FAA wants to change landing fees, but will it help ease delays?
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The Federal Aviation Administration has proposed changes to the way airports calculate the fees they charge airlines. If approved, the rules will allow airports to charge different rates for flights that land at different times. The logic: By charging higher rates at peak times, there will be incentives for airlines to schedule their flights off-peak, to save money on landing fees.
My initial take: If the goal is to truly reduce delays, I don’t think this will work.
Airlines don’t schedule a bazillion flights to depart from New York simultaneously because they’re being arbitrary. It’s because people want or need to depart during those times.
Sure, some airlines might find off-peak pricing to be an incentive — Skybus, anyone? — but that’s not going to be enough to change the Americans, Deltas, and Uniteds of the world. It’ll just push up the price of tickets for peak travel.
For those who want to get deep into the weeds, Chris Elliott has the full text of the new ruling on his blog.
Despite my pessimism regarding delays, allowing flexible fees isn’t necessarily a bad idea… if you’re an airport. Charging more for peak times is a way for airport operators to make more money. Maybe I’m just a cynic, but it wouldn’t surprise me if that’s what this is really all about.
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January 15th, 2008 at 12:23 am |
At least some of the congested scheduling is unnecessary. Done right, peak/congestion pricing may cause airlines to make different choices.
While and infrequently served long haul city pair may have only a handful of takeoff/landing times that make sense. Most shorter haul pairs can be served at multiple times and airlines/passengers timing for say Buffalo to JFK might be more elastic.
Depending on how the pricing is done, especially if they actually limit the number of movements in a given period to an airport’s maximum and perhaps use a bidding mechanism, airlines will give people incentives to fly a bit earlier/later.
January 15th, 2008 at 11:21 pm |
“Airlines don’t schedule a bazillion flights to depart from New York simultaneously because they’re being arbitrary. It’s because people want or need to depart during those times.”
Well, sure, but that’s the whole point of congestion pricing–to reduce demand for flying during those times. Right now, landing fees at rush hours are relatively inelastic and demand is high, meaning that supply of slots is limited. Raise the price, and demand will be reduced. Logic dictates that if the congestion surcharge is set at the right level, airlines will reschedule or raise fares accordingly, with the eventual result of reducing congestion.
Thanks for a terrific blog!
January 16th, 2008 at 2:22 pm |
raising prices doesn’t necessary help suppress demand. business travelers will pay ANYTHING to fly out on monday morning and return on friday evening. if a resource is finite (landings per hour), then only a cap can control everyone. airlines can trade them, the FAA can auction them, they can charge congestion rates, or they can create landing rates that encourages larger aircraft by disproportionately penalizing smaller aircraft. Then airlines will use small aircraft only for their hub-n-spoke instead of hub-to-hub trunk routes. Take Delta/US Airways. Do we NEED NYC-Boston shuttles every 30 mins on A319s ??? Can’t we space that out can say hourly 757s instead? Time is money, but I’m sure most people don’t mind waiting that extra half an hour in the airport if it means their flight will actually arrive ontime.
January 16th, 2008 at 10:36 pm |
“raising prices doesn’t necessary help suppress demand.”
Unless you charge $10M per slot.
Seriously, though, that’s exactly right. Even if you raise fees, will it be enough to slow business travel demand? Doubt it.
January 16th, 2008 at 10:39 pm |
Thanks, Evan.
The problem is that airlines are dealing with pass-through demand, and not solely “their” demand. If demand is inelastic — based on time of departure — then departure time demand may not change much. Business travelers are less flexible than leisure travelers, so at JFK and LGA, for example, I doubt that congestion pricing will change things much. I guess we’ll see!