The Price of Air Travel

(Photo: Dave Sizer)

The cost of air travel is going up, and airlines are counting on us not to notice.

I’m not talking about airfares, which have actually declined in real terms over the past decade, despite inching up in the past few years. And I don’t mean the ancillary fees to check a bag, check in at the airport, speak to a live agent, or pick your seat, though these, too, are going up. Instead, I’m talking about the cost of delays and schedule disruptions that waste travelers’ time and force them to travel earlier to their destinations or risk missing important meetings and events. 

Air travel in the U.S. is becoming less reliable and less resilient to shocks like isolated storms that can ripple through the system and impact passengers thousands of miles away. If anti-trust authorities approve the merger between American and US Airways, we should expect things to get worse.

On a recent trip to Boston for an economics workshop, United canceled my flight out of Raleigh twice before eventually putting me on a rival Delta aircraft. With two flights from Raleigh to United hubs cancelled that morning, the queue for rebooking was long, and some passengers were likely stranded until the next day. On the trip home, my United flight was so delayed that I would have missed my connection if I had taken the original flight. So United again put me on a Delta plane that was ultimately also delayed. And a few weeks ago, a friend was delayed on United out of La Guardia. The airline automatically rebooked him—for travel two days later!

Researchers at MIT and George Mason University estimate that delayed and canceled flights imposed on passengers an aggregate delay of 28,500 years in 2007. The cost of these delays, and of risk-averting behavior like traveling early to destinations, was estimated at $15.3 billion, a startling number that accounts for the opportunity cost of time but doesn’t measure the consequences of missing critical appointments like weddings or job interviews.

Department of Transportation statistics suggest reliability improved in 2012 relative to 2011 and is not much worse than a decade ago, with only 16 percent of flights delayed 15 minutes or more and only 1 percent cancelled. But such statistics belie the true state of air travel in the U.S. and the fragility of airline networks. As USA Today reported earlier this year, airlines have padded flight times in order to improve on-time performance. As a consequence, fewer flights are recorded as late arrivals and the share of flights arriving early has quintupled since 1996 to 20 percent. Even with padded arrival times, however, connecting passengers face a 30 percent or greater chance of experiencing delays.

Airlines are increasingly consolidating service at the nation’s largest airports, according to a report this summer from MIT. Meanwhile, the number of large hubs has declined from 20 to 10, even as the number of flights channeled into large hubs has grown 75 percent.

This means an ever-larger share of passengers must make connections in an ever-fewer number of airports, including those in the most congested airspace in the country. If weather, security, or accidents halt or slow operations at one of those airports, effects can reverberate throughout the system, as late-arriving aircraft delay flights downstream elsewhere around the country. United passengers should find this particularly alarming as five of the airline’s hubs rank among the six worst airports in the country for on-time departures.

Because airlines are also cutting routes and boosting loads, they are increasingly less able to accommodate disrupted passengers, leading to days-long delays. Fourteen percent fewer flights were offered in 2012 than in 2007, while aircraft load factors reached a seasonal record in February and have averaged about 83 percent since 2012, well above the loads in the mid 70s typically observed a decade ago.

In adopting fragile networks, airlines are shifting costs onto passengers in a way they hope will be less likely than fare increases to attract the attention of consumers and regulators. Fare competition is relatively fierce because prices are fairly transparent, particularly so with online travel agents and fare aggregators like Orbitz and Kayak.

Network reliability, on the other hand, is largely a shrouded attribute, insalient to consumers who cannot readily compare the reliability of competing itineraries ex ante nor assign blame to various parties like Mother Nature, air traffic control, and airlines ex post—unless they are expert travelers like Ben Schlappig. Consequently, airlines needn’t compete as aggressively along this dimension as they do over fares. So they minimize expenditures on preventive maintenance, spare planes, spare parts, and spare flight crews, and eke out efficiencies gained from larger, though brittle, hub operations—effectively delivering customers a less-reliable product.

Late arriving aircraft were the leading cause of delays in 2012, responsible for more than 12 times as many delays and cancellations as weather. Aircraft positioning is assuredly within airline control.

In reviewing the proposed merger of American and US Airways, anti-trust authorities should be mindful not only of changes in prices as the industry consolidates but also of changes in product quality, particularly as air transport seems increasingly susceptible to breaking. And as airlines build networks with less resilience to weather, mechanical problems, accidents, and other unforeseen events, remember who is to blame the next time you misconnect.

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  1. James says:

    How bad does it have to get before people start to realize that most meetings, conferences, &c can be done just as well by teleconferencing?

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    • Eric M. Jones says:

      James is right-on!

      I took airplanes to business meetings for many years. I am thoroughly convinced that the vast majority of “business travel” is bogus and a gigantic waste of money. The worst are when somebody travels cross-country to show us a Powerpoint.

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      • James says:

        Scientific conferences in my case, but the point’s the same. I can scan the typical 40 minute slide presentation in 5 minutes or so. Questions could be dealt with far more effectively in an email forum format, giving the presenter time to actually think about the answer. (I know I’ve pulled a few boners in my time, trying to answer questions off the top of my head.) And yet someone from our research group must take the time to travel to conferences, spend unproductive/unpleasant hours waiting in airports, hotel rooms, &c…

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      • Jackie K says:

        Correct, Eric!
        There are times when face to face is needed like meeting clients or managing a change but most of the travel done is so not needed. Either there’s another person at the other end who can do it instead, or, you could book out 2 hours and spend real quality time with your colleagues on a call or conference instead of wasting a day on the travel and still only being available for 4 hours at the other end because of flight times.

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  2. Pauli says:

    Given the delays and cancellations mentioned, would taking a redeye be a good strategy for a smooth trip? In my case, the flights would be between SJC and ORD, and SJC and STL.

    Also, any recommendations for non-airline websites that provide delay and cancellation info?

    Thanks!

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  3. jeremy says:

    Do any of you really think you can de-regulate aviation without paying a price??

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  4. Jackie K says:

    I think this is a good example of something happening across many industries now. Our train service in Melbourne might be similar. It is assessed by govt quarterly and fined if delays slip below a seemingly high benchmark (90% I think), but somehow they rarely do and their on-time figures remain high, even while commuters who have been traveling on the same train routes for years know the trains are slower and more unreliable than ever.
    There are lots of these kinds of example where officially everything is better (and in some ways some of it really is), but we know things are worse than we’re told but can’t quite put our finger on why, and it makes people so frustrated.
    Great article and comments.

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  5. Julien Couvreur says:

    If delay is such a problem and it is high in customers’ preferences, maybe Expedia, Orbitz and other agencies could offer delay insurance.
    Presumably airports or airline companies with better track record would command lower premiums and the change in quality would be captured in an easy-to-understand price.
    They could also offer ratings and alerts for trips through unreliable or congested airports.

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  6. hanmeng says:

    “The cost of air travel is going up, and airlines are counting on us not to notice.” And if you do notice and drive instead, your risk of dying goes up. Better not pay attention!

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  7. Robert Marrlett says:

    I have a solution. Airlines, UPS, FedEx, DHL, take notes. One simple fix can save $60,ooo in each avoided delay. This also saves 4 techs from being diverted for 2-4 hours, and cools down radiant heat from the tarmac and APU. During boarding and loading the engines cannot be on and preflight checks are in progress. Trapped air cannot circulate and overheats systems causing a very common summertime delay, wing leak warnings. Once a warning message is displayed a series of safety checks must be done. Avoid causing the fault warning using a KTConnector.
    Save the environment by not wasting approximately 500 lbs of fuel while these checks are done. The best part is Passengers and crew are not subjected to temperature extremes of radiant heat.
    It is good for business and reduces waste, increases efficiency, and customer satisfaction. Dependable on time departures are one step closer using a KTConnector. Who doesn’t want to save billions of dollars from eliminating waste?

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