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Published on Leave a comment on Auctioning Off the Friendly Skies

This is the smartest commentary I have seen yet on the mishap of United Flight 3411. Regulated companies have to produce policies and then abide by them. Failure to abide by their own policies is what gets these companies into an extra layer of trouble. This could get mighty expensive for United. Frankly, it should. This is a completely unforced error.

I have another suggestion -- that airlines augment their policies for how to deal with flights where passengers have to be asked to give up their seats. Instead of running the auction to get volunteers right on the spot, when emotions and other factors come into play, run it at the time the tickets are purchased, when people are more dispassionate. Give people a few different options, like:

  • re-booking on the next flight, even if the next day (an option only for those originating rather than connecting in the city), plus some token compensation
  • re-booking on the next flight, but only if the same day, plus some token compensation
  • ... all kinds of progressively juicier compensation ...
  • two vouchers for first class travel anywhere a partner airline flies

You get the idea. Then the gate agents can call names and give people what they signed up for. For many travelers, this would become part of their stored profile with the airline. For others, it might change for each flight depending on whether it is a business or leisure trip. In any case, it will save tears (and worse) later on.

Update: More good commentary here, highlighting some of United's constraints due to federal regulations and union rules. Quoting:

Department of Transportation regulations set maximum required compensation for involuntary denied boarding (in this case 4 times the passenger’s fare paid up to a maximum of $1350). So they’re not going to offer more than that for voluntary denied boardings, especially since the violent outcome here wasn’t expected and the United Express gate agent had no authority to do more.

So my (somewhat facetiously) proposed options should be simpler -- 1x, 2x, 3x, 4x ticketed price up to the cap, possibly subject to how the transportation will be completed. The limited room to negotiate when the shortage is at hand makes it even more important to resolve these potential conflicts ahead of time.

Update: And another one, describing both Delta's check-in questions and an alternative that gamifies the shortage.

Published on Leave a comment on Like a Prius with Wings

The Boeing 787 is almost here, and by here, we now mean Boston.  From The Globe this morning:

Even if Boston had enough long-distance travelers to pack massive planes like the Airbus A380, which seats up to 800, Logan’s short runways prohibit such planes from taking off fully loaded with passengers, fuel, and cargo.

The Dreamliner, configured with 186 seats on Japan Airlines’ Boston flight, solves both these problems. ‘It’s definitely a game changer. I think this airplane will reset the expectation of the passengers in terms of cabin comfort.’

“It’s made to order for Logan Airport,’’ said Edward Freni, director of aviation for the Massachusetts Port Authority, which runs Logan. “It’s something that we’ve waited for for a long time.’’

I didn't so much mind changing planes in Chicago or San Francisco for the few occasions that I fly, but I'll certainly take the non-stop.  Of more interest to me is what airlines are doing with the opportunity created by the lower-weight materials:

To try to reconnect travelers to “the magic that is flight,’’ said Kent Craver, regional director of passenger satisfaction at Boeing, engineers added amenities made possible by the flexibility, lighter weight, and durability of the composites. They raised the ceiling and installed larger windows that passengers can dim and brighten at the touch of a button. They increased humidity to combat dryness, pressurized the cabin to a lower altitude to reduce headaches, and developed a filtration system to eliminate perfume and hairspray contaminants that irritate passengers’ eyes and throats.

They built bigger overhead luggage bins and installed technology that helps the plane compensate for turbulence and provide a smoother ride.

That all seems like an expensive alternative to a simple policy of not treating passengers like cattle, but I'll take progress where I can get it and look forward to my first ride.

Published on Leave a comment on No LUV, or Maybe Too Much, from the FAA

As a longtime flyer of Southwest Airlines, this was not welcome news:

WASHINGTON – The Federal Aviation Administration said Thursday it would fine Southwest Airlines Co. $10.2 million for safety violations that included knowingly flying more than three dozen jets without mandatory inspections for structural damage.

Southwest, which found cracks in the bodies of six of its jets during belated inspections, said safety was never jeopardized.

The fine would be the largest ever levied against an airline, the FAA said.

When Southwest belatedly conducted the inspections, it found cracks in the bodies of six Boeing 737-300s, with the largest measuring 4 inches. Serious fractures can depressurize an aircraft and in 1988 caused an Aloha Airlines jet to rip apart, killing a flight attendant.

The FAA announced the fine a week before congressional investigators were to disclose findings from their own inquiry into Southwest's failure to meet airworthiness directives. That investigation was prompted by information provided by Dallas-based FAA inspectors who said their supervisors allowed the planes to keep flying even after Southwest reported its failure to make the scheduled inspections.

The FAA doesn't come out looking too good, either. Regulatory capture, anyone?

Published on Leave a comment on Getting There Was More than Half the …

For my second to last post about our trip to Hawaii, I wanted to point out something about energy consumption and CO2 emissions that I had not previously appreciated.

We flew from Boston to San Francisco (2704 miles) and then San Francisco to Honolulu (2398 miles), for a total of 5102 miles each way or 10204 miles total. How much fuel did we use (assigning us our per capita share for the plane as a whole)?

This page cites an FAA estimate of 48 miles-per-gallon-per-seat and notes that a gallon of jet fuel and a gallon of gasoline create about the same amount of CO2 emissions. This means that as a family, our share of the fuel used was about 4 x 10204 / 48 = 850 gallons. Let's compare that to two other fuel numbers around the Samwick household.

First, I estimate that we drive our cars no more than 1000 miles a month on average and get at least 20 miles per gallon on average, resulting in gasoline consumption of no more than (12 x 1000 / 20) = 600 gallons per year.

Second, we have used about 1100 gallons of #2 fuel oil to heat our home in each of the past few years. (What can I say, we like to be comfortable?) This page shows the CO2 emissions by fuel type, putting the fuel oil on a par with jet fuel, which are both a bit higher than gasoline.

One (glorious) trip to Hawaii used 75% of the fuel we use to heat our home or 140% of the fuel we use to power our cars, with corresponding amounts of CO2 emitted.

As it pertains to energy and environmental policy, this example shows how important it is to be comprehensive in our attempts to reduce oil demand. The most straightforward way to do that is to levy a tax on all fuel products derived from petroleum. It allows abatement to occur at every possible margin--by flying, driving, or heating less or by using technologies that are more fuel efficient.

Published on Leave a comment on The First Mile

Continuing with my Hawaii retroblogging, it was no easy task, though easier than I thought it would be, to get from Hanover to Honolulu with two young children.

The toughest part was literally the first mile, from the hotel at Logan airport in Boston to the gate. At five o'clock in the morning on the first Saturday of the summer, the terminal was an absolute mob scene. Not quite at the level of my experiences in Beijing or Delhi or even Toronto on a summer travel weekend during a labor strike. We left ourselves two hours and made it with little time to spare.

We flew United by way of San Francisco, and all of the usual inconveniences were there, but the planes were filled to capacity, the tickets weren't cheap, and the service was generally okay. It was more apparent what was behind recent good news in the financial markets for the company. So I assume the airline is making as much money as it is ever going to, unless it can magically lower fuel prices or overcome historic management challenges.

Another interesting event--the flight from Honolulu back to San Francisco was the first time I recall having women as both the captain and the first officer.

Published on Leave a comment on Does the Senate Have Any Bite, or Is It All Bark?

As I posted a couple of weeks ago, Continental and American did an end run around compromises reached in the pension reform legislation last year. In his column yesterday, Jeffrey Birnbaum reports that the Senate Finance Committee is not happy about it:

The top brass at the Senate Finance Committee are incensed over a legislative end-around engineered by American and Continental airlines. The airlines used their contacts with the Democratic leadership in Congress to sneak into the Iraq war spending bill a provision that will reduce the payments they have to make to their workers' pension plans, a move that will save them millions.

The Finance Committee's senior members are not pleased. They have asked the airlines' chief executives to explain themselves and are warning that theirs may well have been a Pyrrhic victory.

"These two airlines flew around the Finance Committee to get this pension provision in the spending bill, but we will review, in the light of day, exactly what deal they got," Chairman Max Baucus (D-Mont.) said ominously.

"The committees of jurisdiction spent many months working on a pension bill that took each airline's status into account," added Sen. Charles E. Grassley of Iowa, the panel's ranking Republican. "These two airlines and their allies in Congress have undermined that work."

In other words, flyboys, you've made some powerful foes.

Really? I'll believe it when I see it. If the Senate Finance Committee is incensed, then there is nothing that prevents Baucus and Grassley from introducing new legislation to undo the end-around and building the support to pass it. There may yet be hope for the Senate if they do.

Published on Leave a comment on If You Ever Wanted a Reason for a Line Item Veto …

... now you have it. From the Review and Outlook in today's WSJ:

Pension Crash Landing
May 29, 2007; Page A14

When Congress passed a broad pension reform last year prodding companies to get their retirement programs in order, it seemed too good to be true. Now we know it was.

That's the lesson of an amazing bit of corporate welfare the Senate tucked into the Iraq war supplemental last week. Last year's bill included a hard-fought political compromise: Carriers that agreed to a "hard freeze" of their pension plans would be allowed to use a higher interest rate in calculating their plans -- which would reduce their net liabilities. The idea was to discourage airlines from buying union peace by running up their pension tabs, which they might later dump on taxpayers. A few airlines, such as Northwest and Delta, took this medicine.

Their competitors, namely American and Continental, headed back to the Beltway and last week their lobbying blew apart last year's compromise. Under the Senate's backroom fix, the airlines can use a higher interest rate even if they promise higher pension benefits. The airlines claim this is about "leveling the playing field," which makes little sense because American and Continental could have accepted the same rules all along. This is about giving those two a competitive advantage over other airlines that have already agreed to play by the reform rules.

The taxpayer-backed Pension Benefit Guaranty Corp. is obliged to bail out any company that can't meet its pension obligations, so there is once again little reason for these airlines to practice any pension restraint. The PBGC conservatively estimates that this airline fixeroo will result in an additional $2 billion in underfunded pension obligations over the next 10 years.

No Senator is taking credit for this pension earmark, though we'd note that both Continental and American hail from the great state of Texas. Meanwhile, the architects of the provision were nothing if not clever; by including this in a war supplemental, they made it veto proof.

This is simply unbelievable. When even good legislation is undermined by backroom dealing, it shows a corrosive lack of seriousness on the part of the legislature itself. I think this bumper sticker sums it up pretty well.

Published on Leave a comment on Innovations in Distance Grandparenting

Jennifer 8. Lee reports in today's New York Times on "The Incredible Flying Granny Nanny," with examples of grandmothers who commute by airplane on a weekly basis to look after their grandchildren while both parents are at work. Here's one example:

Terri P. Tepper of Barrington, Ill., made a similar trek every week for a year to help care for her granddaughter so that her daughter could pursue her career. Beginning in 2001, Ms. Tepper flew to New York on Sundays and returned to Chicago on Thursdays.

“It was cheaper than getting a nanny,” said Ms. Tepper, 64. The round-trip tickets, which her daughter paid for, cost between $190 and $230. “I actually saved them a lot of money,” Ms. Tepper said. Her daughter later made partner in her consulting firm.

It's fascinating to see how relative prices can drive behavior here. The article has the economics right, but I think it gets the sociology and history wrong, in the following passages (with my emphasis):

Even at a time when grandparents are more involved than ever in the lives of their children and grandchildren, the efforts of Mrs. Kim and Ms. Tepper are extraordinary. But many grandparents these days are making extreme efforts to help their children bridge the work-life divide.

[...]

Intercity commuting is just one way they provide that help. Grandparents are also taking time off from work, retiring early, moving to the United States from overseas or selling their home to be near grandchildren.

The greater involvement results from a confluence of factors, including the financial burdens of child care and anxiety over the quality of care. But most notably it is influenced by a generation of grandparents who have the time and the financial wherewithal to pitch in.

“This is the first generation where we have so many older people living long enough, being healthy enough and being affluent enough to provide these services on a large scale” since women entered the workplace in large numbers, Dr. Cherlin said.

While it is true that more grandparents are living to old ages and are more affluent than earlier generations of grandparents, it is also true that parents are having their first children later in life and are having fewer children than in earlier generations. (The latter effect is compounded, since it is true of both the parents' generation and the grandchildren's generation.) That generates less opportunity for interactions between grandparents and grandchildren. In addition, the children and grandchildren are often living further away from the grandparents than in prior generations. The article is motivated by the unusual expenses that some families are incurring to recreate what used to occur for free.

In prior generations, the grandparents were needed to help the non-working parent take care of a larger number of young kids. Now, the grandparents are stepping in to take care of one young kid while both parents work. It is not the least bit clear to me that longevity and affluence trump fertility and proximity in this comparison, but I'd be curious to know what others think.

The Cystic Fibrosis pledge drive is still on. If Great Strides is not your thing, how about donations in honor of Mother's Day?

Published on Leave a comment on And in the Skies Above

Two items in the world of aviation caught my eye this week, courtesy of USA Today's travel blog:

First, that Airbus 380 is one big plane. Take a look at these two slideshows as it made its first flights to the United States. I'm curious to see whether a 500-plus passenger aircraft is viable in our air transportation system.

Second, it looks like Southwest is making Philadelphia the City of Brotherly LUV. It's a distant second to US Airways in passenger volume at Philadelphia International, but it appears to be responsible for all of the growth--and lower fares to boot:

More than a decade ago, federal regulators adopted the term "the Southwest effect" to describe the way air fares plunged and passenger traffic soared each time Southwest Airlines started flying to a new city.

Today, there's no better example of the phenomenon than what's happened at Philadelphia International Airport since Southwest came to town in May 2004, according to airport data.

In 2006, for the second year in a row, Philadelphia set a record for passenger traffic, with all of the growth attributable to a 23 percent increase in Southwest customers. The airport had a total of 31.8 million passengers last year, and 31.5 million in 2005.

Greater volume and lower prices? Better be careful. That can be a recipe for a backlash.

Published on Leave a comment on Well, That Was Easy Money

We learn today that US Airways has withdrawn its offer to buy Delta Airlines for what turned out to be about $9.8 billion. As I noted back in November when this madness was announced at the lower value of about $8 billion, "US Airways doesn't have it and Delta isn't worth it." For that reason, I also expected Delta's creditors to leap at the offer (and dump the US Airways stock immediately upon doing so). But here's how the deal was undone:

US Airways dropped its hostile $9.8 billion bid for Delta on Wednesday after Delta's creditors threw their support behind the airline's plan to emerge from bankruptcy on its own.

Delta Air Lines Inc.'s official unsecured creditors committee said in a statement it reached its decision after a lengthy review of both Delta's proposal and US Airways Group Inc.'s proposal.

So it was the creditors who pulled the plug after "extensive discussions." That's a surprise.

What was not a surprise was that there was money to be made here by the ordinary investor. Here's a chart of US Airways' stock price over the past three months:

That big spike in the middle of November was the roughly 16 percent increase in the stock price when the announcement was made, plus some continued appreciation. This was very unusual--the classic result from the finance literature is that upon announcement, the acquirer's stock price is either unchanged or slightly lower. It is the target's stock price that goes up. The reason, I think, is that acquirers often overpay, probably because they overstate the amount of "synergies" they'll get from the acquisition.

I could see no reason for this acquisition to be such a good thing for US Airways, so I sold short. You can see that the position was not always in the black, but eventually, it seemed pretty clear that that gain would be reversed. I managed to pocket a cool 10 percent based on when I got in and out of the position.