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Malaise in the Airline Industry: Safety, Fuel, and the Economy

Thursday, April 10, 2008

This lead in today’s Financial Times says it all:

Chaos gripped US airports for a third straight day on Thursday as the government’s top transportation watchdog called for changes to airline safety oversight, citing an “overly collaborative” relationship between airlines and their regulator, the Federal Aviation Administration.

Calvin Scovel III, the US transportation department’s inspector general, made his comments before Congress as American Airlines cancelled 900 flights to perform safety checks, stranding thousands of air passengers.

American has canceled over 2,400 flights and counting this week due to potentially faulty wiring in its MD-80s, which comprise one-third of its fleet and form the backbone of its medium-haul domestic fleet.  At least 250,000 passengers have been affected, far more than when Southwest Airlines grounded dozens of 737s last week.  Disruptions are afflicting other airlines as well, and further groundings are likely as the FAA responds to the harsh light being shone on its inspection standards.

On Tuesday, Jon Stewart of The Daily Show responded aptly:

Stewart’s money quote:

It’s all sort of ironic, when you think about it.  When you fly, you are inspected quite thoroughly, whereas the plane itself is, perhaps, occasionally vacuumed.  See, with this administration, if a passenger blows up a plane, it’s a failure in the War on Terror.  But if the plane just blows up on its own, eh, that’s the market self-regulating!

Yes, that’s hyperbole (Jon Stewart is a comedian).  But if the aviation system is generally safe, why on earth would federal regulators start down the dangerous slippery slope of cutting corners, glossing over potential problems, and creating the appearance of impropriety in dealing with the airlines they’re supposed to regulate?

Meanwhile, external economic factors have eviscerated the viability of several airlines, while many survivors are trimming their capacity (for more coverage, see last week’s Hotline).  Yesterday oil prices (Nymex West Texas Intermediate) surged to a record $112.15 a barrel before settling at $110.87, even though US demand over the past four weeks was 0.4% below the same period a year ago.  Oil was $52 a barrel in January 2007.  Here is a quick list of airlines that are now history, a list that is bound to grow:

December 26, 2007 – Maxjet Airways (offering London-USA business class service) files for bankruptcy protection
March 31, 2008 – Aloha Airlines ends passenger services after more than 60 years
March 31, 2008 – Champion Air (Minneapolis-based charter operator) announces flights will end from May 31
April 3, 2008 – ATA Airlines ends service, files for bankruptcy protection
April 5, 2008 – Skybus, start-up low-cost carrier which had 65 new Airbus A319 jets on order, ends service
April 9, 2008 – Oasis Hong Kong, budget carrier, ends service after 17 months

So far, Amtrak revenues do not appear to have been hurt by the economic downturn (or recession), and fuel prices probably are driving some business to Amtrak.  This will likely hasten as airlines are forced to raise fares and further reduce capacity to stay in the black.

Intrepid blogger Aaron Donovan has noted that passengers trapped in the current nightmare at American’s hub at O’Hare have the option of Amtrak’s hub at Chicago Union Station, an easy ride away on the CTA Blue Line.  Even taking a leisurely-paced long-distance train would be a faster option for many people than waiting for the next available flight, whenever that might be.  And some passengers are indeed taking advantage of the train option.

Exhibit A:

[Amtrak spokeswoman Tracy] Connell says ridership has gone through the roof out of the Chicago area because of all the cancellations at O’Hare Airport. Some of its trains have seen up to a 60 percent boost in riders.

Exhibit B:

Amtrak has seen a spike in passengers since the flight cancellations began earlier in the week, especially in the Northeast, spokesman Cliff Cole said.

“Our ridership was heavy yesterday, is heavy today and is likely to be heavy tomorrow, based on our reservations,” Cole said Thursday.

Once again, Amtrak is proving its value and relevance by providing redundancy in a fragile transportation system.

--Matthew Melzer

Posted by NARP | (7) Comments


Next entry: Oil Problems Previous entry: Students Continue Push for California HSR

Comments


From time to time the nation’s airlines run into problems, like the current dust up over MD80 inspections.  But the problem will be resolved.  In a month or so most people will probably have forgotten about it. 

Airlines have come and gone.  They will continue to do so.  But the industry will survive the current problem and the fuel cost crunch. 

Before train enthusiasts snicker over the airlines’ troubles, they should remember Amtrak’s problems with the brakes on its Acela trains.  If I remember correctly, they had to be pulled out of service for months.  Also, weren’t the Talgo trains pulled out of service because of a mechanical problem? 

To imply that the country should have an extensive train network for the few times a year that the airlines hit a rough patch is unrealistic.  The network would require a large subsidy (train passengers enjoy the largest per passenger mile subsidy of any common commercial carrier), which is not a good recipe for a country that is up to its ears in red ink.

Quoting a comedian, who probably knows little about air transport safety, is over the top.  What is his expertise regarding airline safety?  Is he a pilot or maintenance officer for an airline?

What is meant by ridership has gone through the roof?  Stating the per cent of increase in riders would be meaningful.  Gone through the roof is meaningless. 

What is fragile about the U.S. transport system?  There are, to be sure, problems that must be addressed, but fragile, according to Mr. Webster, means easily broken or destroyed.  Hmm.  Last year the fragile U.S. commercial airlines flew 679 million domestic passengers to their destinations in safety and relative comfort.  Another 53 million passengers arrived from overseas.  Presumably most of them left the country on a plane similar to the one that they arrived on. 

Apparently part of American’s problem arose from a misinterpretation of the FAA airworthiness directives, which are not always crystal clear.  According to American Airlines, they interpreted the regulations incorrectly and, therefore, upon subsequent inspections, learned that their work did not pass muster. 

FAA critics believe the agency’s new rigor is a bureaucratic, political knee-jerk response to well-publicized congressional hearings. 

The seriousness of the inspection issue should be interpreted properly.  No accidents occurred during the 18 months that American, as well as the other carriers, had to respond to the directive.  MD80 pilots and airline executives insist the MD 80 is safe. 

Air travel is one of the safest forms of transport in the world.  It will remain the mode of choice for people who are traveling more than a couple of hundred miles, especially business people as well as others who are time constrained. 

About half of American’s Austin passengers were delayed seriously.  But most of them were flown out of town within 24 hours of their scheduled departure.  If they had taken Amtrak’s consistently late running Texas Eagle, it would have taken them more than 28 hours to get to Chicago, not to mention the east or west coasts.  If they had gone home, slept, and taken a flight the next day, they would still have beaten the train to Chicago or points beyond. 

Passenger trains are a good choice for relatively short, high density corridors.  But anyone who things large numbers of people are going to give up flying to take a train half way across the country, or from Austin to Little Rock, is unrealistic.

Comment by Paul J. Smith, Jr.  on  04/12  at  09:55 AM


Mr. Smith takes the view that trains are only good for shorter trips. Given Amtrak’s current technology, which is largely stuck in the 1950s, he may have a point.

But let’s face a few facts. Fuel isn’t going to get any cheaper, and airplanes are the least fuel efficient form of transportation. The cost of operating aircraft is going to keep increasing because of it and airfares will sooner or later have to increase to keep up with it. Trains are the most efficient, and trains are where we need to be focusing our transportation planning if cheap transoprtation is to remain available for the masses.

This week’s “temporary” aviation meltdown is part of a problem that has been festering for years. How many times have we seen reports of passengers being stranded or held captive without food or bathrooms because of weather or traffic congestion in the last two years? These are just symptoms of a much larger problem that isn’t going to go away with the next news cycle. And the airlines don’t seem to care one bit about customer care. Look at how they challenged and beat (on a technicality) New York’s passenger bill of rights.

Its time to get America’s rail technology out of the 1950s and into the 20th century, or at least up to the 1980s. TGV type trains could, theoretically, run coast to coast in 15 hours. In even shorter markets, particularly in the 500-1500 mile range, that would offer real competition to the airlines, force them to clean up their act, and give travelers a real choice.

There’s absolutely no reason why passenger trains, given available technology that has proven itself for decades on other continents, need to be limited to 500 mile corridors.

Comment by James Toy  on  04/14  at  01:25 AM


< To imply that the country should have an extensive train network for the few times a year that the airlines hit a rough patch is unrealistic. >

No one is implying that.

< Passenger trains are a good choice for relatively short, high density corridors.  But anyone who things large numbers of people are going to give up flying to take a train half way across the country, or from Austin to Little Rock, is unrealistic. >

Then you can start explaining why a train like the Empire Builder is filled up as much as any NEC train on any given day for much of its journey. By the way, the population between MSP and SPK is nil, most airports are a couple of hundred miles away, and 9% of the ridership travels between endpoints. Likewise a long distance trains serves a series of overlapping corridors. It is time you idelaogues woke up and understood ridership patterns and load factors.

The argument you a are making could just as well dismantle NYC subway routes: since no one takes a train between Bedford Park, Bronx, or Jamaica, Queens and Coney Island, and it is faster to drive,we should dismantle the B, D and F trains.

As for 24 hour airport strandings verses taking the train, given a choice, most would rather be on the move on a train than laying on a cot in the terminal for most of that time.

Comment by Joe M. Versaggi  on  04/14  at  07:12 AM


A TGV train from coast to coast in 15 hours sounds like a nice idea.  But it is impracticable, especially for a country that is constrained by a very large debt burden.

According to Alex Kummant, in July 2007 testimony before the SUBCOMMITTEE ON RAILROADS, PIPELINES, AND HAZARDOUS MATERIALS OF THE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, it would cost approximately $25 to $40 million a mile to build a TGV type system in the United States.  And this is before real estate acquisition costs, which could easily double the total cost. 

The estimated cost to build a high speed rail line from New York to Los Angeles, which is approximately 2,778 miles, would be $69.5 to $111.1 billion, plus the cost of acquiring the real estate, which could double the cost.  Just where the money for such a venture would come from is a mystery. 

A TGV type train would have to average 185.2 miles per hour, without any stops between the Big Apple and The City of Angles, to run it off in 15 hours.  This would take some doing. 

The Empire Builder’s passenger per mile load factor for the fiscal year ended September 30, 2007, was slightly more than 60 per cent.  It has a relatively high load factor from Chicago to Minneapolis, but it is pretty sparse west of the Twin Cities.  Irrespective of it high load factor, the Builder lost $34.8 million in 2007 before interest and depreciation.

If the justification for Amtrak’s long distance trains is that they provide a vital service to smaller communities, or provide an alternative to people who cannot or will not fly, then the service should be extended to every reasonable size city in the United States.  In Texas, where I live, this would mean providing frequent service (a minimum of two trains per day) to Abilene, Amarillo, Brownsville, Corpus Christi, McAllen, Laredo, Lubbock, Midland, Odessa, and Wichita Falls.  It would also mean increasing the once a day or once every other day service to the cities served by the Texas Eagle, Sunset Limited and Heartland Flyer.  This is what some folks are calling for.  Unfortunately, no one has put forth any reasonable rider and revenue or reality based cost projections for such a scheme.  Run this scheme by any serious Texas transportation planner, and you are likely to get laughed out of his or her office.

Comment by Paul J. Smith, Jr.  on  04/14  at  08:36 PM


<< it would cost approximately $25 to $40 million a mile>>

That is not all that far out of line. Construction costs for a mile of four lane freeway is in that same range.

Comment by James Toy  on  04/14  at  09:58 PM


A mile of Central Artery freeway in Boston, which basically replicated an older highway, cost $16 Billion. So what’s money ? I-70 in Glenwood Canyon cost $40 million per mile - 20 years ago. Perhaps some foolish state “transportation” planners love boondogles like that,and laugh at passenger rail. (Others do not). It doesn’t mean we should replicate their stupidity. 

Evidently Mr. Smith has never been on the Empire Builder west of MSP. The load factor is anything bus sparse and the crews are hard-pressed to keep families together. Fully Allocated Costs does not represent the true cost of operating the train, and would not come close to vanishing if the train were to disappear.

Comment by Joe M. Versaggi  on  04/15  at  08:42 AM


The cost to build a mile of limited access highway is irrelevant to the question of whether the U.S. should build high speed or rapid rail.  The relevant questions are how much would it cost to build either; who would use it, how much would the users be willing to pay, and who would cover the revenue/cost gaps, if any.  The larger questions are what social, economic, and transport problems would it solve?

Mr. Smith rode the Empire Builder from Milwaukee to Portland in 2006.  My observations confirm Amtrak’s statistics.  The load factor was relatively high from Milwaukee to Minneapolis.  Beyond Minneapolis the load factor, especially in the coaches, was light.

Comment by Paul J. Smith, Jr.  on  04/15  at  07:37 PM




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