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How to Fix Airport Delays

Wednesday, October 3, 2007

The case for congestion pricing.

FAAThis past summer was another predictable nightmare for U.S. air travelers. With record-high passenger traffic, expanded schedules at many of America’s busiest hubs, and the cost-cutting policies of post-bankruptcy airlines, the slightest thunderstorm or security hiccup resulted in massive delays. Some flights, especially in the Northeast corridor, were delayed every day they operated.

Meeting with senior officials at the White House last week, President Bush identified the chief problems as customer service and congestion. He instructed Transportation Secretary Mary Peters to devise a solution by Christmas, which will no doubt be a short-term fix. But because of the interconnected structure of air travel, any real solution needs to be system-wide.

A large majority of funding for air traffic control services comes from airfare excise taxes. The growth of low-fare airlines exacerbated fare discounts, making these taxes an unreliable source of revenue.

Since deregulation in the 1970s and 1980s, choice and access in the airline industry have increased dramatically, while fares have dropped substantially—by as much as 30 percent between 1979 and 1990 (taking inflation into account). Air travel is now available to far more Americans than it was 30 years ago. But a large majority of funding for air traffic control (ATC) services comes from airfare excise taxes. The growth of low-fare airlines in the 1990s and 2000s exacerbated fare discounts, making the excise taxes an unreliable source of revenue for the Federal Aviation Administration (FAA). Meanwhile, the FAA has not been able to put enough money into capital improvements like its much-touted NextGen.

A blend of new initiatives, such as satellite-based management of planes and redesigned airspace, NextGen is supposed to transform ATC. Almost everyone supports it: the president, the FAA, Congress, airlines, airports, and independent observers. The controversial issue is how to fund NextGen. The airlines argue that corporate jets use too much airspace and pay too little for it. They support a user-fee system in which consumers of ATC services would pay for those services. The corporate jet lobby responds that general aviation accounts for a miniscule percentage of operations at overcrowded airports.

While the Bush administration supports user fees, the House of Representatives recently passed a bill rejecting them. The president has promised to veto any legislation that does not contain sufficient funding for the FAA.

Long-term transformation of ATC—and with it, a reduction in delays—is dependent on a steady source of funding consistent with the actual amount of airspace used. But NextGen is not the quick fix that the president and the public want. Indeed, some of the most significant gains promised by NextGen could be more than a decade away. Bush wants solutions in less than three months.          

 
With congestion pricing of landing slots, all airlines would be able to compete for peak service.

Increasing capacity is essential to reducing airline delays, but that involves implementing NextGen and building new airports and runways—a long-term process. The only short-term fix may be to reduce flights in the most overcrowded airports at peak hours.

The administration and Congress want to reduce flights the wrong way. At a hearing on September 26th, House Transportation Committee chairman James Oberstar asked the FAA and air-travel stakeholders to “sit down with one another.” James May, head of the Air Transport Association, an airline lobbying group, responded that airlines are prevented from colluding on flight schedules by antitrust regulation. That leaves only the FAA to impose arbitrary scheduling reductions, which in turn gives airlines an incentive to pack their flight schedules so they can come out ahead when flights are trimmed.

FAA action poses other problems. Scheduling reductions include existing airlines, but they may not include provisions for new entrants into crowded markets, thus stifling competition. Reductions would also mean that less profitable routes to smaller cities would be the first to go.

A better interim plan, which is apparently under discussion, would institute congestion pricing. Airlines scheduling flights at peak hours would have to pay a surcharge, which could be determined either by a time-based formula or by local airports. The congestion surcharge could be revenue-neutral—perhaps balanced with discounts for flights at off-peak hours—or it could be applied to capital improvements that would reduce delays over the long run.

With congestion pricing of landing slots, all airlines would be able to compete for peak service. They would pass these charges on to travelers, thus reflecting the true cost of a trip. Congestion pricing would also allow airlines to adjust schedules immediately in response to ebbs and flows of traffic.

It’s a shame that the FAA has not kept up with the robust demand for air travel. This lack of progress will now force a contraction in the aviation sector’s busiest markets. But given that reductions in air travel are inevitable, congestion pricing is the least intrusive way to go about it.

Evan Sparks, an editorial assistant at the American Enterprise Institute, blogs about aviation policy at EvanSparks.com.

Image by Shutterstock.

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