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Thursday
Nov152007

Dear Mr. President (and Congress): These Short-term Solutions to Congestion Gives Me Indigestion

As I am doing my afternoon browse of aviation news, I find myself struck by another press release issued by the White House Press Office entitled “Statement by the President on Aviation Congestion” click here. Certainly, some of the short-term actions being undertaken make sense and are being applauded by industry click here. But the final suggestion offered is as follows:

“Finally, the Department of Transportation and the FAA are working on innovative ways to reduce congestion in the long run. While short-term improvements in flight operation and passenger treatment can help, they do not cure the underlying problem: In certain parts of our country, the demand for air service exceeds the available supply. As a result, airlines are scheduling more arrivals and departures than airports can possibly handle. And passengers are paying the price in backups and delays.

The key to solving this problem is managing the demand for flights at overloaded airports -- and there are a variety of tools to do this in a fair and efficient way. For example, fees could be higher at peak hours and at crowded airports, or takeoff and landing rights could be auctioned to the highest-value flights. Market-based incentives like these would encourage airlines to spread out their flights more evenly during the day, to make better use of neighboring airports, and to move the maximum number of passengers as quickly and efficiently as possible.

This concept is called "congestion pricing." It has shown results in other areas of our economy -- in other words, other parts of our economy use congestion pricing. Some states offer discounts to drivers who use EZ-Pass, which reduces long waits at the toll plaza. Phone and electricity companies balance supply and demand by adjusting their rates during peak usage hours. Applying congestion pricing to the aviation industry has the potential to make today's system more predictable, more reliable, and more convenient for the travelers. Over the past seven weeks, federal officials have raised this idea with airlines and airport representatives in the New York area. I've asked Secretary Peters and Acting Administrator Sturgell to report back to me about those discussions next month”.

Whereas I will never suggest that I am an expert on the air traffic system, I do understand the economic drivers of cost to the airline industry. The “Fathers of Deregulation” envisioned the masses flying at significantly lower prices. This industry has evolved and adapted and delivered on the economic experiment undertaken in the late 1970’s. Consumers have benefited through significantly lower prices while shareholders, employees, and other vital stakeholders in the industry have suffered to varying degrees.

Now, nearly 30 years later – because you did not keep your promise to provide an infrastructure that could accommodate the goals and objectives of government policy that was so important in 1978 – you are going to turn the tables on the consumer and make it more expensive for them and somehow - I am sure - will find a way to blame it on the industry that delivered consumer choice and lower prices. And while the consumer is certainly impacted by delays in the system, have you ever thought about the direct cost to the airline industry stemming from delays that are not of their own making?

Market-based incentives are not necessarily going to change the clock that dictates the demand by consumers for air travel at certain times of the day and I do not read that possibility in your release. Further, your inaction on this issue is yet another catalyst to consolidate an industry that destroys capital rather than creates it. But I am sure that when the industry is forced to discuss the very real need to consolidate, the costs imposed on it by government actions/inactions – both direct and indirect – will be forgotten by you and your friends on Capitol Hill.

And all of this discussion at a time when the US signs an open skies deal with the EU that offers promise to an industry struggling to find new (read profitable) flying opportunities. The industry has made it known that at $100 oil it will surely consider cutting capacity. When we cut capacity, the least profitable markets will suffer (read small community air service Congress and President Bush). When we cut capacity, labor is disenfranchised. We could go on.........

There is just not much adhesive left on this band aid.