Sunday, July 25, 2010

Business Travel Coalition: The 3-Hour Tarmac Rule Is Working

So far, it would appear, the draconian rules imposed in late April by the Transportation Department to address the problem of stranded passengers and long tarmac delays have worked. The reports of three-hour-plus tarmac delays by U.S. carriers almost disappeared in May, as the rules -- including a fine of $27,500 per person for unwarranted delays over three hours -- took hold.

At the same time, however, routine airline arrival delays in general, which had been running in the 25 percent average numbers for years, dropped sharply. A reason for that is that airlines have cut back. There are fewer flights, for one thing.

Still, I'm persuaded that the DOT rules put the fear of God into the airlines. The only major tarmac stranding I'm aware of recently is one by Virgin Atlantic -- a foreign carrier that is not covered by the DOT rules (though the department has issued a new proposal that would, if enacted, include foreign carriers.

The airline industry fought the DOT rules tooth and nail, and has also been fighting similar regulations that are included in a passengers-rights section of the pending F.A.A. Reauthorization bill. In the spring, airline after airline warned of massive preemptive flight cancellations when bad weather approached, in what would be moves to avoid the penalties.

That hasn't happened, though the weather has generally been good for flying. We shall see if and when a period of big thunderstorms disrupts operations.

Nevertheless, the industry recently released a detailed study by two aviation consultants and academics claiming that the DOT rules will cause massive harm to airlines, and result in costs to the public of $4 billion over 20 years for canceled flights. The researchers were Darryl Jenkins and Joshua Marks, airline consultants who were formerly with the George Washington University Airline Institute.

The DOT itself scoffed at that report in an unusual statement on Tuesday. "The study, conducted by two business consultants for aviation companies, offers a misleading and premature assessment of the impact of the new passenger protections," the DOT said.

Jenkins, for one, is known as one of the authors of an annual report on airline quality that is generally derided by consumer experts for its total dependence on published statistics that anyone with an interest already knows. Nevertheless, the media usually pay credulous attention to its "findings."

Anyway, another organization now weighs in on the DOT matter, the Business Travel Coalition, which represents travel executives and suppliers and works to encourage transparency in air-travel operations, including costs.

In a report to be published tomorrow, the BTC disputes the airline consultants' assertion and says, "the three-hour rule has in fact forced airline senior management to finally prioritize extended ground delays as a problem to be thoughtfully, if not urgently, addressed."

Here's the full BTC report:

"On April 29, 2010 a U.S. Department of Transportation (DOT) rule went into effect, after a 120-day notice, requiring U.S. airlines to provide passengers an opportunity to deplane after 3 hours of an extended tarmac delay, on most commercial aircraft, providing it is safe and operationally feasible to do so.

AT ISSUE
Last week two airline consultancies (The Aviation Zone and Marks Aviation) published an analysis exceedingly critical of the DOT’s 3-hour rule asserting that the public harm from the rule could reach some $3.9 billion over 20 years; a conclusion based upon just the first full month’s aggregation of flight-cancellation data. The analysis, seriously flawed on many levels, would have likely received little press attention were it not for overreaction by a sensitive DOT that criticized the report in an official statement, supported by a quote from Secretary of Transportation Ray LaHood himself!

The factual and statistical defects in this study are stunning and include:

• ignoring the significant and complex work ahead for airlines to efficiently comply with the 3-hour rule;

• avoiding the central fact that passengers need only be given the opportunity at 3 hours to deplane versus cancelling a flight;

• dismissing the built-in exceptions to the 3-hour rule for safety and unworkable operational conditions; and

• basing conclusions on only the first full month of data since the rule has been in effect (1).

Any experienced analyst or business executive understands the significant length of time it takes to drive fundamental change to where a new model produces normalized and predictive results; to take a snapshot at the beginning of such a major change-management process and make such grand assertions is inexpert in the extreme.

BACKGROUND

The airlines brought the 3-hour rule on themselves after 10 years of not treating the issue as a management priority; on this there is nothing to debate. The issue all along has not been the cause of these extraordinary irregular operations, e.g., severe weather systems, but rather, how airlines responded to them. Were there coordinated plans in place for such events? Were communications systems adequate? Were staffs trained? Did senior executives care enough to engage? Were their spokespersons indifferent? Too often since 1999 the answers were the wrong ones; airlines did not sufficiently heed the many early warning signs of government intervention coming at them.

We live in a country compassionate enough to send a fire truck to extract a cat from a tree or a Coast Guard helicopter and crew to rescue a dog from a swollen river, and without a second thought! What were the airlines thinking? Did they seriously believe our country would allow elderly, infants and health-compromised citizens to be kept on parked planes in freezing cold or sweltering heat at risk for 4, 6 or 8 hours in poor and deteriorating conditions while some airline industry leaders disingenuously dismissed concerns on the rationale that such circumstances are rare?

On the other hand, DOT gave just 120 days for airlines to prepare for the 3-hour rule; under these circumstances it is no surprise that flights will be canceled this summer. No study needed to be conducted to know this. This was a terribly insufficient amount of time to implement the rule given the enormous work that will be required to make adjustments, which includes complex internal airline planning as well as negotiations with federal and local governmental bodies such as TSA, FAA, Border Control, airport authorities and law enforcement.

Many airports, for example, can and should arrange for removal of passengers (who want to deplane after 3 hours, per the rule) by way of truck-mounted stairs, as Dallas Fort Worth International Airport does, thus minimizing flight cancellations. It will likely take a good year or more for airlines, airports and other participants to adjust to this rule. As I stated in a May 2010 National Journal posting, “Passengers will likely be negatively impacted by the rule, largely emanating from flight cancellations, at least during a transition period of a year or more from April 29, 2010.”

INDUSTRY LEADERSHIP MISSING

The Air Transport Association (ATA), which represents U.S. airlines, acknowledged its leadership responsibility in stepping up some 10 years ago, after the Northwest Airlines winter-storm debacle at Detroit, and subsequent Congressional hearings, with airline Customer Service Plans. Business Travel Coalition (BTC) had advocated that very step to the U.S. House Transportation and Infrastructure Committee and ATA in 1999, i.e. let the industry solve its problems before considering legislation. That positive ATA initiative unfortunately turned into industry indifference, and then annoyance that this issue continued to persist.

The airlines, at the industry level, have provided next-to-zero leadership on this issue since those Customer Service Plans were announced in September 1999. BTC testified 4 times in Congress over the past decade against Congressional / government intervention in this passenger-rights area. After 10 years of airlines not taking the issue seriously BTC, the American Society of Travel Agents and the National Business Travel Association all reversed positions last summer with respect to supporting a 3-hour rule.

WHAT’S REALLY HAPPENING

The new DOT rule will have been only the proximate cause of cancellations this summer. The root causes will have been over-scheduling, especially at NYC airports, as well as inadequate planning and implementation time to comply with the new rule. Blaming the 3-hour rule and DOT for cancellations is akin to saying Mexican President Felipe Calderon’s crackdown on drug-cartel activities is responsible for the 25,000 violent, cartel-related deaths since 2006, without acknowledging underlying root causes.
Despite the disruption that is likely to be rained-down on passengers this summer, the 3-hour rule has in fact forced airline senior managements to finally prioritize extended ground delays as a problem to be thoughtfully, if not urgently addressed. To their credits, Continental Airlines and US Airways proactively implemented steps to comply with the new rule ahead of its April 29 implementation date. Airline hyperbole as mirrored in these consultants’ report regarding mass cancellations is really just part continued denial of a legitimate problem, part advance blame-game antics to set DOT up as the cause of all 3-hour rule-related problems and part posturing to have the $27,500 per passenger fine reduced.

THE 3-HOUR RULE IS ALREADY EFFECTIVE

The simple fact of the matter is that because of the new rule, airlines are now forced to fix this extended ground delay problem, and they are and will continue to do so. Canceling flight-loads of business travelers on a sustained basis would disastrously dampen demand just as these high-yield travelers are returning to the market, or drive these customers into the open arms of more able competitors. Mass cancellations represent an unworkable proposition, and well-managed airlines will successfully emplace new systems and processes to avoid this highly undesirable outcome.

UNINTENDED CONSEQUENCES ANYONE?

From a DOT perspective this study and its associated branded website and PR campaign probably look like more of the same coordinated airline industry stonewalling on this issue; apparently the study was initiated before the ink was even dry on the order! What negative "unintended consequences" for airlines might this ill-considered and ultimately shallow attack likely have as DOT takes all manner of decisions later in this year regarding the currently open passenger-rights Notice of Proposed Rulemaking? Have airlines not learned anything from the “gift” of the 3-hour rule? Not content any longer to just shoot themselves in the foot, are airlines now embracing amputation in place of true industry leadership?


1)SOURCE: AirlineForecasts, LLP

May 2010’s 1.24% cancellation rate is much lower than the annual average of 1.5% over the last 15 years, as reported by the DOT. However, the 10-year average has been 1.17% and may be a more representative base line. However, there is a large variation around the mean cancellation rate over the last 20, 10, and 5 years so a one-month comparison would be too noisy to produce anything that could be considered representative of a trend. As an example, cancellations as a percentage of operations increased 116% year-over-year in 2005 [May-over-May] and 85% in 1998, but decreased 48% in 2001 and 45% in both 2002 and 2005. The monthly variations are significantly more volatile than the annual variation."

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