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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.
[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.
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
Tags: air travel, airlines, amtrak, multimodalism, news media, oil, safety, the daily show,Oil Problems
Monday, April 21, 2008
Since there are occasional claims that current oil prices are not accurately reporting the market, and indeed it is possible that oil could experience another significant price drop short-term, the following information reminds us about long-term realities. And, yes, there would be more production if politics did not prevent modern technology from being applied to the oil industries in many nations, but those political issues are real and don’t show signs of going away.
In yesterday’s Week in Review section in the New York Times, the lead story, “Barreling Along: The Big Thirst,” included this:
Oil prices rose above $116 a barrel last week…“This is the market signaling there is a problem,” said Jan Stuart, global oil economist at UBS, “that there is a growing difficulty to meet demand with new supplies.” …At a recent energy conference, John Hess, the chief executive office of Hess Corporation, the international oil company, warned that an oil crisis was looming if the world didn’t deal with runaway demand and strained supplies…The number of [motor] vehicles in China rose sevenfold between 1990 and 2006, to 37 million…China…is set to overtake the U.S. by around 2015. China could have as many as 400 million vehicles by 2030…The United States is the only major industrialized nation to see its oil consumption surge since the oil shocks of the 1970s and 1980s…
Among several accompanying graphs, one showed these oil consumption changes since 1980: U.S. +21%; U.K. +2%; Japan +0.2%; France -14%; Germany -20%.
Last week, a Russian oil executive suggested he might not live to see the day when Russian oil production would exceed the 2007 level. A decline in production this year would be Russia’s first in ten years. Russia’s first quarter output this year was down 1% from a year ago. Russia is the world’s second largest oil exporter.
Financial Times today reports that Saudi Arabia’s “most powerful policymakers have said [the nation] has put on hold any plans to further increase long-term production capacity from its vast oil fields.” FT said these statements, including one by the king himself, “will harden the view of those skeptics who argue the kingdom is unable to boost production because of the high decline rates at its fields.”
Theories that Saudi oil production has peaked are not new. MSN Money in 2004 ran an article, “Is Saudi Arabia running out of oil?” There is a huge article, “The Breaking Point,” in the NYT Sunday magazine of August 21, 2005, by Peter Maas.
Near the end of his NYT article, Maas wrote:
The most worrisome part of the crisis ahead revolves around a set of statistics from the Energy Information Administration, which is part of the U.S. Department of Energy. The E.I.A. forecast in 2004 that by 2020 Saudi Arabia would produce 18.2 million barrels of oil a day, and that by 2025 it would produce 22.5 million barrels a day. Those estimates were unusual, though. They were not based on secret information about Saudi capacity, but on the projected needs of energy consumers… [Capon note: Today’s FT article quoted above has this from Saudi Arabia’s energy minister: “We are idling at around 9 million barrels per day and we will reach capacity of 12.5m by 2009…As far as I know, all the latest projections, at least up to 2020, do not require anything higher than that.” The article goes on to say that International Energy Agency forecasts “reach a different conclusion.”]
More from the end of Maas’s article:
It would be unfair to blame the Saudis alone for failing to warn of whatever shortages or catastrophes might lie ahead. In the political and corporate realms of the oil world, there are few incentives to be forthright. Executives of major oil companies have been reluctant to raise alarms; the mere mention of scarce supplies could alienate the governments that hand out lucrative exploration contracts and also send a message to investors that oil companies, though wildly profitable at the moment, have a Malthusian long-term future. Fortunately, that attitude seems to be beginning to change. Chevron’s ‘’easy oil is over” advertising campaign is an indication that even the boosters of an oil-drenched future are not as bullish as they once were.
—Ross Capon
Posted by NARP
Tags: energy, news media, oil,Oil consumption since 1980: U.S. way up; Europe down
Tuesday, May 06, 2008
To quote again from that April 20 New York Times article, “Barreling Along: The Big Thirst” [the following quote picks up at the end of the quote in Ross Capon’s April 21 blog entry]:
The United States is the only major industrialized nation to see its oil consumption surge since the oil shocks of the 1970s and 1980s. This can partly be explained by the fact that the United States has some of the lowest gasoline prices in the world, the least fuel-efficient cars on the roads, the lowest energy taxes, and the longest daily commutes of any industrialized nation. The result: about a quarter of the world’s oil goes to the United States every day, and of that, more than half goes to its cars and trucks.
An accompanying graphic showed the following changes in oil consumption from 1980 to 2007: Denmark -33%; Sweden -32%; Germany -20%; Switzerland -18%; France and Finland -14%; Italy -13%; Japan +0.2%; U.K. +2%; United States +21%.
Last night, Stephen Colbert addressed the various proposals for a summer holiday on the federal gas tax (see last week’s Hotline) through The Wørd, “proposing” free gas for everyone:
Colbert remarks:
I’m sure you’re asking, folks, “How will we pay for unlimited free gas?” Well, the answer is simple: I don’t care! Besides, have you forgotten about a little thing called ‘our grandkids’? Because they are very generous, even though they don’t know it yet. They can be the generation that walks to work or uses public transportation! They’ll have to, because without a gas tax to pay for infrastructure, there won’t be any roads.
—Matthew Melzer
Posted by NARP
Tags: energy, news media, oil, the colbert report,Case for Trains and Public Transport Grows Stronger
Friday, May 30, 2008
This week saw three particularly good media boosts to the case for sensible transportation or Americans’ readiness for such. First, the Outlook section of Sunday’s (May 25) The Washington Post carried a column by author James Howard Kunstler, “Wake Up, America. We’re Driving Toward Disaster.”
The paragraph of most direct interest is this:
Fixing the U.S. passenger railroad system is probably the one project we could undertake right away that would have the greatest impact on the country’s oil consumption…If we don’t get the passenger trains running again, Americans will be going nowhere five years from now.
Kunstler has been saying similar things for some time, but it is good to see his views get aired in The Post.
If anyone doubts his comment about airlines, consider that AP’s David Koenig reported May 22 that “even though most of the big airline companies have large cash stockpiles, analysts suggest they could burn through their cash and go bankrupt by early next year.”
The Washington Post had a May 27 front-page story about the explosion in transit ridership around the nation’s capital, including car-dependent outer suburbs. The top-of-page-A1 headline was “Stung at the Pumps, More Hop on a Bus; D.C.’s Outlying Transit Systems Rush to Add Capacity; Metro Worried.” (The worry is about trains being “overwhelmed” if gasoline hits $5 a gallon.)
Finally, also May 27, the radio program To the Point had an excellent discussion of the energy situation in which most of the panelists (including the Wall Street Journal’s reporter) said Americans need to drive less and use public transit more. Listen to “The Future of Energy: Is the U.S. Prepared?” here.
The panelists were:
- Neil King: Diplomatic Correspondent, Wall Street Journal
- Juli Niemann: Oil Analyst, Smith, Moore & Company
- David Sirota: author, ‘The Uprising’
- Robert Manning: Professor of Finance, Rochester Institute of Technology
Panelists agreed it was outrageous that the U.S. with less than 5% of world population is responsible for about a quarter of world oil consumption. Interestingly, Ms. Niemann, the principle advocate for expanding oil exploration and drilling within the U.S., said this should only be allowed under strict government regulations which would significantly increase costs. Mr. King said the U.S. consumes roughly 20 million barrels a day and produces only five. He said it is widely believed in the industry that, if the U.S. started taking advantage of all domestic oil opportunities, by 2020, we would still be producing only about five MBD because new production would simply offset declines in existing fields.
—Ross Capon
Posted by NARP
Tags: airlines, james howard kunstler, news media, oil,Rail Advocate Comments on WSJ Story
Wednesday, June 04, 2008
I commend to your attention this commentary by Fritz Plous of Chicago on a recent Wall Street Journal story.
On May 28, The Wall Street Journal ran a story “Europeans Protest Fuel Taxes but Accept High Prices.” Journal reporters Guy Chazan and Marcus Walker quoted anonymous “analysts” citing “fatalism” for the puzzling failure of European motorists to protest high gasoline prices. A named source, British trucking official Geoff Dossetter, was quoted describing motorists’ behavior as “dumb acceptance.”
Actually, the behavior of European motorists is not puzzling, but rational. Unlike Americans, Europeans are not dependent on their cars because fast, frequent intercity trains, commuter trains, rail rapid transit and streetcars connect most of their residential neighborhoods, workplaces, shopping areas and vacation spots.
In Dortmund, Germany, a town of fewer than 600,000, 130 intercity and commuter trains a day serve the downtown rail station, which connects with an extensive network of local light-rail lines that pass through the center of the city in a 6.5-mile subway. On the busier lines, the light-rail trains include a café car. Dortmund is not unique; scores of smaller European cities from Seville to Szeged and from Bordeaux to Bratislava make rail travel the centerpiece of their local and intercity mobility options. Some of those cities are on the fast-expanding European high-speed rail system, now carrying passengers at 200 mph—the equivalent of traveling from Chicago to Kansas City or Pittsburgh in about three hours.
Dortmund is smaller than Jacksonville, Nashville or Columbus, yet the mobility choices it offers to its citizens and visitors makes those three American cities look truly backward: Jacksonville has four Amtrak frequencies per day but no commuter rail, streetcars or rapid transit. Nashville has three daily commuter-rail round trips, but only from its eastern suburbs. All other daily work trips must be performed by car. There is no light-rail transit and, despite the city’s immense popularity with tourists, no intercity rail service (Amtrak reservation agents report Nashville is the most requested destination their company does not serve—what a huge missed opportunity). Columbus, the largest city not served by Amtrak, has no commuter trains or light rail either. Except for a small bus system it is completely auto-dependent.
Except for the very largest cities on the two coasts plus Chicago, most of America is stuck in the same car-dependent environment as Jacksonville, Nashville and Columbus. Not one American city in the 500,000-600,000 population range—not even Portland OR – approaches Dortmund’s level of rail mobility. In fact, a May 27 CNN poll showed that 78 per cent of 86,207 people queried said they had no transit options available to them.
If European motorists are responding to fuel-price increases with a “What, me worry?” attitude, it’s for a very good reason: They have nothing to worry about. The trains are running, the subways are running and the streetcars are running, most of them powered by electricity generated without oil controlled by hostile foreigners. The Europeans have cars, and they enjoy them, but their cars are a discretionary item, not a necessity. American policy makers need to look across the Atlantic and learn a lesson.
—George Chilson
NARP President
Posted by NARP
Tags: chilson, europe, fritz plous, oil,Lytton Op-Ed: CAHSR “Would Save Lives and Fuel”
Thursday, October 23, 2008
Kudos to NARP Board Member Dennis Lytton, whose op-ed piece, “High-speed rail would save lives and fuel,” the Daily Breeze (Southern California) published yesterday. Dennis does a fantastic job bringing into focus the long-term safety and environmental benefits the California High-Speed Rail project would bring. For more analysis, see the CAHSR Blog.
—Matthew Melzer
Posted by NARP
Tags: california high-speed rail, california proposition 1, california proposition 1a, dennis lytton, oil, safety,Some early reflections on the election
Wednesday, November 05, 2008
There’s no question that, by all indications, including their Senate records, Obama/Biden hold the greatest promise for improving America’s passenger train system. And the environment in which they are operating is more supportive of trains than was the case in the 1990s, when close ties between the Clinton White House and the Amtrak Board prevented Amtrak from even requesting the full amounts authorized for it.
At the same time, the number of other urgent issues crowding the national agenda is greater—greater even than it was a few months ago. So we have to remember the words of FDR to his supporters: “You’ve elected me, now organize a movement to make me do what you want.”
Having supporters in the White House and Congress is no guarantee of success. Those supporters still have the same budget numbers and the same set of rules that were in place prior to the election. And, right now at least, lower gasoline prices are cited as a major reason for defeat of a Kansas City light rail ballot measure. Longer-term, the declines in energy investment now happening in response to those lower prices, could set the stage for another dramatic price rise—and still more pressure for passenger trains.
Right now, the task is to keep that pressure on in spite of low gas prices. Some of the strongest potential supporters may be Democratic legislators who initially were not thought to have a serious chance of winning and who, as a result, may not have been vetted (or “re-grooved”) by highway interests to the same extent as “strong” candidates were, and who therefore may come into office with more sympathy for our cause.
For the nation as a whole, it may be a good thing that Democrats did not achieve the 60 votes they need to cut off debate without Republican help. This lessens the temptation for Democrats to run roughshod over their colleagues, at the risk of paying dearly in future elections. But for passenger trains, it is not good that Capitol Hill Republicans as a group likely will be even less supportive in the next Congress than in the current one. It is a reminder that the new law contains many report requirements, most of which look like they were designed by people who don’t like passenger trains (or at least long-distance passenger trains). By the way, there will be many changes in key Republican positions…there will be a big shuffle as a result of the defeat of Rep. Joe Knollenberg (MI), top Republican on the House appropriations subcommittee. The same is true on the Senate side if Ted Stevens (AK), top Republican on the appropriations defense subcommittee, is not elected or does not continue to serve.
When David Gunn headed Amtrak, he used to nod towards Capitol Hill and say, “Those folks aren’t going to kill the trains. It’s the railroads growing inability to handle all their traffic.” Well, the railroads have made great progress in dealing with capacity and with dispatching passenger trains, thanks in part to the on-time performance ruckus NARP raised two years ago, and to the way Federal Railroad Administrator Joe Boardman and indeed Secretary of Transportation Mary Peters picked up that issue and ran with it.
Today, the greatest threat to the long-distance trains may be the age of the equipment, most dramatically illustrated by Amtrak’s inability or unwillingness to put full dining cars on the Lake Shore Limited. The real test for the national network will be whether Amtrak continues to push hard for new equipment for the long-distance trains and whether that push produces results.
For now, be sure to congratulate your new legislators on their victories and work hard to get our agenda in front of them, including full funding of the new law, and acquisition of the equipment needed to expand and update the long-distance trains. And press appointment of transportation officials who recognize the value of a more balanced transportation policy—one with a broader role for passenger trains, to improve overall record of U.S. transportation regarding safety, energy efficiency, and provision of good choices to citizens.
—Ross Capon
Posted by NARP
Tags: amtrak, congress, oil, presidential election, price of oil, usdot,Lessons from GM’s Bankruptcy on the Consequences of a Fly-Drive Transportation System
Thursday, June 04, 2009
For decades, NARP has argued that America’s “fly-drive” system, that is, a transportation system over-reliant on highways and aviation and neglecting trains, was bad policy. We focused heavily on the importance of giving citizens more choices, on environmental impact and—as the opportunity opened—on energy supply issues. We also argued that highways and aviation enjoyed significant public subsidies even as many politicians kept telling themselves and the public that such subsidies did not exist, mistakenly believing that user-funded trust funds completely supported those systems. The fly-drive mentality also contributed to the nation’s overall economic problems, to the extent that the housing bubble encouraged construction and purchase of exurban homes in pedestrian-unfriendly surroundings—actions that would not have taken place if people had known where the price of oil was headed. Finally, we said one of the biggest subsidies in transportation was from airline shareholders to passengers enjoying cheap, non-compensatory fares.
Now, the stories of General Motors and Chrysler have made clear fly-drive’s financial unsustainability. Government subsidies and loans to GM and Chrysler now total over $50 billion, including loans which GM and Chrysler may not repay, and the forms government aid has taken have been varied.
Even today, some still say NARP should apologize for the fact that Amtrak requires government funding. Would airlines be profitable if governments did not maintain airports and air-traffic-control systems? Would bus companies be profitable and driving be affordable if government did not maintain the roads? Would the making of the very vehicles that carry the bulk of American travelers have been profitable without repeated help from Uncle Sam? The transportation system upon which our economy is built requires public funding and is one of the best investments we make as a society. The impact of these investments would be maximized if we had a proper balance between the modes to achieve the most efficient outcomes.
The billions that the government is ready to spend to bail out bankrupt GM are only the latest in a series of large public subsidies to automakers. GM has already received $13.4 billion in taxpayer funds, with Chrysler getting another $4 billion, and both companies’ suppliers got a total of $5 billion. The government guarantees manufacturers’ warranties for GM & Chrysler cars, and the Recovery Act provided a tax credit of $49,500 to consumers who purchase new autos. Furthermore, the climate change bill recently passed by the House Energy & Commerce Committee includes a “cash for clunkers” program, which offers tax credits encouraging drivers to trade in existing cars for more fuel-efficient models. This latter program—which, though sold as promoting energy efficiency, does not take into account the energy costs associated with prematurely scrapping useful cars—has been described as a subsidy to manufacturers, their workers and car buyers.
Some incentives for the production and consumption of more fuel-efficient vehicles are necessary to address our energy problems as long as most Americans continue to live in communities planned in such a way as to make driving a virtual necessity. It is also important for the government to help struggling communities that are dependent on auto manufacturing to get back on their feet. But we need strong efforts to minimize the worsening consequences of increased congestion and urban sprawl. More attention should be paid to the goals set forth in S. 1036, the Federal Surface Transportation Policy and Planning Act of 2009—increased use of freight and passenger trains and mass transit and reduced, and reductions in national per capita motor vehicle miles traveled on an annual basis, in national motor vehicle-related fatalities (50 percent by 2030), in national surface transportation-generated carbon dioxide levels (40 percent by 2030) and in national surface transportation delays per capita.
We need a stronger focus on investing in the infrastructure that support those goals and would give Americans more travel choices. Many forward-thinking commentators have envisioned Midwestern factories retooled to produce wind turbines and solar panels. To that list we should add locomotives, railcars, light-rail vehicles, streetcars, subways, and other rail infrastructure. Surely federal investments to correct transportation priorities are at least as worthy as efforts to maintain specific automobile companies. The “priority-correction efforts” would support more quickly achieving President Obama’s vision of an enhanced role for trains in our mobility network. Such spending would yield dividends for years to come, perpetually benefiting people, our economy, and the environment.
—Ross B. Capon and Malcolm Kenton
Posted by NARP
Tags: auto industry, bankruptcy, chrysler, congress, detroit, energy, gm, highways, mobility, oil, transportation,©2010 National Association of Railroad Passengers | » NARP website
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