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Non-Tech : Airline Discussion Board
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From: Glenn Petersen4/30/2023 3:15:24 PM
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The Path to Abundant Air Travel

Removing regulatory restrictions and other constraints will result in more, cheaper and better options for air travelers

Gary D. Leff
April 28, 2023

When it comes to air travel, we need more options. Image Credit: Moment

More passengers fly within the United States each year than any other country. On many levels, this makes sense, given the size of the U.S. economy, the distances involved, and that aviation is an industry where the U.S. remains highly competitive, from the manufacture of aircraft to the making of jet engines. And supposedly, the industry is also a poster child for deregulation, culminating with 1978’s Airline Deregulation Act.

Yet while there are hundreds of brands of breakfast cereal, there is limited product differentiation from a limited number of U.S. airlines. Moreover, air travel isn’t becoming materially more reliable—the percentage of U.S. domestic on-time arrivals was no greater in 2022 than it was in 2002. We should have more options, and better performance. In short, we need air travel abundance.

The Problem

Contrary to the narrative that today’s airline industry is a deregulatory success story, commercial air travel remains one of the most highly regulated industries in the country. Effectively what changed after 1978 was that the federal government no longer told airlines where they’re allowed to fly, and how much they can charge. That’s no small deal. However, nearly every other element of the experience continues to be dictated—and even directly managed—by the government.

For example, unlike much of the world, such as in Europe and Australia, nearly every U.S. commercial airport is owned by a local government. What’s more, airport security isn’t just regulated to government standards; it’s also mostly carried out directly by the government through the Transportation Security Administration (TSA.) And from the time the plane pushes back from the gate to the time it arrives at its destination, it’s told exactly where to go by air traffic controllers, who are government employees.

Elsewhere in the world you’ll find nonprofit organizations conducting air traffic control, with better technology to direct planes more effectively and efficiently. You’ll also find private security services following government standards. In both cases, these arrangements have been shown to be best practices because the government isn’t simply regulating itself.

The U.S. government isn’t just overinvolved in important areas like air traffic control; it involves itself in mundane decisions as well, and in areas where it is clearly not needed. At the start of the pandemic, for example, when American Airlines wanted to hand out hand sanitizer to passengers, they had to seek buy-in from the Federal Aviation Administration (FAA). That involved both meetings with their local certificate office (there’s an office of the FAA just for regulating American Airlines) as well as higher-ups in Washington, D.C. You might think that makes sense—perhaps hand sanitizer is flammable—but the FAA had already studied the issue and found little risk.

The meetings were performative and completely unnecessary. But this kind of thing is very common; nearly every element of the customer’s air travel experience involves the government. This in turn can descend into farce. For instance, when airlines want to add doors to business class seats, they need to ask permission from the FAA because it requires an exemption to federal regulations. When American Airlines recently asked permission, the FAA refused to consider their submission—because the electronic letterhead the airline used in its request didn’t list its address.

This extensive and largely unnecessary regulation, layered on top of specific rules that limit entry into the market, constrains the availability of air travel. That means it’s less convenient and more expensive to travel—but even more than that, it means the products airlines offer us are much more limited.

So, what should we do? Here are a few simple suggestions that will lead to cheaper, better and more abundant air travel.

Legalize New Airlines

It’s nearly impossible to get approved for a new airline. That’s why new entrants usually buy up existing operating certificates from nearly defunct carriers.

For example, one of two significant airline startups to launch service during the pandemic was Avelo Airlines, founded by Andrew Levy, the former CFO of United Airlines and chief operating officer of Allegiant. But Levy didn’t just start a new airline, he took some of his financing and bought Xtra Airways, a shell of a carrier that had already sold off its fleet—save for one ancient Boeing 737-400, so it could retain its FAA Air Carrier Certification.

Even if you can start a new airline, you are limited in how much money you can take from foreign businesses and airlines. So long-established foreign carriers, like Air France and Japan Airlines, aren’t allowed to control U.S. carriers, or even operate flights within the U.S. As a result, the last major carrier to launch was Virgin America in 2007, since acquired by Alaska Airlines. And that startup was delayed by issues over whether it was really controlled by U.S. investors—or by Virgin Atlantic founder Richard Branson’s group in the U.K.

There hasn’t just been a failure to start new airlines. The number of airlines in the U.S. has shrunk markedly, declining by over 70% during the past 30 years as a result of mergers and bankruptcies. While the largest airlines today have significantly more reach than they did 20 years ago, and U.S. air travel has grown overall in the past two decades, small cities aren’t served by non-stop flights to nearly the same extent that they used to be. The share of airline trips under 500 miles has fallen in half, to just 14%, representing a loss of 30 million travelers. What’s more, many small cities have lost commercial service altogether.

Meanwhile, with ultra-low-cost carrier Spirit Airlines having entered into an agreement to be purchased by JetBlue, it would be great not to lose a low-fare competitor. So, we should welcome Ireland’s Ryanair, Britain’s easyJet or some other low-cost foreign carrier into the U.S. market. At the higher end, Singapore Airlines makes investments in foreign carriers. It would be great to see a prestige airline like Singapore or Emirates enter the U.S. market. The entrance of these and other low-cost and prestige airlines into the U.S. market would boost competition, which in turn would mean lower costs, better service and more options.

More Capacity

To grow airline capacity, we need to expand airports, move more aircraft through our airspace, and hire more people to fly the planes. Yet we don’t have the gates or runways to expand air travel. And, not surprisingly, the current limits favor incumbent airlines and the status quo, not innovation.

Airport construction is constrained by the same problems that plague so many other public infrastructure projects. Thanks to factors such as overregulation and NIMBYism it’s difficult to build a new airport (the last new major one built in the U.S. was Denver International—which opened in 1995) or even build a new runway. In the U.S. there are very few private commercial airports. Local governments could unlock over $130 billion privatizing the largest airports, but the path to do so is incredibly cumbersome.

The most congested U.S. airports, New York’s JFK and LaGuardia, and Washington’s Reagan National, have limits on the number of takeoffs and landings that are permitted. The government has given existing airlines “slots,” or takeoff and landing rights, and these are effectively subsidies for incumbent carriers that keep out competition. We should auction takeoff and landing slots, rather than granting property rights to airlines (that they can use or sell). Another idea is to use congestion pricing to allocate scarce resources to their greatest value use.

It can be difficult for airlines to enter a new market even without slot controls. Long-term gate leases and regulatory capture at government-controlled airports have allowed incumbent carriers to maintain their hold on major hubs.

Meanwhile, attempts to modernize air traffic control have floundered for 30 years. The FAA manages major projects badly, but the effort is also constrained by trying to make capital investments within annual congressional appropriations cycles, which stifles the kind of long-term spending plans that are needed for these types of projects. As a result, we still largely use radar rather than GPS and voice rather than digital communication, and we are only just now switching from paper flight strips (including changes to speed and altitude that are handwritten) to electronic data to manage traffic flow.

The private nonprofit NavCanada (which rolled out electronic flight strips way back in 2002!) oversees not just Canadian airspace but also the North Atlantic. It operates much more cost efficiently than the FAA. And they’re way ahead technologically as well. In contrast, having one agency that is both regulator and service provider (self-regulation, but by government) was identified as a poor practice by the International Civil Aviation Organization, all the way back in 2001. The U.S. is one of just a few countries out of compliance with arms-length safety guidelines.

Spinning off air traffic control into a private entity would be better for accountability and allow for more targeted and consistent investment. Meanwhile the FAA’s Office of Inspector General has found that attempts to modernize air traffic control within the agency have wasted billions of dollars. And things aren’t likely to get better because FAA management and procurement problems are endemic.

More Pilots

It’s all well and good to remove barriers to starting an airline and to create more airport capacity, but there aren’t enough pilots because the government has instituted rules making it more difficult, time-consuming and costly to become a pilot—rules that have nothing to do with safety.

Up until 2013, pilots had to have a commercial license, which required 250 hours of flying, in addition to being type-rated for the specific aircraft they were flying. Following the 2009 Colgan Air crash, the requirement was increased for most candidates to 1,500 hours even though the two pilots involved in that crash already had over 1,500 hours. (The captain of the downed plane had 3,379 hours.)

Not everyone needs 1,500 hours. Military pilots are allowed to fly with 750 hours, those with a B.A. in aviation can fly with 1,000 hours, and those with an associate degree in aviation can fly with 1,250 hours. But even these requirements are onerous and unnecessary—certainly for a co-pilot.

Except for the hours of flight time, on top of a commercial license, pilots don’t have specific objectives or proficiency requirements. It’s just a time requirement. What’s more, there is absolutely no relationship between safety and the 1,500-hour rule—a rule that no other nation has adopted. And, of course, the U.S. allows pilots from nations without such a rule to fly here and depart from U.S. airports. There could be better training and testing with more structured flying instruction that’s easier, more meaningful and less expensive to accomplish. The only thing the 1,500-hour rule does is serve union interests by limiting entry into the profession.

Development of New Aircraft

We should ensure that new aircraft are safe—but we shouldn’t unnecessarily delay new technology in the name of safety. New aircraft in recent decades haven’t become substantially more advanced. Indeed, Boeing’s latest narrowbody, the 737 MAX, was designed to be as close as possible to earlier 737 models. And while materials and electronics have become more complicated, fundamental propulsion technology has remained the same. That could be about to change—if we don’t stifle innovation.

United, along with Mesa Airlines, ordered 200 small electric planes from Archer Aviation. These vertical takeoff and landing planes (eVTOLs), flying up to 150 mph for up to 60 miles, aim to whisk passengers from urban downtowns to United’s hubs in the next couple years. The estimated cost for the flight from Manhattan to JFK airport, for example, would be about $50.

American Airlines has pre-ordered 250 similar aircraft from Vertical Aerospace and taken options on 100 more planes that promise to “carry four passengers and a pilot and fly at speeds up to 200 mph over a range of over 100 miles.” These eVTOLs could be operational “as early as 2024,” according to the company. In reality, however, electric-powered planes may be further off than hoped for due to FAA regulatory hurdles.

As transportation researcher Bob Poole explains, the FAA has unnecessarily complicated the airplane certification process for these new types of planes: “[J]ust about everyone in the emerging eVTOL industry assumed that type certificates [which certify an airplane’s safety and airworthiness] were to be handled under… the same regulation used to certify conventional commercial airliners. FAA would have attached special conditions to the… regs to account for the ability of eVTOLs to take off and land vertically. Instead, FAA has decided to define these new aircraft as “powered lift” vehicles to be certified under… special class rules.” Since those don’t exist for aircraft like this, the government needs to create a set of rules before flight can be allowed.

In contrast, a more conventional regulatory process will be used in Europe, which means, in essence, that the U.S. is saying European safety regulators can’t be trusted (an odd thing after various Boeing debacles), and that manufacturers will have to pursue two completely distinct processes.

A Future Where Airlines Innovate

Today we see some startup airlines trying to find workarounds for rules that have limited innovation. For instance, JSX is an air carrier that operates regional jets with just 30 seats and flies in and out of private airports, allowing passengers to skip busy commercial airports and TSA checkpoints. More than one executive at a major airline has told me that as JSX grows and becomes more of a competitive threat to expect lobbying of Congress and the FAA to disallow their business model. The bulk of JSX flights occur between cities less than 500 miles apart, which have otherwise seen a significant decline in service.

If we allow the creation of more new airlines, if we allow foreign investment and expertise into the domestic airline business, and if we relax the restrictions that keep airports and airspace congested and create a scarcity of trained pilots, we’ll have more abundant and better air travel. Ultimately it’s about eliminating the artificial constraints to efficiency and new competition.

We can have a future where travel is an easier, cheaper and more pleasant experience—where we’re delayed less often and where commercial airlines genuinely compete with a host of different products so we can buy the one that suits us best instead of one size fits all. But to have this kind of abundance, we need a more open and competitive system that focuses on passengers and their needs rather than existing airlines and other special interests.

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