11/30/2010

A More Private Alternative

The new body scanners and enhanced pat downs may not have had a great effect on airline ticket sales over the holiday weekend, but ElJet, a private jet charter out of Los Angeles, boasts a 30% increase in bookings over the Thanksgiving holiday compared to last year by advertising a "pat down alternative." If you feel the new security measures violate your civil rights, or if you simply want to avoid the additional hassles, you can team up with other travelers and charter a private jet. Finances permitting, private jet charter can be a more convenient and logical substitute to long-distance commercial flights when compared to the other alternatives of going by rail, boat, or automobile.

The private jet industry has also experienced economic gains acting as a substitute to corporate jet fleets. According to an article in Business Day, many large companies are faring better economically but are still reluctant to invest in their own corporate jets and choose instead to use chartered jets to fly their executives to multiple meetings while avoiding the hassles of commercial flights.

If the body scanners and enhanced pat downs are here to stay, the demand for private jet charters might increase as consumers are given more time to adjust their flight plans; however, complacency with the measures may result in a decreased demand in the long run. The use of chartered jets should increase as the economy improves, but the use might decline as corporations recover enough to reestablish their own fleets.

6 comments:

Dave said...

Oh gosh ... private jet service as a substitute for commercial services. Who'd have thought that possible?

Private jet service is hugely expensive.

On the other hand, competitive markets in transportation routinely push price down to marginal cost (which is very low if you stuff everyone into a box or tube). Think about this: every major retail personal transportation industry has eventually gone bankrupt - stagecoaches, canal boats, railroads, ferries, buses and airlines.

And ... we routinely pay an exhorbitant amount to personalize our transportation. Think about this one too. No one, anywhere, thinks the IRS will cut them a break. And yet, the IRS tells us how much we can deduct for miles travelled. If they're always ripping us off, this is a lower bound, with the actual cost being substantially higher. Yet people continue to think of driving their own car as "cheap".

Put all this together, and I wouldn't be surprised if private jet service did become competitive with commercial airline service.

Here's more food for thought. Could terrorists have afforded to blow up planes in the old days - before deregulation in the late 1970's - when the real cost of flying was much higher?

We talk a lot in managerial economics about how supply and demand evolve over the long-run, and the introduction of substitutes. It seems to me what we've done is evolve from expensive air travel with few substitutes and a lot of producer surplus, to cheap air travel with many substitutes and lots of consumer surplus, and now towards a system where our consumer surplus is being extracted by either terrorists or TSA.

Jessica said...

Changes to the scanning technology and the methods it is used by the TSA may also affect consumer demand on air travel (http://www.nj.com/news/index.ssf/2011/07/tsa_announces_changes_to_full-.html). As compromises are made in the safety-vs-privacy debate, many consumers may decide that they will accept a less invasive type of scanning in exchange for the convenience commercial flights afford.

Dr. Tufte said...

Excellent point.

Economically, I think the public image problems that TSA has faced is that they are asking people to pay a cost (extra searches) without offering them a tangible benefit (better safety).

Belba said...
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Belba said...

It's important for airline companies to provide a feeling of safety to their customers. When customers feel safe, they are more likely to fly. But according to an article from the Chicago Tribune (http://articles.chicagotribune.com/2011-06-26/travel/ct-met-getting-around-0627-20110626_1_largest-pilots-union-security-screening-biometric), "feeling safe" may become a huge issue. The O'Hara International Airport is testing new security plans, which will allow pilots to walk through security without being tested. How safe will passengers feel then? Also mentioned in the article, passengers who feel offended by the pat-downs or body scanners will be able to complete a prior background check, releasing personal information to bypass security. I know security lines are a huge issue in airports, but isn't safety even a bigger issue?! Will the airlines sales decrease and demand drop due to security changes?

Dr. Tufte said...

I see TSA as selling a negative lottery ticket: a very small chance at avoiding a very rare, huge, negative event. They are selling this for an upfront cost that clearly many people think is too high.