Wednesday, July 16, 2008

Ghost Flights

Various UK media report that British Midland, Britain’s third largest airline, plans to fly empty or near- empty planes during next winter in order to retain valuable slots at Heathrow airport. This is just an extreme example of what all airlines expect to be doing; namely not reducing flight schedules in the face of the anticipated reduction in demand. (Some airlines may cancel individual flights, which would be a major inconvenience to the few passengers booked on such flights. And there is a limit to how much they can do this, because a flight must operate at least 80% of the time in order to retain the slot.)

This situation is crazy, both on economic and environmental grounds, but it is difficult to know what to do about it. Some advocate requiring a certain average percentage of seats to be filled, but when this was tried at the much smaller Norwich airport at least one airline responded by hiring actors to fill the seats.

Another suggestion is to change the way airport taxes are charged. Currently, they are charged per passenger, whereas a charge per seat (regardless of whether it is occupied) or per plane, would provide an additional disincentive to flying empty planes. It is not at all clear that this would work, however, as there is already a substantial financial cost to flying empty planes. Indeed it seems doomed to failure; if an airline is prepared to pay an actor to fill an empty seat, and to pay the tax for that actor, it would save money if it were able just to pay the tax on the empty seat.

The real problem is the use-it-or-lose-it policy on slots. This might make sense when slots are at a premium, but if flights are leaving empty in order to retain slots, that is clearly not the case and the policy should be suspended while demand is reduced. Better still, the policy should be abandoned altogether and slots auctioned afresh each year.

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