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Serving Customers, by Land or by Air

By Fawn Johnson
Correspondent, National Journal
April 25, 2011 | 8:30 a.m.
  • 3

The government can look awfully cool when it does what the Department of Transportation did last week in finalizing new rules that require airlines to disclose hidden fees and refund bag fees if they lose travelers' luggage. Whether it be gas prices, road traffic, or air-travel headaches, policymakers always look good when they're trying to take care of customers.

The trouble is that customers' problems are just the top layer of a vast underlying system of public and private structures -- some heavily regulated, some very expensive -- that also need attention. Sometimes the impact on customers isn't so obvious or direct. Several infrastructure and transportation groups have pointed to worsening road traffic as a reason for more investment in roads and highways, but the time lag between cause and effect weakens the good-for-customers argument.

Customers aren't always served as cleanly as they might expect. Even the relatively clear rules on airline disclosures left some questions unanswered; the DOT will separately consider whether all ancillary fees must be stated at the point of sale. The government itself could be causing the problem. The Air Transport Association made sure to note that government taxes and fees can account for 20 percent of a ticket price.

What can customers expect from the government in making their travel easier? Will DOT's new airline rules make a difference for passengers? How much of customer service really is rooted in businesses' competition with one another, rather than government intervention? What are the possible land-based corollaries to the airline customer-service rules? Is it possible for the regulations to go too far?

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April 27, 2011 11:10 AM

What could be more clear?

By Robert L. Crandall

Retired Chairman and CEO, AMR and American Airlines

One hardly needs to be a transportation "expert" to understand this issue. The case for infrastructure maintenance -- and the taxes to sustain that maintenance -- is crystal clear.

Unhappily, our political structure is so broken that the issue attracts little if any attention except when a bridge in some city falls down, or a monumental traffic jam attracts the momentary attention of the media.

Many have observed -- with respect to deficit spending and other oddities of our time -- that what can't continue, won't. Unhappily, the deterioration in our infrastructure can continue, and likely will, until and unless some major player in the political process starts telling it like it is.

Would any serious person really object to an additional 10 cents a gallon tax on gasoline if the proceeds would assure appropriate maintenance and improvements to our highway system? Or argue that the net impact on the economy would be anything but positive? Can anyone seriously make a case that investing in an improved air space management system which would redu...

One hardly needs to be a transportation "expert" to understand this issue. The case for infrastructure maintenance -- and the taxes to sustain that maintenance -- is crystal clear.

Unhappily, our political structure is so broken that the issue attracts little if any attention except when a bridge in some city falls down, or a monumental traffic jam attracts the momentary attention of the media.

Many have observed -- with respect to deficit spending and other oddities of our time -- that what can't continue, won't. Unhappily, the deterioration in our infrastructure can continue, and likely will, until and unless some major player in the political process starts telling it like it is.

Would any serious person really object to an additional 10 cents a gallon tax on gasoline if the proceeds would assure appropriate maintenance and improvements to our highway system? Or argue that the net impact on the economy would be anything but positive? Can anyone seriously make a case that investing in an improved air space management system which would reduce fuel consumpiton and cut travel delays -- even if ifares increased a bit -- would not be an investment in the country's best interests?

Of course not -- but since we talk politics and not policy in this country these days, these arguments never enter the mainstream of debate. Instead of blathering endlessly about reducing spending -- without any honest explantion of the impact of proposed changes -- lets start to keep the books the way any business does, and differentiate appropriately between spending and investment. And let's start explaining the long term consequences of neglecting the infrastructure that made us great in the first

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April 26, 2011 3:57 PM

DOT Did It Right for Passengers

By Greg Principato

President, Airports Council International-North America

In June 2010, the National Journal’s Transportation Blog asked a similar question in response to the DOT Notice of Proposed Rulemaking that led to the Final Rule on Enhanced Passenger Protections being issued last week. My answer then- and my answer now – is yes.

Every day airport officials work hard to provide the highest level of safety and customer service for air travelers. ACI-NA supported the DOT proposal to provide additional consumer protections and we applauded the department on April 20 when the Final Rule was issued. The new regulations ensure that all air travelers, including those traveling on international flights and those flying through more than 300 smaller airports, are protected against long tarmac delays. It’s unfortunate that it took so long.

When something goes wrong at an airport- regardless of whether the airport had any role or control in the service- we hear about it. That’s understandable because airports are the public face of aviation in hundreds ...

In June 2010, the National Journal’s Transportation Blog asked a similar question in response to the DOT Notice of Proposed Rulemaking that led to the Final Rule on Enhanced Passenger Protections being issued last week. My answer then- and my answer now – is yes.

Every day airport officials work hard to provide the highest level of safety and customer service for air travelers. ACI-NA supported the DOT proposal to provide additional consumer protections and we applauded the department on April 20 when the Final Rule was issued. The new regulations ensure that all air travelers, including those traveling on international flights and those flying through more than 300 smaller airports, are protected against long tarmac delays. It’s unfortunate that it took so long.

When something goes wrong at an airport- regardless of whether the airport had any role or control in the service- we hear about it. That’s understandable because airports are the public face of aviation in hundreds of communities throughout the United States. That is also the reason airport directors are working so hard to change the current system that prevents airports from raising the necessary funds to improve infrastructure and ultimately make travel better.

Aviation’s infrastructure received a D when assessed by the American Society of Civil Engineers. They found a significant shortfall in aviation infrastructure funding over the next five years, and noted that “travelers are faced with increasing delays and inadequate conditions as a result of the long overdue need to modernize the outdated air traffic control system and the failure to enact a federal aviation program.” ACI-NA’s own Capital Needs Survey completed earlier this year found $80.1 billion in projects that are considered essential by U.S. airport and airport users over the next five years. On average that is $16 billion every year between now and 2015.

DOT did the right thing in increasing passenger protections in the Final Rule. Now Congress needs to do the right thing and increase the cap on the Passenger Facility Charge user fee. The PFC is set locally and used exclusively for local airport projects. This will allow local officials to finance new runways, gates, terminals and roads. These projects would, in turn benefit communities, travelers and taxpayers by making air travel more convenient, safe and affordable, without a penny going to Washington bureaucrats.

The PFC user fee accounts for very little of the cost of flying, especially when compared to airlines’ baggage tax, which cost air travelers more than $4 billion in 2010. But, thanks to DOT’s latest consumer protection rule, at least now if your bag is lost, you get your money back.

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April 25, 2011 10:34 AM

Competition or Regulation

By David Heymsfield

Former Staff Director, House Committee on Transportation and Infrastructure

For some elements of airline service, government regulation does appear to have created a better level of service than would be provided by marketplace competition. The issues that come to mind include denied boarding compensation, length of time waiting on a runway, and disclosure of charges. Perhaps this is because the airlines don’t see much potential for attracting passengers by competing on the types of service issues ordinarily covered by regulations. The regulations generally deal with problems that are infuriating when they do occur, but do not happen to most passengers on most flights. How much business would an airline gain from an ad along lines of, “Tired of sitting on the runway for ten hours during a blizzard? Fly xxx and you’ll never sit for more than three hours.” The airlines gain much more business by focusing on fares, frequency of service and the benefits of their frequent-flier programs.

...

For some elements of airline service, government regulation does appear to have created a better level of service than would be provided by marketplace competition. The issues that come to mind include denied boarding compensation, length of time waiting on a runway, and disclosure of charges. Perhaps this is because the airlines don’t see much potential for attracting passengers by competing on the types of service issues ordinarily covered by regulations. The regulations generally deal with problems that are infuriating when they do occur, but do not happen to most passengers on most flights. How much business would an airline gain from an ad along lines of, “Tired of sitting on the runway for ten hours during a blizzard? Fly xxx and you’ll never sit for more than three hours.” The airlines gain much more business by focusing on fares, frequency of service and the benefits of their frequent-flier programs.

The biggest quality-of-service problems are beyond the control of either competition or consumer protection regulations. Specifically, there are the post-9/11 security procedures which passengers find intrusive and unpleasant and which add considerable time to the overall trip by air. Another major problem for consumers is the lack of sufficient capacity and technology at our airports and in our air traffic control system to enable airlines to keep their flights on schedule. These problems are considerably more important to the average passenger than the issues dealt with by consumer protection regulations.

On the ground, the problems faced by the average driver are even more remote from the forces of competition or consumer protection regulation. The best solution for congestion and potholes is more investment in infrastructure, which will require higher taxes or fees. Unfortunately, however upset drivers may be, when they morph into voters many of them they become so resistant to raising taxes or paying fees that any proposed increases become a political non-starter.

The case for a tax increase has never been made more clearly or concisely than it was by President Reagan in 1982, when in support of an increase of 5 cents a gallon in the gas tax he stated:

“But let’s face it. Lately, driving isn’t half as much fun as it used to be. Time and wear have taken their toll on America’s roads and highways. We simply cannot allow this magnificent system to deteriorate beyond repair. [The expanded program] will be paid for by those of us who use the system, and [the five-cent increase] will cost the average car owner about $30 a year. That’s less than the cost of a couple of shock absorbers. Most important of all, it’ll cost far less to act now than it would to delay until further damage is done.”

The only point I would add would be in response to recent arguments that

instead of raising taxes we should rely on the private sector to build roads and charge tolls. Anyone forced to use a toll road will end up paying many times more than the $6 a year average cost of each one-cent increase in the gas tax. How much is it worth to pay a toll to the private sector instead of a tax to the government?

Supporters of improved transportation infrastructure can only hope that before too much more time passes the common sense arguments of President Reagan can cut through the anti-tax slogans and ideology.

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