Monday, March 7, 2011

Unintended Consequences Part 7201

U.S. Dept. of Transportation data show drop in flight delays, rise in canceled flights
Published: Monday, March 07, 2011, 7:00 AM Updated: Monday, March 07, 2011, 9:35 AM

By all accounts, the Federal Aviation Administration’s "tarmac rule" has dramatically reduced the number of passengers who are stuck inside an aircraft on the ground for three hours or more.

Violations of the rule, which went into effect last April, can cost airlines $27,500 per passenger, or $2.75 million for a planeload of 100 people going nowhere fast. In fact, there were just three cases nationwide of three-hour tarmac delays in December — compared with 34 the previous December, according to the federal Department of Transportation, the FAA’s parent agency.

But critics say an unintended consequence of the rule is becoming apparent and spoiling travel plans for a far greater number of would-be fliers.

Economists of the Austrian-Chicago schools (Hayek, Friedman, Sowell, etc.) would absolutely refer to this as unintended consequences.

To put it simply, the airline is impaled on the horns of a dilemma. Which do they do: risk $27,500 in fines per passenger at a cost of $2,750,000? Or lose $500 of business per passenger at a cost of $50,000 (minus the expenses in fuel and some labor hours on the flight as well)?

This is the result of a limited part of "passenger's bill of rights" - a somewhat statist concept that rights spring from the government anyway, but I digress... With bad weather last December at many airports, the regular delays and cancellations were magnified. But this isn't because of December, and this isn't the first time it's been noticed. Not by a long shot.

If the airlines were doing something illegal when airline customers were stuck on planes for 3 hours (arguably this could be the case), a simple prosecution and use of criminal courts would've sufficed.

If airlines were violating their contract with their passengers when they left people stuck on the tarmac for 3 hours, civil courts between the passengers and the airline would've sufficed - a class action lawsuit would result in the passengers getting that $27,500 per person, not the government getting it. Which is a better compensation for the injured party? To get $27,500 for the 4 hours you spent on the tarmac, your flight delayed, unable to get to your important meeting and to see grandma, getting cramped, listening to cranky kids and generally enduring unpleasantness, or would you rather the $27,500 go to a government agency? Assuming you had three delayed flights a year and were given that $27,500 as compensation, you could do pretty well for yourself just through compensation from the airlines. I'd sit on a plane for 4 hours on the tarmac to get a significant part of a house payment or a Mustang.

With the use of what amounts to a new taxation system, a cost-benefit framework is now established for the airlines. Now the airlines are forced by state coercion of extreme fines and thus the laws of economics to abandon flights as soon as the risk of fines come up, which screws passengers further. Imagine sitting for 2 hours and 45 minutes waiting to takeoff and then being kicked back into the terminal and your flight being cancelled.
It's like having your schedule stuck between two warm pillows.

To give a comparison on well-meaning government, consider red light cameras. They were intended to catch people who run red lights. What happens is they scare people on the penalty of a ticket - financial loss - into slamming on their brakes. This results in higher levels of rear-end collisions, increasing the numbers of accidents in one manner.

Red light cameras are frequently used as a revenue stream, and at least in Chicago, are used in poor black neighborhoods (as folks there are less likely to have lawyers or know the Mayor). In Britain, speed cameras known as "Gatsos" are frequently used as a revenue stream via creation of automated speed traps. Speed limits are recorded as being cut as much from 70 mph to 40 mph. The subject (not citizen over there) is inconvenienced, taxed, and all for "their own good"... or fines.

They are not well loved. The British solution is to toss a tyre round the beastly thing and set it alight.

This brings up a cynical question: are the fines intended to actually help airline customers - since a cancellation can be a lot more hassle than a long tarmac wait - or are the fines intended as a revenue stream, with the added bonus for politicians of demonizing airlines for cheap popularity?

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