Government Regulation of Air Safety May Be Hazardous to Your Health
John Semmens is an economist with the Laissez Faire Institute, a free-market research organization headquartered in Tempe, Arizona,
One would guess from media accounts that it is a proven fact that the skies are less safe due to the 1978 airline deregulation. Whether it be stories of actual crashes or near-collisions, hardly any coverage ends without implying that deregulation is at fault.
It is not that the implication of blame is totally implausible. As advocates of deregulation predicted, air travel is less expensive and more frequent than would have been the case had airlines not been deregulated. In 1987, U.S. airlines flew a record number of flights and passengers-more than a 50 per cent increase over pre- deregulation figures. Obviously, then, the skies are more crowded. And, of course, more crowded must mean more dangerous. Right?
Well, the indictment of deregulation is wrong on two major counts. First, the statistical data show that contrary to what one might surmise, the rate of accidents and fatalities is lower in the post-deregulation period. Second, the hair-raising reports of near-collisions at busy airports reveal that there may be serious problems with air traffic control and the allocation of takeoff and landing rights. However, both air traffic control and airport operating practices are public sector activities that have not been deregulated.
The Federal Trade Commission has compared the 1979-1987 post-deregulation record with the 1970-1978 pre-deregulation period. The figures reveal that the accident and fatality rates have declined for all categories of commercial aviation since deregulation. The table on the opposite page provides a summary.
The evidence very clearly shows an improvement in commercial air safety in the U.S. Not only is the accident rate lower, but the number of fatalities is lower despite an increase of over 100 million passengers between 1978 and 1987.
Perhaps the reason these real gains in air safety are not being heralded is the unwillingness of those with an interventionist agenda to accept the implications. From the standpoint of satisfying consumer demand, deregulation is an unqualified success. If interventionists had to concede that flying is also safer, they would have little leverage for undermining the market solution to transportation needs.
So, instead of being encouraged by verifiable gains in safety as represented by decreases in crash rates and fatalities, the public is being bombarded with hysteria bolstered by less precise measures of safety. Two favorite indicators of the allegedly rising danger are the increasing reports of near-collisions and the rise in Federal Aviation Administration (FAA) citations for violations of safety regulations.
The rising reports of near-collisions, however, might be the result of a more determined effort to look for them. Raising the number of citations could be viewed as a way of creating an apparent need for more FAA funding and authority. Or it could be seen as an increased safety enforcement program made possible by the elimination of the distractions involved in regulating fares and routes. Thus, an increased ability to concentrate on safety enforcement would stand as a desirable by-product of deregulation.
Category 1970-1978 1979-1987 % Change
Major Airlines
Accident rate* .580 .266 -54
* The accident rate is accidents per 100,000 flight hours.
Fatal Accident Rate .088 .037 -58
Charter Airlines
Accident rate* 2.010 1.220 -39
* The accident rate is accidents per 100,000 flight hours.
Fatal Accident Rate .354 .296 -16
Air Taxis & Commuters
Accident rate* 4.830 3.300 – 32
* The accident rate is accidents per 100,000 flight hours.
Fatal Accident Rate 1.080 .780 – 28
All Commercial Aviation
Accident rate* 2,340 1.570 – 33
* The accident rate is accidents per 100,000 flight hours.
Fatal Accident Rate .496 .355 – 28
Safety Not Deregulated
Few media stories on air safety make it clear that safety was not deregulated. The FAA retains its extensive responsibilities for aviation safety standards. The FAA is also the operator of the air traffic control system. It is this control system that is supposed to keep planes from running into each other. Further, it needs to be pointed out that all of the overcrowded airports at which the near-collisions are occurring are publicly owned facilities.
The FAA and the public sector owner-operators of airports have neglected to employ the most obvious means of coping with dangerous overcrowding. Failure to charge compensatory fees for scarce landing and takeoff slots has resulted not only in misallocation and inefficient use of resources, but reckless endangerment of the flying public.
Time-of-day pricing is clearly needed at busy airports. Yet, publicly owned facilities routinely base landing fees on weight alone. No adjustments are made for whether the landing takes place during hours of peak demand. Lack of differential pricing leaves no way of measuring the relative value of the scarce landing and takeoff slots.
Because of this system, small, non-radar-controlled planes are attracted into the crowded airspace near busy airports. A demand-based pricing scheme would divert all but the most urgent uses of this crowded airspace to less congested reliever airports. Instead, public officials resort to arbitrary landing slot allocation schemes and much hand-wringing over the threat posed by the small, non-radar-controlled planes.
It is not as if the concept of metering demand via peak/off-peak pricing differentials is unknown to public aviation officials. The airlines themselves are masters of the techniques of using price differentials to obtain higher fares from time-sensitive travelers, while using bargain prices to lure more discretionary travelers to fill what otherwise would be underutilized excess capacity during off-peak periods. The operators of airports and the air traffic control network could manage demand in the same way. Their failure to do so not only wastes time and money, but may be subjecting fliers to unnecessary risks.
Why is it that airlines use this simple marketing strategy, and public authorities do not? Airlines, as privately owned, profit-seeking enterprises, have a strong incentive to pursue efficiency. Airports and the air traffic control system are run by public entities that have little incentive to be efficient. An airline that falls to manage demand and capacity efficiently faces economic losses. An airport that fails to manage demand efficiently is apt to use the peak-period shortage of capacity to demonstrate the “need” for a larger budget and greater subsidies.
Even when it is conceded that the profit motive spurs efficiency, it is frequently asserted that it is insufficient to promote safety. Just why this assertion should be accepted is never very clearly demonstrated. Often, the only evidence offered is a slogan like “people before profits.” Overlooked is the reality that catering to the wants of people (including the desire for safety) is the marketplace’s only path toward profitability.
Crashes cost money and disrupt business. For example, the stockholders of McDonnell Douglas lost an estimated $200 million in market value of their shares following the crash of a DC-10 in 1979. A perceived safety hazard costs profit-seeking firms money. What does it cost the FAA or public sector airport operators?
The risks to travelers being generated by public sector mismanagement serve as the basis for expanding government budgets and authority. The near-collision dangers created by public sector failure to adopt rational pricing are the very arguments advanced for granting the FAA more power and resources. The dangers fostered by mismanagement of airport capacity are the key argument for higher appropriations to build more runways or additional airports. Could anyone conceive of a more perverse system for running an air transportation network?
The alarms being sounded over air safety are pointing to precisely the wrong answer, It is not that deregulation of fares and routes has gone too far. Rather, the proper message would appear to be that deregulation has not gone far enough. Deregulation of fares and service has been a success because it cleared the way for the profit motive to perform its function of stimulating improvements in air service. If safety lags in any way, it is because the profit motive of the main actors (the FAA and municipal airport authorities) is largely nonexistent.
Without a strong profit motive to guide the management of airspace and airport capacity, we will have no recourse but to continue to rely on the good intentions of public officials. But are the intentions of politicians and bureaucrats so reliable that we should choose them over the proven potency of the profit motive in a competitive market? Perhaps trusting to such good intentions is an act of blind faith that is too risky to justify.
Comment by Denny Jackson on 25 February 2011:
Why does anyone think that anything can be done better by govt bureaucrats than by the free market of the private sector (other than kill people and destroy property)? Can anyone point to any example anywhere?
Comment by Aron Martens on 25 February 2011:
I too have often been mystified why, in the absence of any examples of government successes, people continue to favour more government solutions to virtually all social problems. My conclusion is that it may well be the result of our sociological evolution. Maybe there is a romantic gene that just keeps us wishing and hoping that this time it will work. Maybe our biological/sociologica evolution has not yet caught up with the realities of living in a large, complex society consisting predominantly of strangers; We seem to favour solutions that might have been successful in a family or tribal setting, where we would entrust our well-being to some family patriarch or a tribal elder.
Comment by Aron Martens on 25 February 2011:
I too have often been mystified why, in the absence of any examples of government successes, people continue to favour more government solutions to virtually all social problems. My conclusion is that it may well be the result of our sociological evolution. Maybe there is a romantic gene that just keeps us wishing and hoping that this time it will work. Maybe our biological/sociological evolution has not yet caught up with the realities of living in a large, complex society consisting predominantly of strangers; We seem to favour solutions that might have been successful in a family or tribal setting, where we would entrust our well-being to some family patriarch or a tribal elder.
Comment by Charlie on 25 March 2011:
I really do question if everything should be open to private-market competition, especially if matters of public safety are concerned.
The ATCs, of course, aren’t perfect, nobody is. However, to have potentially-conflicting air-traffic control, at least to me, is a risk of unacceptable proportions.
If it takes a few crashes to cause a private enterprise to loose money before they do their job better, then that cost is too high.
Similarly, if the government doesn’t fix a root problem that its air-traffic system caused before expanding power and oversight, this is just as wrong.
Either way, people die for somebody’s bungling, but to have it happen over a private concern’s profit motive or inexperience is, to me, at least, unforgivable.
Without question, improvements can, and should be made, but I nobody has ever made a strong-enough case to me that privatization of the system.
It might work if the entire system was contracted to one company, renewable based on performance, but it seems that many of the pro-privatization folks don’t want that. Perhaps I’ve misread what’s been said, and if so, please correct me.
Every time I see the words “private” and “competition” in context of something like this, I become, for better or worse, very concerned about competing companies not cooperating and putting profit in front of principle and public safety.
For curiosity’s sake- has any country privatized their ATC in any fashion, and do we know the results?
Comment by Michael Price on 4 April 2011:
@Charlie We have “potentially-conflicting air-traffic control” now with government controlling it, so why object to the free market running it? In any case the “risk of unacceptable proportions.” seems to be correlated with less actual dying.
“If it takes a few crashes to cause a private enterprise to loose money before they do their job better” but why would it? Would customers wait for the airline to crash three or four times before they started booking on their competitors? How about insurance companies, will they wait to raise rates until after the 3rd crash? Or will they raise it when they percieve problems with the maintainance program (and they have ever incentive to find out about that).
“Either way, people die for somebody’s bungling, but to have it happen over a private concern’s profit motive or inexperience is, to me, at least, unforgivable. ” How would having it happen for someone’s dogma that government is safer be better?
You become very concerned about “putting profit in front of principle and public safety” but you haven’t shown that the best way to make a profit isn’t being safe. Who would renew a contract with a company that caused a fatal crash? Given the enormous expense of tendering for such a contract and setting up the system a crash would cripple a large company and destroy a small one, even assuming they aren’t liable (which they probably would be).
Comment by vps hosting on 6 February 2012:
It’s appropriate time to make some plans for the future and it is time to be happy. I’ve read this post and if I could I desire to suggest you few interesting things or advice. Maybe you could write next articles referring to this article. I wish to read more things about it! vps hosting | vps hosting |