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.
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.
Yet another "privatize profits and socialize costs" story.
Privatizing toll roads in the U.S. may result in significant diversions of truck traffic from privatized toll roads to "free" roads, and may result in more crashes and increased costs associated with use of other roads, according to a new study.
Peter Swan of Penn State – Harrisburg and Michael Belzer of Wayne State University will present the findings of their study, "Empirical Evidence of Toll Road Traffic Diversion and Implications for Highway Infrastructure Privatization" on Jan. 14 at the 87th annual meeting of the Transportation Research Board in Washington, D.C.
The study used data from the State of Ohio, the Federal Highway Administration, and the Ohio Turnpike to predict annual Turnpike truck vehicle miles traveled, and therefore diverted vehicle miles, based on National truck traffic and Turnpike rates. The researchers then compare estimated truck traffic diverted from the Turnpike to truck traffic on Ohio road segments on possible substitute routes.
Both economic models support the hypothesis that rate increases divert traffic from toll roads to "free" roads.
"While recently privatized roads do not have enough history to determine how high actual rates will rise, adequate data do exist to determine what happens when toll rates increase dramatically on state-run toll roads," says co-author Peter Swan, Assistant Professor of Logistics and Operations Management at Penn State's Harrisburg campus.
The study concludes that if governments allow private toll road operators to maximize profits, higher tolls will divert trucks to local roads, depending on the suitability of substitute roads. The authors estimate that for 2005, a for-profit, private operator of the Ohio Turnpike could have raised tolls to roughly three times what they were under the public turnpike authority, resulting in about a 40% diversion of trucks from the Ohio Turnpike to other roads.
"The Ohio Turnpike substantially increased tolls during the 1990s to help finance construction of a third lane in each direction over substantial portions of the Turnpike," the researchers say. "Because the Ohio Turnpike raised its rates for trucks in the 1990s and later lowered them again, sufficient data exist to calculate a demand curve for the Turnpike based on demand and the toll rate. We then use the resulting demand curve to estimate diversion of trucks caused by the changes in the toll rates and to forecast how toll rates might affect Turnpike truck revenue."
The number of diverted trucks is important to both the State of Ohio and the Nation for economic and social reasons.
First, many of the substitute roads are two-lane highways with crash rates many times that of the Turnpike. Second, the increased traffic has reduced the quality of life for communities located along diversion routes and dramatically increased the maintenance costs of many of these roads, say the researchers.
Finally, higher truck tolls have two negative effects on the economy. Motor carriers eventually pass all tolls to consumers in the form of higher prices for goods. While higher toll rates may not decrease the efficiency of non-diverted trucks, they have raised costs.
Furthermore, diversion reduces the efficiency of these trucks because they clearly are taking a second-best route. The resulting loss of efficiency can stifle economic activity, according to the study.
Many of these economic and social costs may not be considered in future leases or sales, especially when such costs are paid by people in states other than the one making the lease agreement.
The study researchers question whether it makes good policy sense to substitute the existing fuel tax-based system of funding road infrastructure with a system that uses widespread tolls and to grant long-term leases to private enterprises that will operate them for profit.
External costs are inconvenient for advocates of extreme laissez faire economics because such costs argue against a purely private market. In this case a publically owned toll road might minimize total costs. But that keeps the state involved in operating highways and therefore reduces the extent of privatization. Hence the desire to ignore inconvenient external costs.
I always wonder how some people I see driving nice expensive cars can afford to drive those cars. Answer? They are living beyond their means. People are routinely buying cars that depreciate in value faster than they pay off the loans.
Gone are the days of the three-year car loan. The length of the average automobile loan hit five years, four months in October, up more than six months from 2002, according to the Federal Reserve. And nearly 45% of loans written today are for longer than six years. Even some staid lenders owned by the carmakers, such as Toyota Financial Services and Ford Credit, are offering seven-year financing. And a few credit unions, particularly in the West, are tinkering with the eight-year note.
At the same time, the amount of money drivers owe on their cars is soaring. In October, the average amount financed hit $30,738, up $3,500 in just a year and nearly 40% in the last decade, according to the Fed. More troubling, today's average car owner owes $4,221 more than the vehicle is worth at the time it's sold -- up from $3,529 in 2002, according to industry analyst Edmunds.
But Marty Jerome at the Wired blog says the numbers might overstate the size of the problem.
Not mentioned in the "Times" article is that the "average" amount owed on a car is hugely skewed by luxury makes (and utility trucks). A relatively small percentage of individuals and companies are assuming extravagant amounts of debt on auto loans for various reasons, including tax write-offs.
He doesn't provide any evidence for these assertions. Also, he still thinks the trend in auto loans is "unsettling".
My biggest problem with the debt nation is that people who live beyond their means their entire working lives will demand more from government (i.e. from people still working and paying more in taxes) in their retirement. Worse, the US government (and not a few other ones) has over promised on what it can hope to deliver to retirees. The currently retired are getting a great deal where they get far more in benefits than they paid in as taxes. Younger folks are going to get shafted on this and the economy will bog down with taxes to try to pay welfare benefits to baby boomer retirees.
General Motors used to be the mightiest American corporation. Those days are long gone. Toyota could buy all of General Motors with just 1 year of Toyota profits.
At yesterday’s results announcement in Tokyo, finance chief Takeshi Suzuki said that Toyota now expects to make operating profits of $20.2 billion this financial year, $440 million higher than earlier stated and a figure still considered conservative by analysts. By the end of Wednesday trading, which saw GM’s stock price plunge 6% to $33.95, the market valued the world’s biggest automaker at just $19.21 billion.
That market capitalization is less than half a single quarter's sales.
Globally, G.M.’s automotive operations earned $122 million. Total revenue was a record $43.1 billion.
If it seems like the airplanes you ride in are old that's probably because they are old.
The fleet of big jets operated by nine major domestic airlines has aged steadily since 2002, according to Airline Monitor, an aviation research firm. The average age was 10.6 years at the end of 2002, and it has risen each year, hitting 12.2 years at the end of 2006. Domestic airlines largely stopped ordering new planes after Sept. 11, 2001, shrinking their fleets to adjust to a drop in demand. Travel has rebounded strongly, but airlines are, for the most part, years away from taking delivery on large numbers of new planes. A big reason is that Boeing and Airbus have committed most of their airliner production capacity in coming years to carriers outside the United States.
Indeed, only 43 of the 710 Boeing 787s on order have been identified as going to domestic airlines; 25 to Continental Airlines and 18 to Northwest. And none of the 165 giant Airbus A380s on order are destined for United States carriers. In essence a new generation of jetliners — bigger, more comfortable, more fuel efficient — is largely bypassing domestic airlines and their customers.
On one hand the newer airplanes are a lot more fuel efficient. Plus, the cost of oil keeps going up. On the other hand, the old airplanes have lower capital costs. I'm surprised that the airlines calculate the older airplanes are cheaper given the increased fuel efficiency of the Boeing 787 Dreamliner. If the price of oil keeps going up their decision might become a pretty big mistake. On the other hand, another doubling of oil prices will idle a lot of airplanes.
These older planes are dirtier, noisier, and get delayed more often by mechanical problems. Are you like me and find that flying has become an ordeal? One reason (though not the only one) is old airplanes.
US Transportation Secretary Mary Peters wants to use congestion pricing to reduce delays at busy airports. But the airlines oppose market-based solutions for rationing limited resources.
"Congestion pricing has worked exceptionally well in other areas of our economy such as highways, electricity, and telecommunications, and we believe the time has arrived to pursue similar approaches in the aviation sector," Peters told a Senate committee last Thursday.
The airlines are adamantly opposed to the idea of paying more to fly during peak periods, contending that it will only cause them to raise prices and reduce service. Other analysts question whether congestion pricing will work in the New York region.
"Peak pricing doesn't work in a place like LaGuardia because LaGuardia is busy all of the time," says John Hansman, an aviation expert at the Massachusetts Institute of Technology in Cambridge.
Given the shabby ways that airlines are willing to treat passengers their reaction is really par for the course. I think the South Park episode The Entity does the best job of capturing just how bad the airlines have gotten. Even Mr. Garrison's gyro monowheel beats traveling with the airlines.
As for places that are busy all the time: Raise prices high enough and they will become less busy.
Governments look for ways to raise revenue without increasing taxes across the board. Speeding tickets have become a major tax revenue source in some states.
Depending on where you live, speeding fines can range from the puny to the punitive.
In July, Virginia began charging most speeders an additional $1,050 fine on top of its usual $300, with drunken drivers there now facing an additional fine of up to $2,250. Other heavy hitting states include Georgia, Illinois and North Carolina, where maximum fines can hit $1,000, as well as New York, Texas and New Jersey.
I am shocked by the size of these fines. Utah's max is $750.
At least they are fining the drunk speeders a lot more.
Virginia's new law imposes a mandatory $1,050 fee on anyone convicted of speeding at more than 20 mph over the limit, or anyone traveling 15 mph over the limit in a 65 mph zone. When added to a drunken driving offense, a ticket's total can reach $3,550.
Cruise control typically improves gas mileage. But cruise control can also help you avoid a very hefty speeding tax.
Albo and Del. Thomas D. Rust (R-Fairfax), who co-sponsored the fee legislation, project that $65 million to $120 million will be raised annually to cover costs of snow removal, pothole repair and grass-mowing. Money for Northern Virginia's congested roads had to come from somewhere, they reasoned, and new taxes were not going to fly in the GOP-controlled House of Delegates.
So get this: Governments basically want you to speed because they want the tax revenue.
The US domestic automakers are headed down the road to bankruptcy unless they find a way to make their labor costs globally competitive. They've been steadily losing market share to Japanese rivals for years. South Korea is starting to eat into their marketshares as well and even if they find a way to survive the Japanese onslaught the behemoth called China could finish them off. The Big (but shrinking) Three want big cuts in health care costs and creation of health trusts managed by the UAW. It is no wonder then that in the current contract negotiations with the United Auto Workers GM and Ford are threatening to pull all car production out of the US and move factories to cheaper labor countries.
Their biggest burden is the current labour cost per vehicle - an estimated $71 (around £35) per man hour. Workers earn about $27 an hour with the remainder made up of overheads such as pensions and healthcare costs for the thousands of retirees on their books.
Ford and GM have made it clear that they expect to reduce the hourly cost from $71 to about $50 - a cut of about 30 per cent. The companies are keen not to cut workers' hourly pay, but they insist that other overheads must be reduced.
If a deal cannot be reached, Ford and GM negotiators have said the companies will have no choice but to move their North American operations to countries in Latin America and Asia where manufacturing costs are cheaper.
GM says this isn't a bluff. Look at all the other industries that have already bailed. Highly credible argument.
Sources close to senior GM executives confirmed that the prospect of shifting operations away from North America was very real. 'We have seen it in every other industry,' one said. 'There are no sacred cows today. Globalisation means just that, it's a worldwide playing field.'
They are right that they can not survive with their current union labor costs. No way. No how. Either the UAW grants them a big concession or they go bankrupt or they move abroad. Those are the three possibilities.
What I wonder: Can they afford to move abroad? The UAW will try to go on strike to stop them. So can GM or Ford manage to move their factories fast enough that they can get set up in other countries before they run out of cash? How fast could they move?
I'm thinking they could shift some production to Canada in a hurry. For example, Ford could make Crown Victorias and Grand Marquis in the Canadian plant that makes Lincoln Town Cars. Also, they already have factories in Mexico and Brazil. How fast could production get expanded at those factories?
But industry experts say there is almost no possibility of a strike, as the car companies are in such fragile financial shape that a shutdown could force at least one of them into bankruptcy.
“It would be really remarkable if there was a strike. You’d need a complete collapse of negotiations,” said David L. Gregory, a professor of labor law at St. John’s University in Queens. “A strike this time around could be absolutely lethal for the company being struck.”
The UAW's biggest problem is that its members are deluded. They probably can't bring themselves to face the size of the benefits cuts they need to agree to in order to maintain a domestic unionized auto industry. UAW workers oppose efforts to cut auto maker medical costs. Well, US automakers can't survive under current obligations. If the UAW doesn't provide relief the bankruptcy courts will.
The Big Three automakers of Detroit continue to go down, down, down.
DETROIT, Aug. 1 — Detroit auto companies’ grip on the American automobile market ended in July, when dismal auto sales gave foreign nameplates the lead for the first time ever, sales reports showed Wednesday.
The traditional American brands owned by General Motors, the Ford Motor Company and the Chrysler Group held 48.1 percent of the market in July, according to the Autodata Corporation, an industry statistics company in Woodcliff Lake, N.J.
That meant foreign auto companies held 51.9 percent of the market. Their previous high was in June, when they held 49.8 percent of automobile sales.
Note that the Big Three have wracked up huge losses the last couple of years even during a period of strong economic growth. Unless the United Auto Workers (UAW) relents and gives the US car companies big relief on labor costs one or more of them will end up filing for bankruptcy.
In the current contract negotiations the UAW might go after a weakened Ford first.
This time, David Cole, chairman of the Center for Automotive Research, sees Ford as the target.
"They will very likely go to Ford first so the pattern doesn't kill the weaker company," Cole said. "The union is very aware of the financial issues, and it will be a different kind of negotiations. They can't do anything to hurt the weakest company when it's so close to the edge of the cliff. They have to do something that helps keep Ford in the game."
Ford's fragile condition, he said, "reinforces the urgency" that the UAW needs to make more concessions on issues such as health-care costs and retiree benefits. The domestic carmakers contend that those benefits are the main reasons their manufacturing costs of about $75 an hour are $30 more than those at Japanese plants in the United States.
My guess is that large chunk of the UAW's membership rationalize that they are not to blame for the decline in the US auto industry. Therefore even if the union's leaders recognize they are driving the US automakers out of business than the membership wouldn't ratify any contract that cut salaries and retirement benefits enough to allow the Big Three to reverse their fortunes before they reach bankruptcy court.
Once the automakers file for bankruptcy they'll be able to dump tens of billions of dollars of retirement benefits liabilities and maybe even stop using union labor when they emerge from bankruptcy.
The reason this tragedy has dragged on for so long is that the shareholders don't want to accept total loss. The non-union employees of the car companies and the domestic suppliers would benefit from a bankruptcy because with lower manufacturing labor costs they could probably compete and even gain marketshare. But the shareholders, forced by the US government into disastrous contracts with the UAW, keep pushing management to find some tactics and strategy that will bring success in spite of the UAW contracts.
Some say that missteps by the car companies put them in this situation. Lax attitudes about quality certainly cost them in the 1970s and 1980s and even beyond. But the US makers have improved greatly and by some measures Ford now surpasses even Toyota in quality (and more here). Costs are the bigger problem.
What is surprising about this saga is just how long the US car companies have managed to last given their competitive environment. Look at domestic manufacturers in many other industries. The US auto industry has done much better than many other domestic manufacturing industries and has lasted longer. Not only do US car makers compete with foreign makers who have lower costs but US car company labor costs are much higher than blue collar manufacturing labor costs in other American industries. So management and the engineers in Ford, GM, and Chrysler must have come up with many design and manufacturing innovations to allow them to stay in the running for this long.
The new Chrysler is getting its first taste of life without parent Daimler. The sale of Chrysler (DCX) to private equity giant Cerberus Capital Management hasn't gone through yet, but Standard & Poor's and Moody's Investors Service (MCO) have already rated the soon-to-be independent carmaker's debt as "junk," or below investment grade.
That's not all. Standard & Poor's ratings essentially say that Chrysler could be a recession away from bankruptcy. S&P analyst Gregg Lemos-Stein said that if the U.S. car market were to weaken further—with sales dropping from this year's pace of 16.3 million vehicles to 15.5 million vehicles next year—Chrysler could be in default by 2010.
I think the financial position into which a bunch of capitalist financiers have placed Chrysler is great news for the US auto industry. The UAW has been able to very slowly run the auto makers down for years secure in the knowledge that the car companies are not going to go bankrupt immediately. The car companies have been caught in the UAW's grip for decades slowing getting sapped of financial strength. But all the Chrysler UAW workers are now at substantial risk of either a total company shutdown or a bankruptcy that would allow the company to break its UAW contract and kick the union out of Chrysler plants entirely.
In the next round of contract negotiations the UAW is going to need to make major concessions. If it fails to do so then one or more of the big (but shrinking) 3 will eventually end up in bankruptcy court. Chrysler might go first followed by Ford. GM could probably survive the longest.
The UAW's leadership must know just how precarious the union's existence has become. The UAW just took a huge cut in pay for Delphi workers as part of the Delphi reorganization.
The agreement, which runs until September 2011, calls for Delphi to offer wages of $14.50 to $16.23 an hour for all current workers. New hires would make $14 an hour. The agreement also calls for four UAW-represented plants to remain open. The rest will be sold, closed or taken over by GM.
Workers who began their employment with GM or who were hired before the lower- tier wage for new hires went into effect earned about $27 an hour.
About 4,000 of the 17,000 remaining Delphi UAW workers were making the higher wage. Delphi offered buyouts, early retirements and "flow backs" to jobs at GM last year.
The car companies and UAW aren't just threatened by Japanese makers and the next recession. If we are near a world oil production peak (a.k.a. Peak Oil - see Stuart Staniford's Hubbert Theory says Peak is Slow Squeeze and Extrapolating World Production) then the US auto industry will get hit especially hard by rising oil prices. The US makers will need to shift very rapidly over to making diesels, hybrids, pluggable hybrids (PHEVs), pure electrics, and other high fuel efficiency vehicles and that will cause a lot of their existing designs and tooling to become obsolete.
LOS ANGELES — Californians appear willing to pay $4,000 more for used gasoline-electric hybrid vehicles that have state-issued carpool stickers than for hybrids that don't, according to a sampling of prices by Kelley Blue Book for USA TODAY.
The stickers allow low-polluting hybrids to use less-crowded, faster-moving carpool lanes, even if the driver is alone in the car.
This provides a measurement of how much people value their own time and how much they'll spend to go down a faster lane on a highway. Planned High Occupancy Toll (HOT) lanes access in Virginia will sell for $42 per vehicle round-trip per day. That'd put the $4000 premium on HOV lane access as only paying for less than 100 days of access. Though the HOV lanes and HOT lanes might provide different levels of advantage in California and Virginia. Also, one has to make a sacrifice by choosing particular hybrid car models in California whereas the Virginians will be able to take any car of their choosing down a HOT lane. So the HOT lanes probably command a convenience premium over the HOV lanes.
If highways were more like markets then we'd see a lot more fast premium access lanes. Such lanes would also allow buses to offer a time advantage over most cars since the buses could use the HOV/HOT lanes. This would compensate for the time disadvantages of buses due to the need to go only when the buses go and the time waiting and the time getting from the bus stop to where you really want to go.
High Occupancy Toll (HOT) lanes or Lexus Lanes are all the range among free marketeers.
Economics geeks love HOT lanes because they're a beautiful example of supply and demand in its essence. Read the professors on this, and HOT lanes start to sound like econ porn.
Even some environmentalists like HOT lanes on the theory that high tolls will discourage driving and that revenue from tolls can be steered toward transit projects.
So if all these smart people love Lexus lanes, what's the problem?
Drivers tend to hate the idea for three reasons: 1) Lexus lanes seem unfair to low- and middle-income commuters who can't afford to shell out the big bucks. In Virginia, where prices could vary according to traffic volume, planners say it could cost up to $42 per day roundtrip between Prince William County and the Pentagon on the HOT lanes scheduled to be built along Interstate 95.
Wow, $42 per day. Why should drivers hate that the people going in the fast lane are paying more per trip in tolls than the slower drivers pay for transportation total? Seems to me this is a "sock it to the rich" tax where the rich volunteer to pay through the nose.
The cost per trip is so high that the HOT lanes must generate more revenue than they cost to build. Also, the traffic on them reduces the burden on the rest of the lanes.