Archive for the ‘Regulatory affairs’ Category:
Is There An Alternative To Commercial Airlines?
In Japan and Europe, high speed rail often competes with air travel for short distance routes. While it may take 3-4 hours door-to-door to travel 300 miles in an aircraft, the high-speed train can cover the same door-to-door distance in more comfort, the same time, and for less money. An automobile may need 6 hours to complete the same journey at a similar cost of ownership.
What many peoples fail to realize is the possibility that a community can operate their own airline. This alternative is being pioneered by Social Flights. The regionalization of air service is a new concept that allows communities to own and operate one or more aircraft maintaining control over the schedules and locations where the aircraft flies.
In the United States, a rift continues to grow between available air service and reasonable alternatives to air service. This creates a substantial burden on families; but it also creates a compound burden on the economy upon which those families depend for their livelihood. If corporate travel is constrained, the economy as a whole is constrained.
From this article in the NY Times:
Consider the new realities of air travel. Competition is decreasing, fares are rising and airlines are adjusting routes (and charging extra fees) in ruthless calculations to extract the greatest possible revenue per mile flown.
Many airlines will continue shrinking overall capacity and trimming domestic routes in 2012, and the Chapter 11 bankruptcy filing of AMR, the parent company of American Airlines, will merely exacerbate the situation. In 2012, American will “ground some planes and resize our network,” the company’s chief executive, Thomas W. Horton, recently told employees.
In addition, John P. Heimlich, the chief economist of the trade group Airlines for America, said, “Capacity reduction is one of the steps the industry is taking to preserve profitability.”
Several articles are now popping up comparing the alternatives that are available. An overnight Amtrak in a cozy sleeper car can cost the same for some routes as the aircraft - unfortunately, Amtrak is not universally connected to very many routes. High speed rail is still on the drawing boards but still many years away with fewer stops and likely connecting major hubs anyway. The other alternative is to simply drive; with the ground travel and delays incurred t hub airports, a commercial flight less than 750 miles can have an door-to-door average speed of around 70 miles per hour.
Michael Boyd, the president of the consulting company Boyd Group International, sums up the phenomenon succinctly. “The cost of flying airplanes across the sky has eclipsed the ability to support it at many communities,” he said in a recent forecast. In 2012, he predicts, airlines will accelerate the mothballing of smaller 50-seat jets, the workhorses for connecting service between many midsize airports, and even some big ones.
Social Flights can provide the knowledge, expertise, personnel, certification, and equipment to maintain and operate an aircraft fleet, as well as the social media backbone that allows people to self-organize around the aircraft asset.
As such, the community can create direct flights bypassing hubs, they can schedule flights for their corporations and shuttle their executives to new business markets for a price that is hugely favorable to any existing alternative; which is often nothing.
Another Travel Tax Clips 4M Wings
Few people take into account the social value of air transportation. There are very few studies that can measure the impact on a community when they are immobilized due to lack of a service that had previously been available. There is no true economic category to describe such loss except as a tax on travel.
A regressive tax is taxation that takes a larger percentage from low-income people than from high-income people. A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder. Social Flights can restore this value with a regionalized public jet charter system.
Now we can add “Travel” to the list
Sales taxes that apply to essentials are generally considered to be regressive as well because expenses for food, clothing and shelter tend to make up a higher percentage of a lower income consumer’s overall budget. In this case, even though the tax may be uniform (such as 7% sales tax), lower income consumers are more affected by it because they are less able to afford it.
<via American Eagle to park planes, reduce service – Dallas Business Journal>
The small city gets the regressive travel tax
American Eagle announced that they would reduce frequency in a few select markets, they would discontinued seasonal service from D/FW to Augusta, Ga. Eagle would also discontinued service from Chicago to Tri-Cities, Tenn as well as discontinued service between Miami and Savanna, Ga., and Miami and Fort Myers, Florida. American Eagle would also hasten the cancellation of Los Angeles-Boise, Chicago-Calgary and D/FW-Fayetteville, N.C., service from Feb. 9 to Jan. 31.
So how many people would these reduction in service decisions impact? If we just add up the populations of the smaller metropolitan area in each city pair, we can estimate economic loss of opportunity under the assumption that the larger city would have alternate options. Fair enough?
Augusta, GA: 556,877
Tri Cities, TN: 500,538
Savanna, GA: 347,611
Ft Meyers, Fl: 618,754
Boise, Id: 616,500
Calgary: 1,230,248
Fayetteville, NC: 366,383
The Creeping Costs
The total is at least 4 million who will lose one more degree of economic freedom. 4 million people will pay a regressive tax denominated in time, money, and dignity in some form or another for the benefit of stockholders in American Eagle. 4 million people will lose the economic benefit of travelers from large cities.
On closer inspection, with the exception of Calgary and Boise, all of these cities are well within 1000 miles of each other. Each of these cities is well within 1000 miles of cities just as large as those that American Eagle is diminishing service.
While a hub and spoke model may break down economically, a regionalization strategy may work quite well. It has been proven that people are willing to pay a premium for direct service (otherwise the airlines would not be dropping less profitable indirect service). It is also obvious that people place a premium on their time and hassle as demonstrated by trends in online shopping, communication, and social organization.
These ingredients simple add up to a regionalization air transportation route structure enabled by online social organization tools such as Social Flights where community airlines can form around community priorities. Social Flights can restore this value with a regionalized public jet charter system.
The Personal Light Jet
National Public Radio recently aired 2 very interesting segments on the airline industry. The first segment cited companies leaving small cities because of poor air transportation service. The second segment cited an interesting statistic; all of the airlines that existed before the deregulation act of 1978 have gone bankrupt.
But wait, wasn’t airline deregulation supposed to be good for the airlines? Wasn’t it supposed to spawn innovation and drive economies of scale? Wasn’t it supposed to increase choices for the airline passenger?
Well, at least one of these impacts is true; deregulation spawned innovation – although probably not the way it was predicted in 1978. Today, new technologies are appearing everywhere from new forms of social organization to faster and smarter aircraft systems. This article features a very interesting aircraft sector called the personal sport jet. While I do not know enough about their actual business model, it would appear that they are aiming where the airlines and major manufacturers simply cannot reach.
With an operating cost of $400 per hour instead of $1200-$2000 per hour in this class, the excel sportjet can deliver a 2 hour jet flight performance in a “regionalization” market. Social media trends show us that people are connected in shorter distances and far more diverse locations than the hub and spoke system can accomodate.
This aircraft is small, lightweight, and fast. It uses a single jet engine and flies at a lower altitude reducing pressurization forces and associated cost. The Sport Jet II carries 4 people and employs extensive use of composites in addition to simplified pilot qualification requirements.
Clayton Christensen’s book “The Innovator’s Dilemma” cites numerous now classic examples of how industries are threatened by simple upstarts that deliver what the customer wants at a price they can afford without the complexity and “over-performance” burden that mainstream players evolve into.
While the aviation business is very complicated, it is truly a pleasure to witness new products and innovations that come to market under the radar of the big players. We hope that they grow to have an impact on the industry. After all, that is what Social Flights is all about.
Bravo Sport Jet II, Bravo.
When Business Follows The Airlines Out of Town
Ok, now this airline game is becoming serious business. It is bad enough when small communities that never had air service options have given up trying to grow (where new opportunities fail to materialize and young knowledge workers move away). It’s a whole different matter when companies pick up and leave a community because the airlines pull the plug on air service.
[via When Airlines Depart Cities, Businesses May Follow : NPR]
Last month when Chiquita announced it was moving its corporate headquarters from Ohio to North Carolina, it said it was lured there in part by the number of flights in and out of the Charlotte Douglas International Airport. Cincinnati came out on the losing end of the deal because like so many other cities, it faces a shrinking airline hub, which can affect the city’s business climate.
US Cities are vulnerable to decreased economic development due to Airline Service loss
Regressive Economics
When a company leaves town, it takes with it the self-identity of the people who worked their entire careers to make that company great. When people are forced to migrate to find new work, they impose a cost on their families and futures. While corporations maintain economic freedom to make decisions in their own best interest, the public does not have the economic freedom to respond in their own best interest.
Daily Departures
Cincinnati; At peak, 2005: 673 daily (5 international); Current: 200 daily (1 international)
Pittsburgh; At peak, 2001: 579 daily (3 international); Current: 145 daily, (1 international)
St. Louis; peak 2001: 595 daily; Current: 250 daily
And, this is ONLY THREE Cities.
Looking at the above statistics; well over 1000 flights per day have been eliminated from these three not-so-small cities. That is 365,000 flights denying economic equality to over 50 million travelers in a single year. The scale of entrepreneur career-years alone squandered due to lack of air service is absolutely catastrophic for the American Economy. The irony is that people who move away need to travel more to stay connected to families. The economic friction imposed on communities is staggering.
“I remember coming here a few years ago and it was a hub of activity, you know, with all three concourses,” he says. “Now there’s only … one concourse left, if that, and it’s just really amazing to see this huge infrastructure supporting very little flights.”
Van der Horst with the Cincinnati chamber says she doesn’t expect Delta to go back to 673 flights a day at CVG, but she knows that for Cincinnati to attract and retain more business, it will mean landing more flights.
Social Flights is working overtime to create a Community Air Service Program that allows communities to access modern jet aircraft to fulfill their own travel needs whether they need direct flights, hub flights, corporate shuttle flights, or charter jet operations. Social Flights has the operational experience to teach communities how to manage their own air transportation operations through their own airports, FBOs, and responding to their own social priorities with modern aircraft.
Economic Freedom belongs to everyone. This is the cornerstone of the Social Flights business model – Social Flights is the people’s airline. Let us know where you want to go, before someone else does that for you….