Trying to play the populist hero, Department of Transportation Secretary Ray LaHood came out with its response to the recent Airline Zone/Marks Aviation study showing cancellations rose dramatically in the wake of the new rule prohibiting lengthy tarmac delays.
Meanwhile, government failures are once again to increase hassle factors that have been proven to drive passengers away.
But its reaction, in the face of a growing body of statistics, indicated that DoT is continuing its head-in-sand approach to passenger disruptions. The irony here is, at a time LaHood is heading up a commission on how to help airlines, it is clear he is more interested in a political sound bite.
That doesn’t bode well for the commission conclusions and recommendations, due out next month, which will be released with great fanfare on how the DoT is working on behalf of airlines. It will then, as has always happened in the past, be shelved to gather dust along with all other previous studies.
Blogging his disapproval, ominous implications for consumer rule
In his pre-Thanksgiving blog, LaHood touted the success of the rule, clearly pointing to himself as hero to the small number of passengers that experienced lengthy tarmac delays, noting such delays dropped almost to zero.
He went on to mention his second consumer initiative: ensuring passengers have a full understanding of fares and fees before purchase. That comes in the middle of a pitched battle between American Airlines and Orbitz. Any rulemaking may forestall much-needed changes to the global distribution model that is now hampering the industry’s ability to do what other retailers take for granted, marketing directly to their customers using tailored pitches.
It was LaHood’s reaction to the study, aired last week, that really takes the cake. He dismissed it out of hand, despite the fact it really only confirmed DoT’s statistics that cancellations have doubled. But LaHood is not letting the facts get in the way of a good story, especially when he is cast as hero.
LaHood studiously avoided mentioning the fact that, after nearly a year, the department has steadfastly refused to clarify whether or not the USD27,500 fine is per passenger or per flight, a significant distinction, indeed. Instead, DoT is indicating it is waiting for a test case before an Administrative Law Judge. That small clarification has the power to reduce cancellations, which studies prove drive passengers away, faster than anything else.
Without that clarification, airlines necessarily opt for a conservative interpretation and ensure they don’t incur a fine that could far outweigh any revenue expected from the flight. That means, DoT is intentionally allowing more passenger disruptions than is otherwise necessary. Yes, indeed, LaHood is quite the hero.
Deliberately misleading the public
LaHood has also ignored statements from airline executives such as United CEO Jeff Smisek who said last spring, before the rule became effective, that airlines would necessarily have to defensively cancel flights in order to avoid the fines. Nor would LaHood even entertain the Airline Zone/Marks Aviation study, preferring to ignore its robust analysis.
Instead, he chose again to deride a study that is the most comprehensive look at delays in history trying, but failing, to characterise it as an attempt by the industry to role back the new rule. That anti-business rhetoric may play in Peoria but it is a also a deliberate attempt to mislead the public.
“Recently, a pair of airline consultants cooked up a report alleging that our rule limiting tarmac delays was responsible for thousands of cancelled flights between May and September,” wrote LaHood. “That is simply not true. In fact, the same airline consultants’ report admitted that 4793 of the 5068 additional flight cancellations they counted in May–September 2010 were cancelled before the plane even left the gate, which means they have nothing to do with limits on tarmac delays.”
Cooked up? The study came to its conclusions on a data base covering a decade of weather, delay and air traffic statistics and resulting in 100 million lines of data or two terrabytes that afforded the most comprehensive analysis of delays that has ever been done. And it confirmed DoT's findings! In addition, its analysis of the summer of 2010 showed weather was much better than it has been in the past.
In fact, the study confirmed that cancellations are coming further out when conditions conspire to make it look as if a given flight might exceed the 2.5-hour limit airlines have imposed on aircraft waits because it takes so long to return to the gate. The further out a cancellation occurs the easier it is for airlines to accommodate disrupted passengers. It is the airlines’ only defense against rising cancellations.
The only solution, clearly, is Congressional involvement to bring some sanity back into the mix. Study authors Airline Zone President Darryl Jenkins and Marks Aviation Principal Josh Marks noted, while DoT has ignored their study, Congress has taken notice.
The Airline Zone/Marks Aviation study conclusions are clear. The next step is to determine the impact on passengers. The study indicated that average taxi-in and taxi-out procedure for flights that must return to the gate is more than 60 minutes. But that only counts passengers who ultimately get to take-off, not how long their gate-to-gate trip. Their original study published in July found that not only was the DoT’s economic analyses for the tarmac rule woefully inadequate but it underestimated the average time it would take for a cancelled passenger to be rebooked by half. Its assumptions were based on outdated studies done at a time when load factor was 70% versus the 85%-plus experienced in today’s world, said the Jenkins/Marks study. It found the wait for a new seat after a flight was cancelled was 19 hours rather than the nine presumed by DoT.
“Nineteen hours is just unacceptable,” said Jenkins. “The reality for most of these 406,000 passengers is a day or more of time spent waiting for an available seat.” Even nine is too long.
Economic impact is huge
Perhaps the most important question is what this is doing to the economy. A recent study showed that delays cost the economy USD33 billion annually. But there is more to that figure than just a straight look at the economic impact and that is the inconvenience factor.
In the most comprehensive study to date, five universities, funded by the Federal Aviation Administration, concluded in their study delays cost the economy USD32.9 billion annually, largely borne by passengers in disrupted travel plans to the tune of USD16.7 billion in lost time and inefficiency. Missed connections and cancellations accounted for half that cost. The delays constituted a USD4 million drag on the nation’s economic output and cost airlines USD8.3 billion that year.
In perhaps the most interesting conclusion the study indicated that previous measures used to estimate the impact on passengers are far below the actual cost of passengers.
Based on 2007 statistics, as the industry was at the peak of the last up cycle, the study by the University of California Berkeley, University of Maryland, Virginia Tech, Massachusetts Institute of Technology and George Mason University, concluded that airline delays amounted to more than 28,000 years that year.
Impact of the hassle factor
That study confirms two studies done in the 2008, showing the further impacts of delays. One showed the defection of business travelers to business jets and the other showed the hassle factor has caused passengers to give up entirely on flying. Given the recent uproar over the new strip-search, molestation security procedures promulgated by the Transportation Security Administration, the trends in these studies are likely to repeat themselves.
Perhaps one of the most interesting factors in these studies is the fact that passengers are rightly blaming the government for their hassles rather than the airlines, reflecting a sophisticated understanding of NextGen issues with delays. In addition, cancellations and security issues were also cited as reasons for being driven away. Ironically, the surveys indicated passengers were twice as likely to trust the airlines to solve their problems over the government
The US Travel Association survey, in the first quantification of how the hassle factor impacts both the airlines and the economy, showed passengers avoided 41 million trips over the previous year, costing airlines USD9 billion in revenues; the economy USD26.5 billion, including USD9 billion lost to hotels and restaurants; and USD4 billion in lost federal, state and local taxes.
“The air travel crisis has hit a tipping point – more than 100,000 travelers each day are voting with their wallets by choosing to avoid trips,” said USTA President and CEO Roger Dow said at the time. “This landmark research should be a wake up call to America’s policy leaders that the time for meaningful air system reform is now. We need to find ways to encourage Americans to continue their business and leisure travel. Unfortunately, just the opposite appears to be happening.”
Business aviation benefits
Shortly after the USTA issued its study, Stanford Transportation Group (STG), a leading US-based aviation consultancy, recounted the growth of business aviation for the premium – read that the highest yielding airline passenger – from 16% of all premium business traveller trips to 41%.
Granted that has since dropped with the Great Recession but business aviation is growing again and it does indicate how premium travellers react to the inconvenience factor. Indeed, the gap between business aviation and airline costs narrowed during the Stanford study period and with airlines continuing to rely more heavily on business travellers to foot the bill, the increasing inconvenience may ultimately killing the goose that lay the golden egg. The biggest gains in business aviation were seen with jet cards and fractional shares, a relatively new phenomenon in the last decade that means business travellers do not have to buy a jet to take advantage of its benefits.
Interestingly, travellers target the travel process rather than the airlines in venting their frustrations to researchers, an astonishing conclusion given the fact that the advent of airline ancillary fees and increasing publicity about lousy airline service was occurring at the same time. Their key issue was delays, something that always happens at the top of the business cycle and was an echo of similar complaints expressed in the grid lock that occurred in 1987 and 1997/98. And, just as it has every decade, the bottom fell out of the market taking with it the political will to do anything about it.
Besides delays, these studies pinpointed cancellations and over-reaching security procedures as their next top issues, two very good reasons to abandon airlines in favor of business aviation. While security procedures now include the business aviation industry, given the pace of rolling out the controversial body scanners, it is highly unlikely business travellers will be subject to them any time soon.
So, the government, that had been blamed for two out of the three top issues – delays and security – can now be blamed for rising cancellations as well.
The results of the 2008 studies are instructive since they clearly presage what is happening. Some 60% believed we have a deteriorating air travel system and a third of all travellers express dissatisfaction with it. Among frequent flyers (five-plus trips annually), 48% were not happy. About half expected that things would get no better and, judging from the past two years, they were right.
“Many travellers believe their time is not respected and it is leading them to avoid a significant number of trips," said Allan Rivlin, a partner at Peter D Hart Research Associates, which, with the Winston Group, conducted the Stanford study. He indicated that airline and security personnel where least respectful of their time.
Efforts to improve the environment for airlines and passengers have always taken a back seat and that will likely continue in the future. Let’s face it, America has never had the political will to do anything about transportation, at least not since the Eisenhower Administration achieved its national highways system.
There have been several government commissions in the last few decades and all amounted to nothing. The industry has also thrown numerous studies recounting the USD1.3 trillion airlines contribute to the economy in addition to the USTA and Stanford studies that prove the debilitating impact of government inaction on the industry and the economy. But no matter how the industry and economists cast these compelling arguments, the government and economists have turned a deaf ear.
While Congress has been able to pass legislation authorising budgets for aviation, highway and rail transportation, such efforts have been years in the making as transportation rarely makes it to the top of the political agenda. Indeed, the FAA is now in its fifth year of continuing resolutions.
LaHood’s blog is clearly an indication of more of the same. Even so, he should take one lesson away from the Airline Zone/Marks Aviation study and it is an old truism. You learn more from those who may criticise you than from all those who pat you on the back combined. That is the type of philosophy that really leads to change, although it is unlikely politicians will pay no heed to it.