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More airport fees, now what?

Aug 9, 2010

Monday, August 9, 2010

By Vanessa Horwell

So airports have won the right to charge airlines higher fees during peak hours (see article in BNET). Are they being slammed in the media about these fees, like the airlines are? Um, no.

The concept behind this Bush-era regulatory change (which has been undergoing various legal challenges until a few weeks ago) is that if airlines have an incentive to operate flights during off-peak hours, fewer flights will be flown during peak hours, reducing the strain on airport infrastructure.  That is the premise, anyway.

However, the problem with this line of reasoning is that the incentive is misplaced.  The incentive for airlines to operate their flights at the times they do is determined by passenger demand – and meeting demand for the airlines’ core product will always outweigh any cost savings associated with avoiding marginally higher airport fees.  Passengers, by the same token, are not being incentivized to fly off-peak, particularly the business travelers that make up the majority of peak-hour passengers.  Except in an isolated hypothetical example like that of a leisure-focused low cost airline being able to aggressively sell cheap off-peak flights, this change in policy will almost certainly result in higher prices for consumers, slimmer margins for airlines, and a right royal mess of conflicting flight schedules, difficult connections, incongruous airport policy and so on.

And this is precisely what the airline industry does not need.

As more flights are pressured to move to off-peak slots by the increase in operating cost associated with the higher airport fees, demand for these flights will also fall off due to business travelers unwilling to travel off-peak or connecting travelers needing peak-hour flights to make connecting flights.  Without the demand to sustain them, off-peak flights will be cut altogether (we can’t forget that airlines are still in a bad way; most cannot support a route or a time slot that consistently loses money).  This will result in no net gain in terms of traffic reduction at the airport, and so the Department of Transportation has effectively facilitated an additional reduction in capacity- one flight at a time. Congratulations!

The benefit for consumers (and really, benefit to consumers ought to be the focus of any governmental initiative): higher fares, more crowded airplanes.  Congratulations again!

Like BNET, we’re against this regulation.  Instead, we’d propose a long-overdue overhaul of the nation’s airport and air traffic infrastructure.  Institute changes in technology that result in the more efficient use of runways, gates, and time slots to alleviate traffic and delays.  Use tax incentives or direct government spending to construct better, more efficient airports, or overhaul existing airports (and put a few hundred thousand Americans back to work in the process).

Giving airports carte blanche to squeeze airlines already constricted by volatile fixed costs, slack demand, and artificially low fares is not the way to improve a national air transit system.

It’s just a way of encouraging off-peak performance, not fixing the broken down model.

Vanessa Horwell is Chief Visibility Officer at ThinkInk. She works with companies in the U.S., UK and Europe to improve their visibility through strategic public relations and new media channels. Reach her at vanessa@thinkinkpr.com.

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