Truck and Barter

"Sir, Your Toothpaste is too Big..."

Kudos to the TSA screeners at Dayton International Airport!

They are the first team out of about a dozen airports to realize that my half-empty 5oz tube of Aquafresh Extreme Clean -- securely grouped with my other liquid bottles and gel tubes in the ubiqitous clear quart-sized plastic bag -- violated security regs.

Screeners at far bigger airports -- including Dulles, National, and Los Angeles -- have missed my too-large toothpaste, even during the deadest off-peak travel times. I've gone through so many times with that one Aquafresh tube, I hadn't even given its contraband size another thought. Perhaps the screeners have all missed it until yesterday it because I usually lay out the clear bag on its own tray, in full view. Yesterday, I crammed them in with other items, and the pre-screener did her job right.

Granted the TSA at Dayton missed the toothpaste last month, but hey, nobody's perfect.

A Modern Platform

And I thought my humor was dry:

"We are committed to continuing to support the warfighter by making this the most modern platform possible," said Forrest Gossett, Boeing Wichita spokesman.

That "modern platform" would be the B-52H, first deployed in 1962. Of course, much of the guts and skin of each tail in the current USAF fleet have been repaired or replaced or upgraded several times since initial delivery, so much of the technology in the B-52 really could be modern.

See also, Boeing's B-52 timeline.

Airbus to Give Billions in Fuel Rebates?

Last month, Enplaned was all over the plan by Airbus to offer its customers a fuel rebate so that the operating cost of the A340 will match that of the more fuel efficient Boeing 777. Says Customer COO of Airbus:

“I can agree a figure with a customer that reflects the fuel burn delta and run that out over 12 years and pay it to them,” he adds. “But if the 777’s fuel burn advantage was to give it greater range, then we’d have to look at [improving the A340].”

Enplaned makes some respectable back-of-the-envelope calculations:

Well, OK, it's probably wrong maybe it's $15mm, maybe it's $30mm, we just want to get an order of magnitude estimate. But it's big. Maybe it's smaller for the A340-600 vs the 777-300ER than the A340-500 vs 777-200LR, who knows.

Even on an aircraft with a list price of $200-250mm that's a lot to spot your competitor. Leahy has just offered this to the world. Every customer from now on is going to be insulted if bargaining on the A340-500/600 doesn't start from a similar premise. Not to mention those who already have the airplane knocking on Airbus's door asking for some money back. If Airbus is planning to sell, say, another 200 of the A340-500/600 we're talking $25mm times 200 = $5bn. Big bickies, as they say downunder.

Airbus is willing to spend billions on rebates instead of billions more on a redesign of its current A340. Enplaned notes the preferences many European people and company boards have for limiting environmenal impact:

So very seriously environmentally-concerned Lufthansa is polluting the earth something like 10-20% more than it needs to by running A340-600s? How will that look to the deep green German public? Sure, you can make up the cost of the kerosene with money from Airbus, but what about the damage to the earth? Who's going to pay for that? At the very least, Airbus ought to plant a few trees to make amends.

It's basically impossible to forbid Airbus from giving cash back to repeat customers, but if it were, would that intervention be the closest anybody has ever come to calculating a Pigovian tax?

H/T: Randy's Journal. The Randy being Randy Baseler-- Vice President of marketing for Boeing Commercial Airplanes in Seattle.

Overheard at Islip Airport

Due to unspecified security concerns, last night's 8:30 from ISP to BWI departed at 11:30 or so, but I had already rescheduled for the first flght out this morning when I was passing through a pack of baggage handlers smoking outside. One sang a very short ditty:

Nuttin' but DE-lays, baby

makin' OT like CRA-zy

Though the extreme delay was not the fault of this man or of his colleagues, one can see a perverse incentive arising. Still, I'm not a manager, but I'd say than an overtime structure that rewards everyday personnel with a bonus for working slowly is neither labor-friendly nor shareholder-wealth maximizing.

This got me thinking, "Could airport ground crews collude with one another to slow down air traffic, giving each other routine OT?" These aren't sumo wrestlers, but why not?

Garry Kelley, call your office.

P.S. While I'm complaining about business, I should note that not all taxicab passengers like heavy-on-bass dance music cooming in their ears, especially on what could be a serene ride on a deserted highway at 4am. In addition, empty beer cans on the floor of the backseat do not inspire confidence about a driver's sobriety, sanity, or cleanliness. Now I didn't complain about either the music or the beer, as both were easily explained: the driver had spent a night returning drunks home from the bars. More importantly, he was willing to discuss the economics of suburban taxicab driving (which are, in his experience, radically different from urban taxi driving, except in the Hamptons and surrounding environs, where the drunk kids are BIG tippers).

A Choice of Aircraft Options

Re: A new system for passenger aircraft to thwart shoulder-fired missles:

�Yes, it will cost money, but it's the same cost as an aircraft entertainment system,� Kubricky says.

Is it worth the cost?

A RAND Corp. study this year recommended postponing installation of anti-missile systems. The study assumed, however, that it would cost $11 billion � not the $6 billion Northrop now cites � to equip all U.S. aircraft with anti-missile technology.

Does $5 billion less really change the buy decision?

EasyJet Conquers Geneva & Basel; Withdraws from Zurich

Last year, we noted that Geneva airport was cheaply remodeling an old terminal for EasyJet. Air France, KLM and Lufthansa were... upset, to say the least. However, the courts and boards keep ruling in EasyJet's favor. Still, using legal maneuvers, Air France has managed to delay the opening of the new terminal from November 1, 2005 until the middle of 2006.

Not counting on complete success at Geneva, EasyJet is opening a new hub in Basel:

�EasyJet is already the largest airline at Geneva airport and this deal will make us the largest airline at [Basel's] EuroAirport,� said easyJet chief executive Ray Webster in a statement issued on Thursday.

In that statement, the company calls for consumers to email them their most preferred new destinations out of Basel.

easyJet is in the process of negotiating a number of new routes from the airport, but is also inviting consumers to suggest where, within Europe, they would like to travel and why. Consumers can post their suggests to a special email address wohinvonbasel@easyjet.com or debalevers@easyjet.com. Those whose recommendations match the destinations chosen by easyJet will enter a draw of 1,000 free tickets to fly on the new routes during the Summer.

Iraqi Airways

Continuing our assessment of the once and future Iraqi economy, we focus on the state of Iraqi airports and the condition of Iraqi Airways, the formerly proud national air carrier. We start by noting that Baghdad International Airport is fully repaired, is being run by Iraqis, and that most other regional airports are ready for domestic flights:

There are approximately 108 airports and airfields throughout Iraq. Baghdad and Basra both have international airports, while Mosul, Kirkuk and Irbil have domestic airports.

Iraq's airports are heavily outdated, having suffered from a lack of maintenance and shortages of parts for a number of years....

Baghdad International Airport (BIA) is open and has successfully processed more than 4,500 non-military passengers since July 2003. BIA's commercial capability continues to be expanded by a number of renovations, while Basra has almost completed its commercial preparations. The evaluation of Mosul Airport's reconstruction requirements was recently concluded.

The airports in Iraq have, as in many of the country's sectors, suffered from a shortage of power, water, sewage and telecommunications, with new plans for the installation of a number of communications systems necessary for safe and effective air traffic control measures, enabling safe air travel.

Iraqis have their own share of Chutzpah; one example is the national carrier declaring in January that it intends to resume international flights, even though it cannot field even a single plane:

Iraq has invited international investors to help revive the country's national carrier by assisting in the operation of the five remaining planes from what was once a large fleet. A local newspaper advertisement said that Iraqi Airways was accepting bids to overhaul three Boeing 727s and two 747s. The planes have been inactive in the Jordanian desert and in Tunisia for more than a decade. "The planes are to be operated on joint basis, taking into consideration the experience and abilities of Iraqi Airways," reads the advert.

Wars and a crippling economic embargo have wiped out most of the Iraqi Airways fleet, except for the five planes, which were moved out of the country to avoid destruction during the 1991 Gulf War. Iraqi Airways has not operated an international flight since. The US-led administration in Iraq had planned to sell off Iraqi Airways. However, the plan was scrapped following objections from the Iraqi Governing Council (IGC).

Now operating as a skeleton company, Iraqi Airways still has status as a public enterprise under the jurisdiction of the Ministry of Transport. It is not yet clear when an Iraqi Airways plane could take off, or whether indeed the fleet is still operable. Baghdad International Airport (BIA) has been closed to regular traffic since last year, although it was repaired following damage from heavy bombing during the US-led invasion.

Indeed, this terrifying photo of an Iraqi Air 727 cockpit reveals the fleet to be almost irreparable. (The tails stored in Tunisa were vandalized and ripped apart for scrap).

I was going to write that there could be a thriving domestic and international aviation industry in Iraq, initially supported by cushy U.S. government contracts, and that the Iraqi authorities have chosen to shackle the industry in a bureaucratic mess. While possible, I don't think that would have been a likely outcome. The real, likely alternative to government ownership might have been a Russian-style oligarchic ownership by crooks and insiders. And I'm not about to argue that a cheap fire sale to corrupt industry neophytes is better than government bureaucrats. As detailed in this report:

Iraq Revenue Watch has obtained a confidential document that reveals plans to privatize Iraq�s air transport industry despite the CPA�s recent pledge to postpone privatization until a sovereign Iraqi government is in place. The powerful Khawwam family, which had close ties to Saddam�s regime, is set to assume control of 75 percent of Iraq�s air transport industry�bypassing any public bidding process. The deal, brokered by a senior official with the Ministry of Transport, would include the assets of Iraqi Airways, the national carrier, which at the same time is seeking to revive its operations. U.S. carriers are reportedly looking to partner with these post-war oligarchs-in-the-making.

As we have seen, there is little left to the actual airline except, perhaps, airport slots and a few marginal aircraft, so how big a threat this sale presented to the future airline industry could easily be overblown.

(Note: Image from this website.)

UPDATE 8-25: Iraq to Jordan test flight completed successfully:

(MENAFN) The Director of Iraqi Airways said that the airline sent a test flight from Jordan to Iraq, the first such flight by the state airline since the 1990 U.N. sanctions on Saddam Hussein's regime, the Associated Press reported.

An official at the airline's Amman office said that this was a test flight and comes as part of our effort to resume regular flights by Iraqi Airways at the end of this month.

In the first stage, Iraqi Airways will fly once a week from the Jordanian capital to Baghdad, while more routes will be added later.

For now, Jordan's flag carrier Royal Jordanian Airlines and the Virginia-based Air Serv are the only two airlines with regular passenger service to Iraq.

United

United has been trying to get the federal government to underwrite its loans:

United Airlines on Monday lost a bid to secure a federal loan guarantee, a fresh setback to the carrier's efforts to emerge from bankruptcy.

The Air Transportation Stabilization Board said that after studying the airline's latest application, submitted last week, it would not change the panel's June 17 decision to reject United's request for a $1.6 billion federal loan guarantee....

In Monday's letter, the board said it "carefully considered the additional financial information provided by United." But in the end, the board concluded � as it did in its June 17th rejection � that granting the loan guarantee was not a necessary part of maintaining a safe, efficient and viable commercial aviation system in the United States, a requirement for receiving a federal loan guarantee.

If they cannot climb out of bankruptcy on their own, perhaps they don't deserve to survive. I say let 'em fail!

There would be a market upheaval if the second largest carrier failed. I'm not going to judge whether this would be "good" or "bad" in a welfare sense, but clearly creative destruction is sweeping through the airline industry.

Low-Cost Airports for Low-Cost Airlines

Geneva airport plans to charge budget airlines smaller fees than standard airlines.

Low-cost travellers would have taxes reduced to SFr14 ($11) while others would see the rate upped by SFr3 to at least SFr19.

The move is designed to cement Geneva�s position as a hub for budget airlines, which are continuing to capture a larger share of the market.

But this is NOT price discrimination; instead airport authorities justify it as cost allocation. The low-cost terminal will be inexpensively remodeled, and the savings will be passed onto the low-cost airlines.

Naturally, entrenched interests do not like this one bit:

Despite the claim, airlines such as Air France, KLM and Lufthansa have cried foul.

The three traditional carriers, which account for about 20 per cent of all passenger traffic at Geneva, said that the two-tier fee system grants low-cost carriers an unfair competitive edge.

�It�s very apparent that this is a solution designed to suit easyJet,� Werner Kellerhals of Lufthansa told the "Tribune de Gen�ve".

The "unfair competition" line will be a tough sell to anybody trained in standard price theory.

The airport jointly produces standard and budget airline flights; if its managers can demonstrate that budget airlines are cross-subsidizing larger airlines, I don't think there's an easy way to stop the airport from charging different prices.