|
» Airport Policy and Security Newsletter Archives
By Robert Poole
In this issue:
Should Different Airlines Pay Different Rates at Congested Hubs?
Airport congestion pricing has been studied by economists for several decades. But about six years ago, as their modeling began to get more detailed, some economists pointed out that the theory of congestion pricing was based on charging aircraft operators for the delay costs their peak-period flights imposed on other operators. But at a congested airport that is a fortress hub for one airline (e.g., Atlanta for Delta, Detroit for Northwest), since many of the flights being delayed at Atlanta are Delta's own, it is choosing to impose the delay costs on itself. Therefore, went this reasoning, airport congestion charges should be small at a fortress hub like Atlanta, because most of the delay costs there are "internalized" to Delta. Others said that's not quite right; by their logic, a carrier with 50 percent share of operations at a congested airport should be charged for one-half the delay costs it creates-the delay incurred by other carriers-while the carrier's smaller competitors, which have many fewer operations, should be charged for all the delays they create.
So far, this discussion has been pretty much confined to academia. But because of the growing debate in this country over airport pricing, this seemingly obscure point is bound to see the light of day before long. Thus, I'm pleased to report that this (in my view) rather bizarre approach to airport pricing has been answered by two well-respected transportation economists, Steven Morrison of Northeastern University and Clifford Winston of the Brookings Institution. Their paper, "Another Look at Airport Congestion Pricing," is in the December 2007 issue of American Economic Review.
To set the stage, they point out the political reality that "many air transport operators would be more strongly opposed to efficient congestion pricing [the kind suggested above], because they would perceive it to be blatantly inequitable: operators with a small share of flights at a congested airport would pay higher [runway charges per flight] than those with a large share, even if both operated during the same time period." In addition, to the best of my knowledge, charging different prices to operators of 737s at the same time of day would be illegal discrimination, under both DOT's airport rates and charges policy and ICAO airport charging principles.
But since this idea about "optimal" airport pricing is out there, Morrison and Winston decided to put it to the test, to see whether it is significantly better at improving the welfare of society, the way economists measure such things, than what we might call "ordinary" airport congestion pricing. Are you with me this far?
To do this, they used data from the FAA's Aviation System Performance Metrics (ASPM) database, for all flights at 74 commercial airports on all 365 days of 2005. They created a model of net benefits from air travel, defined as airport users' gross benefits minus total flight costs, both undelayed and delayed. They did this calculation three ways: with current weight-based landing fees, with ordinary "atomistic" runway congestion pricing, and with supposedly "optimal" pricing charging different airlines differently. Overall, their model showed net benefits from the "optimal" pricing across all 74 airports of $2.7 billion. Doing the same calculation with ordinary "atomistic" congestion pricing yielded net benefits of $2.5 billion. So there is very little gain in using the more complicated and controversial approach.
Morrison and Winston explain this small difference as resulting from the fact that most delay is external delay-i.e., imposed by one carrier on another. The fraction of delay that is internalized is relatively low, even at large hubs such as Atlanta (33%), O'Hare (22%), and DFW (41%). Hence, the simpler (and legal) form of airport congestion pricing is clearly the way to go.
» return to top
International Registered Traveler Coming Soon
Evidently impressed with the growing appeal of the Registered Traveler program, now in place at 17 U.S. airports, Congress wants to expand the idea to frequent international travelers using U.S. airports. The FY2008 omnibus spending bill enacted at year-end included funding and a mandate for the Customs & Border Protection branch of the Department of Homeland Security to have such a program up and running within two years at the top 20 airports for international arrivals into this country.
The measure was pushed for by the Travel Industry Association and the National Business Traveler Association. They pointed to successful programs overseas, in countries such as Australia and the U.K. which provide express-lane entry for frequent travelers who have passed a background check and obtained a biometric identity card. The rationale presented by NBTA and TIA is very much like that used to create the original (domestic) Registered Traveler program overseen by the Transportation Security Administration. Says Cathy Keefe of TIA, "Provid[ing] the U.S. government with robust background information on frequent international travelers [would] speed up their entry into the U.S. and allow CPB officers to focus their attention and resources on arriving travelers for which we have less advance information." In other words, it's not just a convenience for frequent flyers but also an aid to risk-based security.
And that apparently was the genesis of the idea when it was first being considered within DHS. Stewart Vendery was assistant secretary for policy at DHS at the time, and is now at NBTA. He told Aviation Daily (Jan. 14, 2008), "When I was still at DHS, we were on the cusp of launching a pilot in January 2005 between JFK and Amsterdam. But [Sec. Tom] Ridge left and IRT went into hibernation."
I'm glad to see that international registered traveler is back on the agenda-and I hope with its original risk-based focus. That's consistent with other risk-based programs, such as the biometric Nexus access card which pre-clears travelers through U.S.-Canada border crossings. Nexus has been operational at Vancouver International Airport since November 2004, is up and running at Toronto and Montreal airports. It's expected to be offered at Calgary, Edmonton, Halifax, Ottawa, and Winnipeg airports this year. And 17 member countries of the Asia-Pacific Economic Cooperation group offer reciprocal privileges for their APEC card, which allows fast-track (and visa-less) airport entry via special APEC lanes at major airports. And as of last year, APEC card-holders with a passport and visa can use the crew lines at U.S. international airports to speed their entry into the country. Oddly, Canada does not yet recognize the APEC card.
It appears that CPB practices the risk-based approach to allocating security resources, while the TSA only talks the talk. Domestic Registered Traveler was supposed to focus less screening attention on pre-cleared members, allowing them not merely to have shorter waits in line but also not to have to do the checkpoint strip and unpack their laptops. But TSA thus far has insisted that RT members go through the identical screening as the vast mass of non-cleared travelers. Doesn't anybody at the top in DHS see the contradiction?
» return to top
Bringing Airport Parking into the 21st Century
International research has found that privatized airports are more customer-friendly (see www.reason.org/ps254 for a summary of a 1998 Oxford University study). Airport privatization began in the U.K. under Margaret Thatcher, and has probably become more entrenched there than anywhere else. So I wasn't surprised to learn of two innovations pioneered by BAA, the first airport operator to be privatized. Both are aimed at making airport parking more customer-friendly.
The first dates back to the early days of airport privatization: pre-booked parking. Developed by software company Chauntry Corp. and eagerly adopted by BAA, the system allows passengers to book airport parking space in advance, and prepay. The internet based system can be customized to individual airport needs, allowing them to do airline-type yield management to offer both premium and discount pricing. The system is used at all BAA airports, and the company says that about 70% of its customers now prebook and prepay, according to Chaudry's Theresa Hughes, in an article in Aviation Week's Airports newsletter (Oct. 9, 2007). The company has expanded the concept to most of Europe and is now seeking airport parking business in North America.
BAA's newest parking innovation is opening this month at Heathrow, in the high-tech 3,800-space short-term parking facility at the new Terminal 5. A system developed by Siemens and Highlight Parking Systems has equipped the garage with infrared cameras and a space-occupancy monitoring system. On arrival, after getting a parking card imprinted with the vehicle's license plate number, the driver consults an information screen to find the location of the nearest available space. Illuminated arrows on the floor guide the driver to that space, which is marked by an illuminated green light. This system saves time and fuel (hence, emissions) by eliminating people's search strategy in a crowded parking structure. BAA estimates that the system will reduce carbon emissions by 397 tons per year.
On the traveler's return, by inserting the card into one of 16 car-locator machines, he will see on a 32-inch display screen a 3-D interactive map showing where the car is located. The map also points out the closest elevators and stairwells.
I'm glad to see this kind of customer-friendly innovation continuing, at privatized airports. Here's hoping we have more of this in America.
» return to top
After Subsidizing their Flights, Must We Subsidize Their Screening?
This year marks the 30th anniversary of airline deregulation-and also of the Essential Air Services (EAS) subsidy program. Originally authorized as a 10-year transition program for small communities, to help them cope with the impacts of deregulation, it's become a kind of entitlement, taxing ordinary airline passengers to subsidize service on small planes that often carry only a handful of passengers. Now supporters of the program are pushing to balloon the subsidy even further, by having Congress force the TSA to institute passenger and baggage screening at these tiny airports.
The opening wedge in this campaign is the seven EAS airports in Montana, which the state's two senators insist that TSA equip with screening, at an estimated cost of $2 million per year. These airports are served by 19-seat turboprop planes, averaging just two passengers per flight. Current federal rules require screening only for planes with more than 61 seats. Passengers on the 19-seaters who plan to transfer to another flight at their initial destination must go through screening at the larger airport. All seven airports are served only by Big Sky Airlines, which connects them all to the larger airport at Billings, MT. Needless to say, Big Sky is lobbying hard for the TSA checkpoints.
Last year the Government Accountability Office did a report on EAS, "Programs and Options for Providing Air Service to Small Communities," released April 25, 2007 (www.gao.gov/new.items/d07793t.pdf). The program costs $110 million a year and subsidizes flights in 35 states plus Puerto Rico. The average subsidy per passenger os $135, but it's $572 in Oklahoma, $449 in Tennessee, $394 in Washington, $358 in North Dakota, and $365 in Montana. A recent USA Today article (Dec. 31, 2007) cites the Big Sky flight between Miles City and Billings, for which a 30-day advance purchase round-trip ticket costs the passenger just $88, but the government (meaning other airline passengers like you and me) kicks in $779. You can drive that trip in two hours.
Over time, like most federal programs, EAS has expanded. A growing number of EAS flights connect small cities to major hubs that are within 90 miles; 24 such communities now take part in EAS, accounting for about 20% of its total budget. A case in point is Macon, GA, which gets twice a day flights on Atlantic Southeast Airlines. Typical one-way fare is $78, with the taxpayers adding $145 per passenger for this 19-minute flight. And it's not that there isn't an unsubsidized alternative. Groom Transportation runs hourly vans from Macon to the Atlanta airport, at just $31 per passenger.
The DOT last year proposed eliminating EAS flights to 65 cities that are within 230 miles of a larger airport, but that effort went nowhere in Congress. But adding costly TSA screening to tiny EAS airports would compound the unfairness. We've got to draw the line somewhere at egregious wastes of aviation tax money.
» return to top
Bag-Check Options
Except for a two-week trip to Australia seven years ago, I haven't checked a suitcase in about 20 years. But most people travel with enough luggage that they have no choice but to check in one or more suitcases, and it's an increasingly unpleasant experience. Leaving aside airlines' propensity to lose or misdirect your bag, there's the hassle, at most airports which lack in-line baggage screening systems, of lugging your bag to the location of the giant EDS (explosive detection system) machines. And to add insult to injury, airlines are starting to charge non-trivial fees for checking bags.
I'm pleased to report that the small industry that lets passengers bypass the bag check-in process is growing. When using a small but growing number of airports, you can check your bag before going to the airport, thanks to these companies. The charge may be more or less than what you'd have to pay the airline, but at least you don't have to lug the bags to the airport or around the terminal.
Two firms-BAGS (Baggage Airline Guest Services) and Bags to Go-seem to have most of the market. Thus far, there are three types of off-airport location where passengers can check in their bags and receive a boarding pass from one of these companies' check-in points. In Orlando and Las Vegas (where the trend began) plus Phoenix, it's available in a small but growing number of hotels and the convention centers. In Tampa, Orlando, Los Angeles, and Ft. Lauderdale, it's available for cruise ship passengers as they disembark from the ports of Tampa, Port Canaveral, Los Angeles, Miami, and Port Everglades. And at Los Angeles, San Francisco, and Phoenix, the service is available at remote parking and/or rental car facilities (and in Los Angeles, also at the convention center and downtown's Union Station).
The charges range from $5 per person (boarding pass plus up to two bags checked) at LAX and SFO to $20 per person (boarding pass plus up to three bags) at Ft. Lauderdale and Las Vegas. The TSA is involved, since it must verify the baggage company's process for keeping the bags secure from the moment of check-in until it delivers the bags to TSA at the airport. It welcomes the program, since it reduces the peak demand on baggage screening systems, since many passengers (especially at hotels) check their bags long before they go to the airport, to get them off their hands. "One less bag is one less passenger to be processed in overcrowded lobbies," TSA's Larry Fetters told USA Today. Airport managers like the program, too, for helping to de-congest lobby areas, allowing a larger fraction of passengers to go straight to the passenger screening checkpoint. Randy Walker, airport director at McCarran International in Las Vegas, has set a goal of getting 10% of all bags processed through off-airport drop points. Airlines, too, seem to be getting on board, with Alaska, AirTran, American, Continental, Delta, Northwest, Southwest, and United among the active participants.
» return to top
News Notes
Italy Shifts Slot Allocation Responsibility. Although the European Union requires that slots at congested airports be allocated by a disinterested adjudicator, actual practice usually differs. In Italy, this responsibility has traditionally fallen on Assoclearance, a joint effort of airlines and airport operators. But in February, the government announced that it plans to transfer this responsibility to Enav, the air navigation service provider. The move comes amidst the impending takeover of Alitalia by Air France/KLM, which has said it will downsize Alitalia's operations at Milan's Malpensa Airport. Some 18 airlines have expressed interest in acquiring slots that become available there.
Progress on Scrapping MANPADS. News reports in early March reported progress on U.S./Nicaragua negotiations to destroy the latter's stock of shoulder-launched SAM-7 anti-aircraft missiles. The Nicaraguan government says it has already destroyed about half its original stockpile of 2,000 of the missiles, and negotiations continue about destroying the remaining 1,051. The initial deal calls for destroying 651 of them "in exchange for modern medical equipment and medications," while the final 400 would be kept pending regional arms-reduction efforts.
Singapore Upgrading LCC Terminal. One of the pioneers in setting up separate, no-frills terminals for low-cost carriers was Singapore's Changi airport. It's been very successful, with weekly flights increasing from an initial 124 in 2006 when it opened to 248 in February 2008. Dow Jones reported (March 6th) that the airport will expand the terminal from a capacity of 2.7 million annual passengers to 7 million. Construction will begin in July and should be completed by early 2009.
New Resource on Airport Finance. The Transportation Research Board's relatively new Airports Cooperative Research Program has produced its first synthesis report. "Innovative Finance and Alternative Sources of Revenue for Airports" is 43 pages in length and can be ordered via the TRB website, www.trb.org/bookstore.
» return to top
Quotable Quote
"At most busy airports, flights are planned according to the capacity of the runway, with the number of flights and specific slots coordinated between airports, airlines, air traffic control, and government agencies. In the U.S., this does not take place. Airlines, in competition with each other, schedule flights with little regard for the capacity of the airfield. This must change. If airport capacity cannot be increased, existing capacity must be managed effectively - using demand management and economic tools."
--Robert Aaronson, Director General, Airports Council International, in "The Airport Capacity Crunch Is Hurting Business," Financial Times, Nov. 5, 2007.
» return to top
|
3415 S. Sepulveda Blvd.