August 12, 2007
Why Air Transportation Delays? Becker
The past few years, and especially this summer, has seen loud and frequent complaints against American airlines because of flight delays, cancelled flights, lost baggage, poor on-board service, overbooking, and other problems. Only 68% of airline flights were on time in June, down from 73 % a year ago, and complaints in June rose almost 43% compared with June 2006. Let me try to add to Posner’s fine discussion about why this has been happening.
It is no surprise that the quality of airline services declined after deregulation of air travel took hold in the 1980's. The Civil Aeronautics Board that controlled the airline industry prior to deregulation severely restricted the degree of price competition among airlines. So the main way available to airlines to attract customers from competitors was to offer higher quality services, such as better food, shorter check-in lines, more empty seats on a typical flight, and the like. After open competition on ticket prices became common due to deregulation, airlines naturally cut back on most of the services that had been provided because they could not compete on price. Of course, lower prices and greater competition made air travel available to millions of men, women, and children that would have been financially out of their reach under the old system.
That is, the greater price competition brought in the marginal customers that Posner considers who have lower incomes, and who are much less willing to pay for better services. To some extent, special airlines, such as the now defunct Peoples Airline and Southwest, began to cater to younger and lower income customers by having only cheaper economy seats, longer delays at check-in, simpler (if any) food, and more crowded flights. The major airlines, like American and United, tried to meet this competition while at the same time offering superior service to first class and business travelers. Indeed, under competitive pressure, they even improved some of their services to premier customers, including faster lines for them to get through security checks, special rooms where they could be more comfortable while waiting for flights, and faster baggage delivery. But even first class passengers could not avoid flight delays, break downs of air conditioning on planes, and other recurring problems in air travel.
One obviously important factor in the especially rapid deterioration of airline services during the past few years is the awful financial situation of practically all airlines- there are a few exceptions, such as Southwest. As bankrupt and other financially weak airlines struggled to stem their losses in the face of steep rises in the cost of fuel, they cut the number of employees serving customers either directly or indirectly, reduced the number of their flights, eliminated food on most of their domestic flights, and made multiple other reductions in services to reduce costs.
Another factor behind the deterioration in services during the past couple of years is the large increase in occupancy rates on planes. When planes are running at or near capacity, even small weather, security, or other shocks to the system can create major headaches. With high occupancy rates, it becomes difficult to rebook on other planes when flights are cancelled, baggage delivery is slowed and more baggage gets misplaced, the limited number of toilets on flights are more intensively used, and have become dirtier and more likely to clogg up, overbooking grows to a much bigger problem, and delays get longer even when the number of flights do not increase because some passengers and baggage are late for connecting flight. In many other ways as well, flights are just much more uncomfortable when all or almost all seats are occupied.
The inconvenience to customers of high occupancy rates is made worse by inflexible prices charged to airlines that gives them various rights at airports. For example, take off and landing fees for commercial and private planes are largely determined by the weight of an aircraft, are fixed in advance, and they are not sensitive to variations in the cost of using airports at different times. Weight-based fees encourage smaller planes to clog runways during peak periods whereas they should be encouraged to use off-peak times. If airports charged higher fees during busier times of the day and on busier days, and if they made some adjustments of fees when there is bad weather and other causes of delays, airlines would be induced to stagger their flights more than at present over a day and during the week, and perhaps even to adjust their schedules to expected to weather conditions. More flexible prices in turn would particularly help flights with the largest number of total passengers and more first class and business passengers since airlines would be willing to pay more for these flights in order to get them priority positions on take offs and landings.
Posted by becker at 04:21 PM | Comments (5) | TrackBack (1)
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Well, if we keep opting to fly, what do the airlines care if we receive shoddy service?
Posted by Thomas at August 12, 2007 06:42 PM | direct link
A bit oversimplified, professor. Graph the number of hulls put into service over the last 20 years and graph the increase in supporting infrastructure (ATC, airports, terminals) and you'll see where the delays come from.
It's not from cheap airlines overcrowding (network carriers have higher load factors than low cost carriers and have had these for more than five years). It's the same problem that we see on I94. Too many vehicles attempting to use the same piece of concrete.
Taxes collected through landing fees are spent on huge, marginally useful edifaces (see the SEA terminal, or PDX terminal, soaring glass atriums and stunning architecture) instead of meat-and-potato infrastructure upgrades.
ATC is stuck in the 50s, leading to the majority of delays. The throughput of airports are constrained only by the rate at which ATC allows aircraft to depart and land.
Posted by GSB'er at August 12, 2007 07:31 PM | direct link
I'm one of those guys who has a lot more time than money, and I’ve worked as a contract engineer and programmer for 40 years, taking an average of 33 weeks (unpaid) leave per year. Now I’m semi-retired and have even more time, so I am in no hurry to get anywhere and gladly take the money for getting bumped. Airlines have put me up for two days in the Bahamas and, just this year, for two days at the Sheraton on the beach in Rio. No problem!
I have spent the night on airport floors more than once. No problem!
What I want are cheap flights and some things that are currently not offered, like free or cheap booze or the right to bring my own, which would cost an airline next to nothing. And, speaking of obesity, I would prefer that the airlines charged passengers by their weight and size in addition to weight and size of their baggage. I see no reason why a 300-lb person should pay the same for a seat, all the time crowding me out, while the airline continues to charge me some $100 extra for each slightly oversized or overweight bag.
Posted by jimbinio at August 13, 2007 12:08 PM | direct link
Unfortunately, this analysis ignores some facts. The legacy carriers are among the worst when it comes to being on-time; service and low price is not an "either or" proposition. The discount carriers have better service measured by this metric -- which is the subject of the blog post.
http://www.bts.gov/press_releases/2007/dot077_07/html/dot077_07.html
According to this, the best and worst are:
Highest On-Time Arrival Rates
1. Hawaiian Airlines – 92.9 percent
2. Aloha Airlines – 86.8 percent
3. SkyWest Airlines – 77.9 percent
Lowest On-Time Arrival Rates
1. Atlantic Southeast Airlines – 56.0 percent
2. American Airlines – 57.9 percent
3. American Eagle Airlines – 60.5 percent
Additionally:
Highest Rates of Canceled Flights
1. Mesa Airlines – 6.4 percent
2. American Eagle Airlines – 5.9 percent
3. Northwest Airlines – 5.3 percent
Lowest Rates of Canceled Flights
1. Hawaiian Airlines – 0.2 percent
2. Frontier Airlines – 0.4 percent
3. Southwest Airlines – 0.4 percent
Figuring out why cheaper carriers have better service is an interesting problem for economists, and one that does not easily fit our analytic framework (it runs counter to the notion that people face tradeoffs). I challenge Becker and Posner to take up the question of superior management -- and in an industry dominated by only aboud a dozen players, this is almost certainly the answer.
Posted by P at August 14, 2007 04:42 PM | direct link
An aspect missed is that of complexity. It is far more difficult to master processes in a complex environment than in a simple one.
Cheap airlines are forced to keep their processes simple. Complex processes need more qualified people, custom software and other tools, which are expensive. Ask McDonalds: The simpler the process the cheaper the operations. And the more reliable (or better: replaceable) the resources. In addition, complexity makes it more diffcult to handle uncertainties and quality problems.
Legacy companies have legacy processes: Complexity has grown over time. Managers are often not measured for business success but for some other metrics, which top-management believed to be more important. The integrity of the entire organization and all its systems struggles.
It is very difficult to reduce complexity in a running operation. A nice idea would be to stop operations for some time, re-arrange everything and then start again. But this is obviously not possible.
Posted by Oliver F. Lehmann, PMP at August 15, 2007 04:57 AM | direct link
