In Case You Missed It

I want to bring two items from the Washington Post to your attention—an article on traffic on Washington-area roads, and an editorial supporting our proposal to auction airline takeoff slots at New York City’s congested airports.

Today’s Post features a front page story on the cost of congestion to the Washington, DC region. The article explains very well the negative effects congestion has not only on quality of life, but on local businesses as well. Our proposal to refocus, reform and renew the nation’s surface transportation system would give communities like Washington the flexibility and resources they need to battle the kind of congestion so vividly described in this article. You can read more about the proposal here.

And this weekend, the Post editorialized in favor of our plan to auction peak takeoff slots in New York airports. Our proposal will keep airfares competitive and service robust at these three busy, and capped, airports by giving airlines a chance to enter the market or expand their current operations. Indeed, in markets like Philadelphia where new airlines have entered the market, the average fare dropped by 25 percent in less than one year. The Post wrote our plan is a “good idea,” and agreed that a preferred takeoff slot is a “commodity that belongs to you, the taxpayer,” and that “airlines should no longer get it free.”

The story and the editorial give further credence to our argument that the way we pay for transportation is at least as important as how much we pay. We can choose to pay for our transportation systems through wasted time, unreliability, pollution, higher taxes and ineffective spending strategies, or we can choose to pay directly and transparently. The latter will usher in a new era of high speed, high tech and clean mobility, while the former will simply produce more economic loss and a declining quality of life.

-Secretary Peters

Comments

[Larry]

Personally, I think that this "slot auction" scheme is a very poor idea. I'm an economist and I don't see how this will "decrease prices" and "increase competition" in the NYC area, especially since well over a hundred different airlines fly there. Which ones are missing? I have seen studies by game theorists using what we call "perfect conditions", saying that this could work, but perfect conditions do not exist. To be honest, I see this as nothing more than a tax which will just increase fixed costs, whom the airlines will just pass on to the consumer, thus raising prices. Unless you can show me a concrete example (and I'm not talking about papers by university game theorists) where this has been used and has succeeded in the aviation world, I and many others will continue to be skeptical.

Secondly, your PHL example of Southwest entering the market is a very bad one. PHL is not slot-restricted. Any airline can enter and leave if they choose. In theory, Southwest can operate as many flights as they want. As well, Southwest didn't have to pay for any slots (as your proposal would have for New York) to enter the market and thus, their fixed costs were lower than they would have been if they had paid. So, this example has absolutely nothing to do with your proposal since the conditions are totally different.

While I think the situation in New York is bad, your idea will do nothing but increase prices and won't promote competition (especially if the incumbent airlines will buy their own slots back). As well, promoting this as a "market-based" solution when it's nothing more than a tax in disguise is disingenuous. No wonder so many people are against this idea.

[Larry]

I should also add, especially pertaining to the PHL example you gave, that PHL ticket prices are up 26% this year. So much for the "Southwest effect".

"The good news in those cities doesn't change the bad news for everyone else: Overall, fares are up - 11 percent for leisure travel, 6 percent for business fares, according to Harrell. Many individual cities are worse. He found year-over-year increases of 26 percent in Philadelphia, 17 percent in Minneapolis..."

http://www.nwcn.com/sharedcontent/northwest/travel/stories/NW_093008TRB_airfares_KC.cb085250.html

The article mentions that EWR fares are up too, but NYC fares are DOWN by about 4%. This is without slot auctions...