Cannabis in US airports

 An anomaly of US Federal law is that marijuana is illegal on airplanes (interstate commerce) even when the airports involved are in states where marijuana is legal.

The WSJ has the story and a picture:

Don’t Put Your Stash in the Overhead Bin. A ‘Cannabis Amnesty Box’ at Chicago’s Midway Airport.  By Bob Greene

Elizabeth "Betsy" E. Bailey (1939-2022)

 Betsey Bailey, an economist of many parts, has passed away.

I knew of her both as an academic dean at CMU and as a proponent of airline deregulation, in theory and practice.  The theory had to do with the idea that even markets with big players who had lots of market share might be perfectly competitive (and hence not need lots of regulation) if they were "contestable," i.e. if new entrants could enter the market at low cost if they saw profitable opportunities.  The idea was that the airline market would keep prices low to ward off new entrants, or entry by competitors into profitable routes.  Her stint on the Civil Aviation Board led to much reduced regulation of commercial airlines, after which airlines adopted the 'hub and spoke' patterns we see today. (When they were regulated, airline routes looked more like railroads, e.g. some had northern routes, some southern...)

Here's the Washington Post obituary:

Elizabeth Bailey, pathbreaker for women in economics, dies at 83. She was the first woman to receive a PhD in economics from Princeton and helped deregulate airlines as the first woman on the Civil Aeronautics Board  By Emily Langer

"Dr. Bailey, 83, who died Aug. 19 at her home in Reston, Va., was widely credited with opening opportunities for women in her field.

"In 1972, she became the first woman to receive a PhD in economics from Princeton University. Five years later, President Jimmy Carter appointed her the first female member of the Civil Aeronautics Board, where she helped provide the intellectual framework for the deregulation of the airline industry.

...

"Later, at Carnegie Mellon University in Pittsburgh, Dr. Bailey became the first woman to serve as dean of a Top 10 graduate business school."

*******

See 

Morrison, Steven A., Clifford Winston, Elizabeth E. Bailey, and Alfred E. Kahn. "Enhancing the performance of the deregulated air transportation system." Brookings Papers on Economic Activity. Microeconomics 1989 (1989): 61-123.

Bailey, Elizabeth E., David R. Graham, and Daniel P. Kaplan. Deregulating the airlines. Vol. 10. MIT press, 1985.

Bailey, Elizabeth E., and William J. Baumol. "Deregulation and the theory of contestable markets." Yale J. on Reg. 1 (1983): 111.

Keeping pilots in the Air Force, in the face of renewed, post-pandemic demand from airlines

 I spent a good deal of time last year working on understanding the internal labor market of the Air Force, and how it interacts with the larger American labor market.

During the pandemic, with airlines cutting back on flights, it may have seemed as if the problem of retaining pilots had eased. But airline demand for pilots is growing,rand the Air Force will have to think creatively about retention of pilots who are at or near the end of their service obligation.

Here's a short piece in Defense One, by two Air Force officers:

The USAF’s Bad Bets on Pilot Retention Show It Needs Outside Help. Service leaders think the same old tactics can reverse a pilot shortage in a resurging economy.  By BRIAN KRUCHKOW and TOBIAS SWITZER

"Despite the pandemic, the Air Force is still short of pilots, thanks to low retention and strong airline hiring. Before COVID-19 reached the United States, the Air Force had a deficit of more than 2,000 pilots, requiring $15 billion to train replacements. The pandemic temporarily paused airline hiring to the Air Force’s relief, reducing pilot losses, but Covid-19 also hampered pilot training, leaving the overall shortage almost unchanged. Instead of using the reprieve as an opportunity to try bolder retention initiatives, the Air Force recently placed a large wager against airline recovery and renewed airline pilot hiring.

...

"Before the pandemic, the Air Force offered retention contracts as short as three years to pilots completing their initial ten-year commitments. Seizing on the collapse of airline hiring in 2020, though, the service changed the terms of its contracts. Gone are three- and four-year contracts; the shortest pilot contract is now five years, which gets you about 70 percent of the maximum retention bonus. To get the full amount authorized by Congress—$35,000 per year—the Air Force requires at least an eight-year commitment. These are hardball terms compared to past years and are a strong bet that airline pilot hiring will be weak for an extended period. 

...

"Air Force pilots are poised to leave active duty, not stay, according to our research. Despite the incredibly dire economic and health conditions in 2020, only 51 percent of the Air Force’s eligible pilots signed retention contracts, a small increase from recent years. Of those pilots who signed retention contracts last year, though, we found that 33 percent signed on for only three years. The rest stayed on active duty without service commitments and are now free agents able to depart on short notice. Air Force pilots are keeping their options open and believe airline hiring will return soon, offering better opportunities.  

*****************

Earlier:

Tuesday, December 1, 2020

The labor market that is the military: a report from the National Academies of Science, Engineering, and Medicine

Frequent flier miles, infrequent flying, and credit cards

 The WSJ has the story of how frequent flier programs keep airlines afloat even when there is less frequent flying:

American Airlines to Use Frequent-Flier Program to Raise $7.5 Billion. Carrier will use funds to replace a loan from the federal government  By Micah Maidenberg

The airline on Monday said it would issue $5 billion in notes and seek a $2.5 billion term loan backed by AAdvantage, its loyalty initiative for customers, to secure the funds. Both Delta Air Lines Inc. and United Airlines Holdings Inc. also have tapped their respective frequent-flier programs to land financing.

"Carriers have found the relatively stable cash flows that their frequent-flier programs bring in to be a rich source of collateral for financing.

"Airlines mainly earn money from frequent-flier programs by selling miles to banks and retailers that then award them to customers who sign up for credit cards and make purchases. That means airlines stand to benefit from every swipe of a co-branded card, whether customers are buying plane tickets or clothing. Airlines have said this revenue has held up better than ticket sales as travel demand dried up last year."

********

Earlier post:

Thursday, October 15, 2020

Frequent flier programs during the pandemic slowdown in air travel

Frequent flier programs during the pandemic slowdown in air travel

 It turns out that frequent flier programs get a lot of their income from credit cards that reward purchases with miles. So they are one of airlines' big profit centers, that hasn't suffered so much from the slowdown in air travel.

Here's a NY Times story:

Airline Miles Programs Sure Are Profitable. Are You the Loser? United and Delta have been boasting to lenders about fat margins in frequent-flier mile programs. Time for customers to pay a bit more attention.  By Ron Lieber

"Even as the coronavirus pandemic has sapped the ability and desire to travel, miles programs are a winner for the airlines. In the first half of 2020, Delta’s passenger revenue fell 60 percent, but the cash the airline got from American Express’s purchases of miles for its customers fell less than 5 percent. ...

"United puts a different but no less illuminating set of words and numbers to our mile lust. It goes into granular detail in its pitch about its ability to “nimbly” control its mile redemption costs on “peak days.” That explains why it’s so hard to use your miles to get a great deal during school vacations, Mardi Gras or other occasions."

******

Here's Market Watch:

Airlines are using frequent flyer programs to sell debt. Here’s how it works  By Sunny Oh

"In essence, miles are sold to credit card companies who offer them as part of their reward programs to their customers. The revenues earned from selling the miles are much higher than the cost of any flight travel redeemed by passengers,

...

"In a June filing, United Airlines valued their MileagePlus loyalty program at $21.9 billion which is around double the total market capitalization of the company itself."

United frequent flier updates as market design, by Scott Kominers

Scott Kominers, at Bloomberg (possibly written while flying):

United’s Frequent-Flier Program Gets Some Game Theory
The change is a case study in marketplace design.
By Scott Duke Kominers

"In United’s old program, those who reached top frequent-flier status were given a number of upgrade certificates that could be used to boost tickets from one class of service to another, typically from economy to business. 2  Some of these upgrades were regional, meaning that they could only be used on a select set of flights -- mostly all within North America -- whereas others could be used globally. To obtain an upgrade, customers often had to join waiting lists, where priority was determined by a mixture of flier status, ticket type and request date. As a result, plenty of fliers didn’t get the upgrades they wanted.

"The new program replaces the fixed-format upgrades with a currency-like system called PlusPoints, which, like the old certificates, are awarded to those with top status. Different types of flight upgrades now have different PlusPoints costs, at an exchange rate corresponding to the old upgrade format. Many upgrade requests will still be placed on waiting lists, but there's a new option to skip the waiting list if you're willing to pay a large PlusPoints premium.
...
"the change is also likely to reduce congestion in the upgrade market; under the old system, transnational long-haul flights such as those from Boston to San Francisco were frequently glutted with upgrade requests, because they were among the longest flights that qualified for regional upgrades.
...
"There’s also some funny game theory around the option to skip the waiting list. Whereas before everyone ended up on the same upgrade waiting lists, now some people will skip the line. But that means fewer upgraded seats will be available for those on the waiting list, which in turn creates more incentive to jump ahead. So we might see some customers buying the option of skipping the waiting list just to preempt others."

PBS on Uber's economists

Paul Solman interviews Uber economists (John Hall and others) and other economists (Susan Athey and Paul Oyer) on what economists do at Uber:

Signaling that you're not a business traveller by committing to a mixed strategy

Airlines like to price-discriminate against business travellers and others whose trips are non-discretionary. So, how to identify the leisure travellers?

Travel site Getgoing.com offers substantial airfare discounts to those who agree to "Pick Two, Get One" and choose two destinations and let the site choose one of them.

Matchmaking on a plane

On those long overseas flights, picking a seatmate is a bit like picking a roommate, and KLM is on the case: Mile-high matchmaking: airline to let you choose your neighbour via Facebook

"The "meet and seat" service would allow passengers to see the Facebook or LinkedIn profiles of other flyers, who are also using the opt-in service, when selecting their seat."

HT: Ben Greiner

More on the taking of photos

Here are two followups on my earlier post today on British Airways' claims about photographs. The first via Paola Manzini, concerns US Airways' similar claims. The second, via Ben Edelman, concerns a very recent court victory in the U.S. by the ACLU, regarding citizens' rights to photograph police officers.

Woman thrown off U.S. Airways flight for taking a picture of rude air steward's name tag.
"A photographer was thrown off a U.S. Airways flight and branded a security risk after she took a photo of a rude air steward's name tag so she could complain about her."


A Victory for Recording in Public!
"The CMLP is thrilled to report that in the case of Glik v. Cunniffe, which the CMLP has blogged previously and in which the CMLP attempted to file an amicus brief, the U.S. Court of Appeals for the First Circuit has issued a resounding and unanimous opinion in support of the First Amendment right to record the actions of police in public."

British Airways Conditions of Carriage

A disturbing incident at British Airways raises interesting questions about their Conditions of Carriage, the fine-print online contract that you and they enter into when you buy a ticket. (In many markets what is bought and sold is at least partly a legal contract.)

To make a long story short, we were accosted in the public (pre-security) area of London's Heathrow airport by a bizarrely aggressive BA employee who declined to identify himself. I took his picture. When I was about to board the plane an hour and a half later, I was asked to step aside, where another BA employee told me that photographing BA employees was forbidden, and it was a condition of carriage that I delete the photo.

I have not been able to find that clause in the published COC, and have written to BA for clarification.

Random allocation, preferences, and welfare: a fish story

Flying from Madrid to Boston on an Airbus with two aisles not long ago, two stewardesses proceeded in parallel down the aisles offering food. I asked for the fish, but the stewardess in my aisle was already out of fish. Speaking to her colleague in the other aisle, she ascertained that her colleague still had some fish. Rather than pass the fish across the (empty) seat between them, “my” stewardess told me that, if her colleague still had fish when she completed her aisle, then I could have it. (I chose the vegetable dish…)

We see similar issues when changes are discussed in how to allocate deceased-donor organs for transplants, or some other policy where there has been a previous decision on an order of allocation to randomly arriving agents. To have passed the fish across to me would have disadvantaged some passenger who, but for the demand for fish on my side of the plane, would have been able to eat fish…

Of course, assuming that on which side of the plane passengers are seated is random, the policy of allowing fish to be passed from side to side and not just from front to back would have the same ex-ante welfare properties. But, once the passengers are seated, any change in policy would likely help some passenger only by hurting another.

This kind of discussion comes up from time to time in the allocation of school places, as well as transplant organs.

Auctions of airport slots: dead in the water, again.

The latest news on plans to auction off takeoff and landing slots at NY's LaGuardia airport: DOT scraps auction plan for NYC airports .

NYC's airports are the most congested in the nation, but plans for an auction have been politically troubled from the start (see some of my related earlier posts). What is the nature of the politics? Perhaps some of the airlines that fly in and out of NYC airports actually like the congestion, since it keeps out new competition by preventing airlines that don't presently have any slots from getting any.

Freakonomics has a non-auction suggestion for relieving the congestion: Shut Down LaGuardia.

Market for airline flights

As the pricing, scheduling, and seating options grow more complex, booking an airline ticket is looking more like a combinatorial auction. Some travel sites, like TripAdvisor and Kayak.com aim to help with that by displaying more clearly the available bundles of choices: A Clearing in the Fog of Complicated Booking.

" ' We’re bringing clarity to the marketplace, with disclosure up front,” said Bryan Saltzburg, the TripAdvisor general manager for new initiatives. More clarity and disclosure in the marketplace? Let’s hope it’s a trend."

Auctions of airport takeoff and landing slots--maybe not so soon after all

Auctions of slots at NYC airports delayed yet again: Court Order Delays Auction of Landing Slots at Airports

"A court order on Monday delayed a Bush administration plan to auction landing slots at the three major airports in the New York region, pushing the proposal into the Obama administration, where it may die.
The Court of Appeals for the District of Columbia granted a stay on Monday, in a case brought by the Port Authority of New York and New Jersey, pending arguments on whether the Federal Aviation Administration has the legal authority to auction the slots. The first auction was scheduled for Jan. 12, eight days before the Bush administration ends. "

Who would have thought that such a good idea would run into so much trouble...

HT to Scott Kominer

Auctions of airport takeoff and landing slots--maybe coming soon

U.S. to Auction Slots Soon at New York City Airports reports the Times.

"The auction is scheduled for next Friday, with results announced soon afterward; the changes are to take effect at La Guardia in March and at Kennedy and Newark in October.
If the auction is not overturned by the courts or Congress — and either seems possible — it could be the last significant transportation action of the Bush administration, which leaves on Jan. 20.
What is being auctioned is the right to land, or take off, within a half-hour period for 10 years. The reserve price — below which the slot will not be sold — is $10,000 for peak hours and $100 for off-peak, but the president of the auction company, Lawrence M. Ausubel of Power Auctions, said that those numbers were likely to be “well exceeded.”
Mr. Ausubel said he did not know of any prior auction of airport slots."

HT to Scott Kominer

Airline safety: incentives and reporting

The NY Times has a story on airline safety, Panel Backs Letting Airlines Confess Errors Unpunished . Airlines and doctors have very different practices about reporting errors: there's more public reporting of "near misses" and other events in the domain of air traffic control, but docs have morbidity conferences in which they talk among themselves about bad outcomes.

Auctions for airline slots

A good idea that isn't going anywhere quickly is an auction for airline slots in the most congested airports. Here's a recent story from the Washington Post.