An Air Travel Lemons Problem

I wonder whether allowing airports and gate agents to deny entry and travel to those ticket-holders who are coughing and sneezing all over the place could prevent a pretty nasty lemons problem.

Specify that risk aversion about contagious disease correlates with riskiness: the risk averse are more likely to take actions that prevent their being infectious. They'll wash their hands more regularly. They'll be careful about coughs and the like. And they'll be a bit quicker than others to avoid places that look risky.

Prior to any pandemic, only Howard Hughes refuses to fly. It takes extreme risk aversion to not get on the plane. So the airplane's population mirrors the general population.

When the pandemic hits, the most risk averse and consequently least risky take a look out the window and decide not to fly. Being stuck on a plane for an hour next to someone who is coughing - the risks of that are just too high for them, even though the absolute risk of being in that situation aren't really all that high.

When they leave, the remaining passengers on the plane are a bit riskier than the general population.

That makes flying a bit riskier than it otherwise was.

That makes the next tranche of risk-averse people avoid travelling.

And the whole thing unravels quickly from there until the plane only contains people who are coughing, or the risk-preferring. And air travel collapses.

The unravelling is less likely to happen if people expect that the gate agent would deny entry to someone who is coughing, and that the airport would actively be kicking out sick people.

It only works if people are more worried about being seated next to a cougher than about being mistakenly kicked off a flight. But I'd be pretty happy to be denied boarding for several flights to avoid the risk of being seated next to a sneezing person for one flight; perhaps I'm just among the more risk averse.

Is there any law or regulation that would prevent airlines from actively denying entry? Can they change their conditions of carriage to allow this discretion? Is it possible to block the unravelling?

Update: Note that this also applies to public transport. But at least you can get off of a bus if someone is sneezing.

Blaming deregulation

Phillip Longman and Lina Khan at Washington Monthly blame airline deregulation for high cost, low frequency flights between less-travelled American cities. Some cities are losing major business headquarters because of poor flight logistics. They recommend a return to airline regulation with cross-subsidization of low-volume routes. I'd be awfully surprised if that fixed things.

As best I'm aware, Air New Zealand is under no mandate to provide cheap travel between smaller New Zealand ports of call. So as a quick test, I checked the price on Air New Zealand for travel from Christchurch (population 330k or so, South Island) to Napier (population 100k or so, North Island) for a month from now. They're quoting NZ$273 ($218 US) round trip with no connections. There might be cheaper flights; I didn't check any aggregators. A shorter (about two-thirds the distance) hop within the US, Pittsburgh to DCA, for the same dates, is US$374 (including $43.21 in taxes and fees) on Orbitz with a stop in Boston. In real terms, the shorter US flight costs more and is less convenient. If I want a next-day flight, the NZ round trip is NZ$642 (US $514); Orbitz has the PIT-DCA route at US$635.

If you change things to American cities that are more comparable in size, like a routing from Toledo, Ohio to Erie PA, the New Zealand advantage gets a fair bit stronger: the next-day flight between those two is $1000 US and has two stops. Maybe there's just something weird about the airport combinations I've picked; they were random draws based on rough city size.

Point-to-point domestic travel within New Zealand has lots of small planes going between lots of small places, as well as a few higher volume routes with bigger planes. And, in general, it's a joy: rock up to the airport 20 minutes before your flight and walk straight onto your plane after waving your phone at the machine at the gate. If you have checked baggage, add another 20-30 minutes to be safe. When the weather is clear, just watching the mountains out the window is almost worth the price of the airfare.

So, if deregulation is the problem, why is flying within New Zealand relatively cheap? It isn't going to be fuel costs: I'd expect that domestic air travel attracts carbon charges via our emissions trading system. And small-country maintenance and engineering costs have to be higher: engineering works have a big fixed cost component, though I think AirNZ has outsourced some of that work.

Further, whatever subadditivity and network problems might require network regulation in the US ought to apply doubly hard in New Zealand, where Australian airlines can cherry-pick whatever higher margin NZ domestic routes they like. Cabotage is forbidden in the US, but flying is less expensive here.

If I had to point a finger at anything in the States, I'd start with airline security. You get enough stories about TSA agents making 4 year old kids cry, or stealing money from 95 year old war veterans [or allowing that the money be stolen; who knows what happened], or molesting women, and people don't want to fly. Lengthy security-induced queues at airports add a fair bit of time to your total flight cost. So more people choose to drive. That sucks in industries geared up for bigger passenger volumes that now have to spread those fixed costs across a smaller number of fliers. Worse, airline security measures increased the fixed costs of flying at the same time as they reduced the number of travellers over which those costs could be spread. New Zealand lets small airports provide low cost services.

Want cheaper flights and better service within the US? Look at airport slotting fees, cabotage rules, and security arrangements before putting in price and route controls.

Bad management

Managers are strong complements to workers; with bad managers, everyone's productivity goes down the toilet.

Eli Dourado reckons the cost of managerial complements makes a case for zero marginal product workers: the worker might be producing more value than he's taking home in pay, but not enough to cover the cost of the manager that lets the worker produce positive-value products. Read the whole excellent post.

And we can see this when the managerial complement goes awry. Case in point: Mexico. 

Mexico City’s Buena Vista Walmart is the first super-market I’ve ever seen paralised by a trolley-jam. It is not more busy than any other large city supermarket, and not understaffed. No: the reason it takes ten minutes to walk from one side of the store to the other every single night is because they have no baskets—only large trolleys. To my sample of Mexican Walmarts, this is unique; most Mexican Walmarts have trolleys and baskets. And so the error must have been made by the managers of that particular outlet. Of course, this is only a small example of inept management in Mexico, but it’s sadly representative—labour productivity in Mexico is about a third of that in the US. If Mexico were as well managed as the US, it would be as rich.

This all raises a few questions: why are managers in Mexico (and the developing world in general) so terrible? why are those in the US so good? and how much of the difference is able to be affected by policy?

James Savage chalks it up to Mexico's caste system, nepotism / seniorism, and an awful school system. If your first worry is about hiring somebody who won't steal from you, you'll weight connections over competence. But again, read the whole post and despair at the morass of interlocked problems that reinforce each other and make solutions difficult. Foreign firms coming in and bringing with them stronger demand for competence has to be part of the solution, but the Walmart example suggests it might take a while.

Air Canada provides a different problem. Here's Josh Gans, lamenting just how awful Air Canada is compared to what he's been used to in Australia. Where Virgin in Oz had in-flight face painting for the kids at the back of the plane - effectively in-flight child entertainment far away from the parents - Air Canada seemed determined to make sure his family of 5 were separated throughout the plane. Josh very nicely explains the obvious points about just how terrible it is for all fliers that Air Canada made it impossible for him to sit beside his kids; it would be surprising if Air Canada's gains in forcing families to book through the Air Canada system outweighed the losses they get from ruining everybody else's flight.

The less sinister explanation is that Air Canada have a very poorly executed booking and flight reservation system. Someone, somewhere forgot about families and deep in the code there is no way for Air Canada to sort out the mess. My bias is on incompetent planning rather than evil attempts at price discrimination in these matters.

This is observationally equivalent to my hypothesis, formed about a decade ago and now potentially out of date: a too-large proportion of Air Canada staff actively hate the passengers.

I don't think Josh's explanation is sufficient; Air Canada could always choose to release third-party booked seat allocations more than 24 hours ahead of flights. And my "they hate the passengers" explanation is not only more plausible than that it's profit maximizing to impose potentially massive costs on full-fare paying flyers to keep price-sensitive families from using aggregators, it's also parsimonious, explaining much of the overall Air Canada experience.

Again, like James's Mexico problem, we've got a set of interlocking issues: this time around union rules, seniority, effective domestic monopolies, and government bailout backstops making for soft budget constraints. But this one seems easier to unravel. Canada could unilaterally allow cabotage on its routes instead of waiting for a bilateral agreement with the States. Let Virgin America run intra-Canada flights, drive Air Canada into bankruptcy, sell off the planes to new entrants, and start over with new management that doesn't hate passengers.

I'll continue to be very happy with Air New Zealand (regardless of changes to its AirPoints upgrades system), and even more happy with Emirates on the Trans-Tasman.

...and international travel is easy too

I'd noted a couple weeks ago how simple and inoffensive domestic travel is in New Zealand. Todays's report: Trans Tasman is dead simple too. I'm off to Canberra this morning, catching a seven am flight from Christchurch.

I parked at the airport at 5:55. I got my boarding pass and checked my bag using a kiosk, cleared security, cleared NZ exit customs and was waiting in line for coffee at the gate by 6:20. Now I've a minute to kill before boarding. So I thought I'd remind American readers what air travel is supposed to be like.

Assorted updates

• We leave Winnipeg for Christchurch tomorrow morning, landing Friday morning Christchurch time.
• My travel was booked through the University's travel agent; I still spent an hour on hold with Air Canada sorting out conflicting luggage allotment rules.
• Winnipeg's a great town in summer. What was shabby and dated twenty years ago is now retro-chic. Wait long enough and all that's old is new again. I base my wardrobe on such expectations.
• The Christchurch Airport has been iffy between regular daily earthquakes magnitude 5 and up and volcanic ash from Chile. I hope we don't get stuck in Auckland; we'll see.
• Getting back into the daily earthquake routine fills me with dread.
• Nobody in North America knows squat about what's going on in Christchurch. It was a headline in September and February; everybody reckons that all's back to normal. As update for folks who've lost track:
  • there was another 6.3 last week, there are between a half dozen and a dozen earthquakes every day magnitude 3-5.3, with strong potential for bigger ones
  • Literally 60% of downtown is set to be bulldozed
  • The army cordon around downtown is set to be in place for another six months
  • The boil water notice from the last quake seems to have been lifted, but there's going to be liquifaction silt all over the place, random road closures, sewerage failures.
  • All the normal bits of life you're used to in your town: the places you take the kids on a rainy day; the place you usually go for coffee; your barbershop; the swimming pools for the kids - just imagine that more than half of those are gone for a few years and the others are touch and go. And that nobody in town's getting any sleep. My twitter feed's full of Christchurch folks up at 3 in the morning with aftershocks every damned night.
  • We'd just say bugger it and stay here a while longer: Susan can work remotely. But I've got lectures to give in a couple weeks and NZ / Australian conferences ahead.
• Blogging will continue to be very light while on the road and prepping for the NZAE meetings; I'm now giving two papers there rather than one as a wait-listed paper was drawn at the last minute. I'm only at NZAE on the Thursday as I'll be in Oz for a few days mid July and am trying to limit the number of overnights I'm away from home while the aftershocks continue.

Canada-Czech disputes: Throw Eric from the train edition

Canada and the Czech Republic are again ramping up disputes about the number of Roma fleeing the Czech Republic and claiming refugee status in Canada.

The last time this happened was about 10 years ago. Canada and the Czech Republic had a visa waiver agreement. So, all the tour guide books said that Canadians didn't need visas to visit. In the late 1990s, a documentary aired in the Czech Republic encouraging Roma to become refugees in Canada.

A 15-minute television report spurred the exodus of Czech Roma to Canada in 1996, according a report from Radio Prague in 1997. On Aug. 5, 1996, a documentary entitled “Na vlastní oči” (With Your Own Eyes) aired on Czech commercial broadcaster TV Nova that depicted a Czech Romany who had immigrated to Canada and was living a very comfortable life. It portrayed Roma families living well with state support while they waited to be granted asylum.

The days following the broadcast were full of reports from local officials of Roma selling their possessions and property in preparation to leave. One week later, the Canadian Embassy in Prague was receiving hundreds of calls a day—reportedly 90 percent were from Roma. Various reports and experts, including the report from Radio Prague, stated that mayors in some localities were exacerbating the situation by offering to provide funding for Roma who were seeking airline tickets to leave.

Canada then started demanding visas for Czech citizens visiting Canada. The Czech Republic later retaliated by demanding Canadians also get visas to visit there.

The new visa requirements came in after the publication of the guide book on which Sue was relying when she made our travel plans while I was on a post-doc at ZEI in Bonn in the fall of 2003. And so, a bit after 3 in the morning we were woken in our sleeper car on the train heading to Prague. Sue, an American, had no trouble: the visa waiver still applied. But not so much for me. And so I was thrown off the train at 4 in the morning at an empty and closed train station near the Czech Border: Marktredwitz. Sue decided to stick with me rather than continuing on to Prague. And so our planned tour of Prague became a tour of Bavaria once the train station opened two hours later.

My Czech colleague Andrea Menclova had a similar experience in traveling to Canada while in grad school at New Hampshire.

In Canadian-Czech disputes over Roma, it's always the innocent academics who get hurt.