Thursday, July 24, 2008

Fun in the skies...and on the ground

Via Patrick Appel filling in for Andrew Sullivan, Christopher Hayes tries to find out, from a "super secret source inside a major air carrier," why air travel is so arduous these days. The source says, first, that air travel isn't really all that bad, that there are generally no more than "numerous small frustrations and irritations," and that, on an inflation-adjusted basis, fares are still quite low.

Essentially, our expectations have changed, we have become accustomed to jumping on a plane in a casual, low-cost way, and it's due to "the dramatic democratization of air travel since deregulation." The downside is that the industry has had to deal with "complete and constant change" (one wonders who pushed for deregulation in the first place). The source goes on to describe a fairly typical scenario of an industry that overbuilt when it was flush (the late '90s), then had a major crisis when times got tough. He makes an arguable point that the failure of one major carrier would have adjusted capacity downward, solving all the problems, a point that is more interesting than certain.

On we go through the Oughts, as the government begins to ladle out help, despite which four major carriers go through bankruptcy. With all this protection, the overcapacity persists, and then comes the big shock - fuel costs go through the roof, finally forcing the airlines to cancel some routes and cut back flights on others. The industry as a whole will drop more capacity after Labor Day than they did after 9/11.
So what’s going to happen? Fewer flights, higher fares, emptier planes (yeah, fares are going to drive down demand, not consolidate fullish flights onto each other), fewer air traffic delays. In short, the fuel price will accomplish just about everything that reregulation could hope to do. It’s exactly the same reasoning as why anyone concerned about climate change needs to see $5/gallon gas in the US and cheer, because it’s the only way to change consumer behavior.
The experience will be better for whatever air travelers are left, though it will be more expensive.

There is one huge implication that this analysis fails to consider, not surprising since this is an industry perspective. Cheap fuel and too-low-to-be-true fares have created a mania for projection of exponential growth in air travel, and anybody relying on these forecasts to make their future plans is likely in big trouble.

In particular, O'Hare Airport is in the midst of a big expansion, the common wisdom being that the ever-increasing need for travel would make this $15 billion (or much higher) project a necessity. And much of this project is irrevocable; there are swaths of two Chicago suburbs that have been obliterated to make room for new runways.

Someone's on the hook for a project that now looks like a massive waste, and we have to assume that the airlines, previously reluctant to bear any part of the expense, now have even more leverage to avoid writing a check (fine, we'll just take our planes and go home, or to Dallas, or to Denver). So, to a list of people affected by the reckless planning of the airlines, including those who can no longer go home to see Grandma (we don't fly there any more) and the masses who used to work for this industry, add the taxpayers (unclear at what level) who will have to come up with billions for empty runways...but they'll be really nice runways.

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