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2008 January 27 Sunday
Huge Costs Seen From Flight Delays

Air flight delays are not just irritating and fatiguing. Time is money and so flight delays cost travelers a lot of money.

During the first 11 months of last year, 1.6 million passenger flights were at least 15 minutes late. The total delay time added up to 170 years -- up steadily from 98 years lost on 1 million flights during all of 2003. The average delay of a late flight has grown from 49 to 56 minutes during that period, the data show.

With the U.S. economy stumbling, regulators and lawmakers are turning their focus to the economic toll of such delays. In a speech to the Aero Club of Washington on Tuesday, Transportation Secretary Mary E. Peters estimated that flight delays cost the U.S. economy $15 billion a year. In an interview, she said she thought that figure was probably low.

"It is incredible," Peters said. "It means a loss to our economy, a loss to our productivity; it also means a loss in quality of life."

When you have to wait in long queues (e.g. waiting in an airplane to get clearance to pull back from the gate or circling overhead waiting for permission to land) it is usually sign that market forces have been blocked somehow. Certainly that is the case with airport take-off and landing slots. Huge delays in take-offs and landings are a result of lack of a bidding mechanism for those slots. Resources aren't allocated by price and therefore they are allocated by making people wait in long lines.

Robert Poole of the Reason Foundation points to an obvious solution: congestion pricing.

Today, airports charge a fee based solely on the weight of the plane. That means a 767 carrying 300 people pays about 10 times as much as a 35-passenger regional jet. Both planes use the same air traffic control resources and runways, but the smaller plane is lighter and thus pays a fraction of the fee.

A much smarter way is to charge all planes the same amount to use the runway (since they use the same resources) and to make that price much higher during rush hours and lower at off-peak times.

Such congestion pricing would cause airlines to move some flights out of the busiest periods, reducing delays. Small jets that jam runways during rush hours without consequence would be forced to choose cheaper, off-peak times or make sure passengers are willing to pay the significantly higher ticket prices that come with rush hours.

For Kennedy, a recent Reason Foundation study estimates that during the morning peak, the departure price should be $1,800 to $1,900 per plane. In the afternoon peak, prices would be up to $2,000 per flight.

Congestion pricing would also stimulate "up-gauging" - meaning airlines would reduce flights but use bigger planes to ensure they could carry the same number of passengers as they do today. For example, there are 30 flights a day between Kennedy and Baltimore-Washington International. Ten of those flights are on small regional jets during peak hours. The same number of passengers could be handled by about 20 flights using larger jets, cutting air traffic by one-third.

For a 200 passenger airplane the $2000 cost would be $10 per passenger to leave at peak times. There'd be a cost of leaving at other times but it would be lower. Well, let pricing push airplane size up and less time sensitive passengers toward cheaper times.

Some business travelers want to get paid for delays.

It's no wonder 81 percent of business travelers surveyed by Directravel, a corporate travel management company based in Mahwah, think airlines should give them at least a partial refund when their flights are late. The longer the delay, the higher the refund should be.

The problem with such a scheme is that by itself it doesn't create all the incentives needed to eliminate delays. I think revenues raised from a congestion pricing scheme could be used to fund an upgrade of the air traffic control system and that would address two causes at once.

The reason the congestion pricing proposal wasn't implemented years ago is that the airlines don't want to pay more to leave at peak times.

In slamming the department's proposal, Air Transport Association President James C. May made the good point that the plan "does nothing to fix the primary cause of delays: our nation's increasingly antiquated air traffic control system."

I'm not sympathetic to the airlines. Sure, we need a better air traffic control system. But that won't eliminate delays because we will still have limits on how many airplanes can take off or arrive at the busiest times of the day. Scarce resources should be handed out based on price unless there's a compelling reason to use some other mechanism. I do not see any reason to make people wait longer periods of time in terminals and airplanes.

Share |      By Randall Parker at 2008 January 27 08:17 PM  Economics Transportation

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