We all know that crowded airports create plenty of nightmares for fliers here in the US, especially during the busy summer. A couple weeks ago, the FAA came out with its latest proposal to fix this by allowing for congestion pricing. There has been a lot of talk about this in the blogosphere, and some people are in favor of this plan. I am not one of those people. (If you’d like to read the the opinion of someone who thinks it is good, try here.
Before I get into my thoughts, let’s outline the plan itself. If you’d like to read along, you can see the entire 25 page docket in this PDF file. There are three basic parts to the plan.
- Landing fees determined by both departure and weight instead of being solely by weight
- Allowing airport construction costs to be included in landing fees before completion of project
- Allowing airports to charge landing fees for secondary airports to the primary congested airports instead
It might (definitely) not be clear why this would reduce congestion, so I’ll talk about each one as I explain why they won’t actually solve the problem. It’s important to know before we get started that airports are required to charge “reasonable fees [that] must be based on the capital and operating costs of the facilities for which the fees are assessed.” (from the PDF)
Proposal #1 – Right now, landing fees for aircraft are almost always determined by weight of the aircraft, but airports are allowed to charge on a mix of per departure and by weight. This proposal actually just clarifies and I guess encourages airports to start charging landing fees based on a mix of weight and a per departure basis.
The idea here is that small jets are problems because they don’t carry a lot of people, but they contribute just as much to airport congestion as a 747. So, if you charge on a per departure basis, it will effectively push smaller jets out because they can’t spread the cost of landing over nearly as many passengers. Will that stop regional jets from flying to an airport? Some of them, sure. Higher landing fees will make for unprofitable flights.
The end result, however, may be a less congested airport, but it’s also going to mean less access to the hub from smaller communities. If flights are marginally profitable to a small city now, this plan could end up making it largely unprofitable and the service will cease. We shouldn’t be discouraging flights to smaller cities just because they don’t have as much demand.
Proposal #2 – This is really the heart of the congestion pricing proposal. Since airports can’t charge above and beyond their cost of operation, the FAA had to get creative here. Currently, airports cannot charge for construction projects in their landing fees until that project is finished. There has to be a tangible and current passenger benefit for inclusion of the cost in landing fees to be permitted. This rule would change that to allow for projects under construction to be included when construction begins.
I don’t really have a problem with this proposal in its basic form. It will encourage airports to start construction projects because they can pay down their debt faster. It’s definitely an incentive that would help get things rolling, but how does this encourage congestion relief?
Well there are two proposals here. One of them would let them only charge for construction projects during congestion periods. That way, they could charge more when the airport is congested and less the rest of the day. The other would allow these costs to be charged at any time. So why would you only charge this during congestion periods? I guess because it’s the only way they can figure out how to charge more during busy times without breaking the rule about having reasonable fees.
As a congestion-relief tool, this proposal is garbage unless you’re willing to accept large fare increases. A small increase in landing fees during peak periods will not get any airline to shift their flight times to a non-crowded time. A large increase for a more massive construction project may get some flights out of there, but the remaining flights would have to raise fares a lot to remain profitable. So you either don’t relieve congestion or you end up with extremely high pricing during peak periods just to cover costs.
Really, this would be a temporary measure anyway. As they say: “Any costs recovered for principal and interest during the construction period would have to be deducted from the amount later capitalized and amortized for recovery in the rate-base after the facility is put into use.” So, once construction is done, the fees would then be spread across all departures as they are now.
Proposal #3 – This one would allow primary, congested airports to begin charging landing fees for secondary airport operations. Put it this way. If LAX is a primary airport and it’s congested, it would be able to incorporate landing fees for Ontario into its landing fee package. Meanwhile, Ontario would be able to lower its fees so that costs would be lower over there. This can only work if the two airports are owned by the same operator.
I still don’t see how this would relieve the larger airport. Lower fees would probably encourage more flights at the secondary airport, but people still want to fly out of the larger airport. As long as that’s the case, the flights won’t disappear just because the costs go up. Instead, the fares will go up and the customers will have to pay.
Can you see a common theme here? These proposals aren’t really going to fix the problems. Now, if you could start jacking up fees to the point where airlines would stop flying routes, then you’d be able to reduce congestion. But at that point, you’d also see a steep fare increase, and that shouldn’t be the goal here.
There’s even more ridiculousness, like the fact that Pittsburgh, St Louis, Tucson, Long Beach, and others are all defined as “congested” by this proposal. Um, those are not congested airports, but I won’t get into that right now.
The primary goal should be to create more capacity by building more runways and terminals. In the mean time, we need to get better at increasing the number of flights that can be handled at the airport. I know that at JFK, for example, there are ways to get more flights in an out by reconfiguring runways. That’s not an easy task, but it’s a good medium term fix until the long term airport projects are completed. And in the short term? Airport caps. You’re going to get to the same place with caps as you are with congestion pricing. The only difference is that with caps, fares will stay the same whereas with congestion pricing, fares are bound to increase.