009, but February 2010 was actually higher by 50%.

Read USA Today’s article on the new regulation here. See the BTS data for yourself here.

7 comments:

Colin said...

And, predictably, airlines canceled more flights in order to avoid the fine:

http://www.kansascity.com/2010/07/09/2073866/with-threat-of-fines-airlines.html

Flight cancellations spiked in the first month after the federal government got tough on airlines for parking planes on the tarmac for hours and stranding passengers.

Statistics reveal that airlines nationwide canceled 6,716 flights in May, up 40 percent from May 2009. At Kansas City International Airport, 72 arriving and departing flights were canceled, an increase from 45 scrubbed flights in May 2009.

“I’d bet the rent that the new rule didn’t help,” said travel industry expert Terry Trippler. “It wouldn’t surprise me if well over half of the increase was due to the legislation.”


Libertarians predicted this very result back in February:

http://reason.com/blog/2010/02/18/your-flight-to-cancun-is-cance

Ben said...

Well, I'd like to see a bit more context for that (like I tried to provide in my post), but I can't seem to find the total cancellation data by month on BTS. Let me know if you do.

As far as Libertarian grand-standing, do you all prefer to sit on the tarmac for more than 3 hours at a time? Is that a better result? Do you all claim credit for people becoming ill in those circumstances?

Colin said...

As far as Libertarian grand-standing, do you all prefer to sit on the tarmac for more than 3 hours at a time? Is that a better result? Do you all claim credit for people becoming ill in those circumstances?

No, I hate sitting on the tarmac, but I also think that there are far smarter ways of addressing it than simply fining airlines, which is a measure that really only makes sense if one thinks airlines are sadists that enjoy torturing their customers, and lack incentives to get their planes moving.

This is clearly not the case. Every minute an airplane is sitting on the ground rather than flying is money lost. Even if the airlines don't give a damn about their customers, they are simply wasting their assets by sitting around waiting to take off. Quick turnaround times and maximizing use of the airplanes is a huge determinant of profitability.

If we really want to get serious about the problem we should start looking at why these delays occur. My understanding is that planes elect to stay on the tarmac because they will lose their place in the takeoff queue and also because there isn't a gate to return to. I seem to also recall reading in at least one instance that the passengers would have had to have all their baggage rescanned as a mandatory security measure.

Fortunately, libertarians -- being the constructive people we are -- have some suggestions for alleviating this problem:

http://reason.org/blog/show/tarmac-delay-flight-cancellations

One [policy measure] would be for more U.S. airports to shift to the kinds of common-use gates that are commonplace in Canada and most of Europe, especially with privatized airports. I’ve sat on taxiways many times after arriving early (or late at night) and waited half an hour because “my” airline had no gate available—yet we could see empty gates sitting there unused.

And since a huge fraction of these delays occur at a handful of the most congested airports during bad weather, market pricing of runway access would allow the most time-sensitive travelers to book trips on “premium” flights that pay extra for take-off priority when weather imposes serious constraints.


But this approach requires a sober and level-headed approach to policymaking. The contrast is taking a problem which impacts roughly .02-.03% of all flights but generates headlines and attracts media attention, and vowing to get tough and defend consumers by mandating steep fines on airlines (of which the consumers receive $0). Now that's grandstanding.

Jason said...

"Every minute an airplane is sitting on the ground rather than flying is money lost."

I think you overestimate the cost to airlines if a plane isn't flying. By the time a flight departs the gate the airline has charged all onboard a fare and where applicable a checked bag fee.

And, considering a flight from coast to coast is generously six hours, presumably they have nearly collected all fares from people next in line to use that plane.

I'll cite the New York Times piece I posted during earlier comments, where essentially once you pay the fare the airline owes you getting from point A to point B. The timing of that trip is largely at their discretion.

Ben said...

Every minute an airplane is sitting on the ground rather than flying is money lost. Even if the airlines don't give a damn about their customers, they are simply wasting their assets by sitting around waiting to take off.

As Jason points out, this is not true--particularly in this era of maximum capacity flights. Not only have the airlines already earned the value of the fare they've charged, today they are better insulated against downstream effects and additional costs. Moreover, because deregulation has left in place regulations that disadvantage customers, the ability for a passengers to seek civil redress is severely curtailed. Absent the fines, the incentives currently in place all encourage airlines to load planes to capacity and put them on the tarmac until they can get into the air, irrespective of effect on the customer. These incentives become even more perverse on the airlines that charge for all beverage service (as opposed to only alcohol).

A better approach would likely be to combine both fines for airlines (to provide the appropriate incentive structure) with an independent organization responsible for determining the actual cause of any given delay--that way the airlines aren't in a position to claim that every delay has resulted from inclement weather, providing them an unchecked exit from obligations to their customers.

Once upon a time, Common Carriers were obliged to provide their customers the highest standard of care. Oh, how I long for the progressive times of the Lochner era.

Colin said...

I think you overestimate the cost to airlines if a plane isn't flying. By the time a flight departs the gate the airline has charged all onboard a fare and where applicable a checked bag fee.

It is beyond question that delays have a very real and negative impact on airline profits:

http://www.usatoday.com/travel/flights/delays/2008-05-22-travel-delays-billions_N.htm

Delays cost the airlines $19.1 billion in increased operating costs. That represents far more than the $3.8 billion the airline industry earned in profits last year, according to the Air Transport Association, which represents large carriers.

...Delays forced airlines to use an additional 740 million gallons of jet fuel, equal to about 5% of total fuel consumption.


SouthWest airlines, one of the few that is profitable in most years, requires quick turnarounds as part of its business model:

http://en.wikipedia.org/wiki/Southwest_Airlines#Rapid_Turnaround

Colin said...

A better approach would likely be to combine both fines for airlines (to provide the appropriate incentive structure) with an independent organization responsible for determining the actual cause of any given delay--that way the airlines aren't in a position to claim that every delay has resulted from inclement weather, providing them an unchecked exit from obligations to their customers.

No, the incentives do already exist as I have documented the billions airlines lose due to delays.

Furthermore, customers already have an avenue to redress their grievances -- simply choose another airline. Last time I was on a flight that was delayed, the airline -- Frontier -- gave us all free DirecTV as compensation. It wasn't much, but it was obvious they were interested in staying in our good graces. Airlines, like all industries, need to please their customers to stay in business. The competitive pressures of the marketplace do far more to ensure good service than any regulation.

In any case, I fail to understand why your proposed approach of fines and some new bureaucratic organization (the costs of which would be substantial -- an investigation for every single airline delay? There's one way to drive fares up) would be superior the one I mentioned in my second post.