Build those runways!

I don't like to say I told you so (oh, who am I kidding, I do enjoy it at least a little bit), especially when not all of the story is played out, but air travel is down. O'Hare is at the lowest level since 1994, and Midway dropped about 12% last year (story here).

At the same time, Chicago is going to pay United Airlines $163 million to move a cargo building that sits where the city wants to build the next runway. Keep in mind that any new runways would benefit United enormously; the O'Hare expansion already represents a major public subsidy for this hilariously-operated major company.

I said back in July that:

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).

I underestimated, assuming that we were just going to allow the major airlines to avoid paying their fair share. I didn't anticipate that Mayor Daley, in his mania to tear down large tracts of other towns, was going to actually pay the airlines.

Eventually, the non-wired generation is going to realize that there are more channels of communication than ever, that in a world of videoconferencing, IM'ing, Twittering, and so on, actual face-to-face business travel is going to decline. The hassle of flying and security lines and the longer flights necessitated by globalization is going to catch up with the industry, and these airport expansion projects are going to be seen as the boondoggle they are. Well, at least they're "shovel-ready."

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.

The future of air travel

I thought of leaving the body of the post blank as an ironic comment, but decided this needed a few more words.

A few years ago, Greyhound pulled bus service from numerous cities, claiming that they were no longer profitable routes. The near-universal train service that we used to be able to take for granted has become problematic. The main reason: inexpensive air service that went with minimal stops at reasonable fares.

My brother-in-law is traveling from Binghamton, NY to Chicago next week, and this trip of 750 miles is difficult no matter how he goes. By train, he would have to find his way to Syracuse, then spend 13 hours on an Amtrak train (and the highest probability is that the train will be late). He can take Greyhound, but that's a minimum of 16-1/2 hours with two layovers. He can (and will) go by air, but, for a decent fare, that involves 7-1/2 hours (plus the time he needs to get to the airport and stand in line) and stops in Philadelphia and Raleigh (!).

I suppose we should stand in awe, consider the reality that 200 years ago such a trip would take weeks. But this inconvenience is a loss, an acceptable one perhaps, but a loss.

And this is true of a lot of what is happening now that gas prices are so high. I've seen a lot of articles virtually gushing over the changes in the American lifestyle. Many of these things are commendable, but each one comes with a cost (and some of what seems attractive in May or June is going to seem like a huge burden in January - have fun commuting by bike). Bicycles are slower than cars, so shopping trips and commuting by bike leave less time for other activities.

Our lifestyle evolved over a long time, and was based on certain assumptions about the price and availability of energy. If those assumptions are changing, and I think they are, the lifestyle will have to change also. Cloth bags instead of plastic seem small enough, but, when the pickle jar leaks, the bag that would have been easily thrown away will now have to be cleaned. I certainly don't mind that the soccer moms will have to eschew the heater while Janie is at practice, but there is a cost to them.

Air travel in particular is going to change, and it will alter everything from the nature of business to the universe of vacations a family can consider. Has America had it too easy? Perhaps, but it's what we've known, what most of us have grown up with. I love St. Louis as a short destination, but that doesn't mean I feel a loss when I "have" to go there on vacation instead of, say, Paris. I doubt that we've even scratched the surface of the costs we're going to see over the next 10 - 20 years, and I'll be very surprised if our belated aggressive alternate energy programs will make up for that.

We know why you don't fly

Via Kevin Drum, Jon Stewart:

With this administration, if a passenger blows up a plane, it's a failure in the war on terror. But if the plane just blows up on its own — eh, it's the market self-regulating.

Funny, but obviously untrue. After all, American Airlines has canceled more than 1500 flights over the past two days, as they inspect their MD-80 airplanes - "At issue is how cords have been used to secure bundles of wires in the plane's wheel wells." An FAA inspector apparently found some problem on Monday, and, not wanting to incur an FAA penalty, grounded all those planes.

What I find interesting is the corporate spin, the tap dance to assure everyone that this is just a minor requirement, nothing that affects safety. AA's spokeswoman was on TV last night to let us know that this was not an actual issue that puts people at risk, just a minor compliance matter. From AA's website:

Additional inspections of our MD-80 fleet are being conducted to ensure precise and complete compliance with the FAA's directive related to wiring in the aircraft's wheel wells. Please be assured that safety of our customers is, and always will be, American's first priority.

In other words, it's just the FAA being picky, nothing bad, not to worry.

If that's true, why did they have to pull all the planes out of service immediately? Couldn't they have staged these re-inspections over several days, doing them at night when the fleet is pretty much idle? Why would they take the risk of ticking off thousands of travelers for a minor look-see?

Two answers present themselves to the last question. One is that AA simply doesn't care about serving its customers, perhaps feeling that they have no credible alternative. The other is that the problem is far more acute than they're letting on. I'd put up a click poll, except that I suspect the answer is, "Both."

We make money by leaving the tough stuff to others

Boeing has encountered yet another problem with the 787 Dreamliner (as reported in the Chicago Tribune - here). What fascinates me is the contrast between the reality and the plan as expressed in the Global Business section of Time just a few months ago (here).

The glowing report in Time, which, even then, read like a reworked press release, now seems to be the product of wishful thinking rather than revolutionary business thinking. The 787 project was going to revolutionize manufacturing, largely through the expedient of having Boeing do as little of it as possible. Instead, they were to outsource not just the component work, but the design of the components:

[T]he specification control document, which explains how to build an electrical-distribution system, was about 2,500 pages for the 777. "[Partners] had to figure out 2,500 pages of stuff, and we monitored them applying 2,500 pages of stuff," says Bair.

On the 787, the equivalent assignment was 25 pages. "For high-level requirements, you go design it," says Blair. "We're not going to micromanage how you do it." Bair says this accomplishes three things: partners can show their expertise; there is no duplication of work; and innovation can flourish where "in the past it was our way or no way." He doesn't consider these new methods revolutionary.

This, of course, is the logical consequence of modern-day management thinking. You out-manage your risk by transferring it to others, relying on contract compliance to take the place of responsibility. You conceptualize or ideate, not even descending to the point of high-level design, rather shifting that to the "experts" who know better than you what you need.

But you can't take a contract and glue it into a working airplane. Perhaps Boeing will get some money back, eventually, through negotiation or lawsuit. Will they ever make up the deficit to Airbus in market or mind share? I doubt it.