Wednesday, March 26, 2008

Domestic airline capacity shrinking, international routes increasing

A New York Times article explains that, largely due to oil prices, airlines are cutting back on domestic routes and ramping up international routes.

International routes tend to fill up large planes that are relatively fuel-efficient, while domestic routes tend to be with small planes that are gas guzzlers.

Here's the meat of the article:

Last week, Edward H. Bastian, the president and chief financial officer of Delta Air Lines, gave an informative presentation at the JPMorgan Aviation and Transportation Conference in New York.

Mr. Bastian outlined Delta’s aggressive plan to expand internationally while shrinking domestically. Most other major airlines are doing the same. By the summer, he said, 41 percent of Delta’s available seats will be on international routes.

By the second half of this year, Delta’s domestic capacity will be “down a full 10 percent over where it was just last year,” he said. By this summer, international capacity will be 77 percent higher than it was in the summer of 2005, he added.

“A considerable amount” of Delta’s international growth is coming out of the domestic system, he said.

Delta will further reduce its domestic capacity by 5 percent by August, when the airline will have removed from its fleet (by sale, re-leasing or simply parking in storage) 15 to 20 larger aircraft and 20 to 25 smaller regional jets.

Regional jets, I do not need to remind many of you, provide most of the service at small and even some big airports.

Many airports could be facing sharp cutbacks in service, unless those cities happen to provide what Mr. Bastian called “better asset flights.” Those are flights whose passengers are headed to a hub in the United States to make an international connection.

“Domestic capacity is increasingly being pointed toward feeding international destinations,” he said.

So the future of air travel in the United States is cutbacks for domestic travel.

How are we going to meet the growing demand for domestic travel?


Lots and lots of trains.

More daily frequencies to more places at faster speeds.

Or we'll have people drive, buy more oil, make Saudi Arabia even wealthier and spend even more time in congested highways.

I vote for trains.

What do you vote for?

Saturday, March 15, 2008

Establishing better connections with intercity bus service

Policy development -- in partnership with legislators -- is an under-appreciated job of advocacy organizations. It's our job to work with (and ultimately for) those legislators who share our long-term vision as they develop policies that can earn the support of a majority of elected officials. That's the heart of policy-oriented lobbying.

This week, an Illinois Senate Committee debated a proposal to establish better intercity bus service directly connected to Amtrak service. It's a good example of the process and value of public policy development.

Senator Michael Frerichs (D-Champaign) introduced SB 2178 to authorize the State to contract with private bus companies to provide feeder bus service that complement existing Amtrak routes. I worked with Senator Frerichs to develop this proposal on behalf of the Midwest High Speed Rail Association and over the next few weeks (and potentially longer) intend to work with him and amend and refine the legislation that reflects the concerns and sentiments of other legislators.

The vision that we're trying to implement is a healthy network of intercity feeder buses that directly connect with Amtrak service in Illinois. Imagine that when a train pulls into Springfield or Champaign or Bloomington that there is a bus or two waiting for them, ready to take passengers to other cities like Decatur, Peoria or Danville not currently served by Amtrak. And then imagine that the bus has dropped off dozens of passengers from those cities who then climb on to the train.

To implement this vision ... that's the hard part. That's where policy development comes in.

We started with replication. California is the only state with a very successful intercity bus program up and running. More than 80% of the state's population has access to the Amtrak California rail network, thanks to the "rubber-tired extension" of the rail network, in the words of Gene Skoropowski, Managing Director of the Capitol Corridor in California. We leaned heavily on Gene and CalTrans staff to find the underlying statute in California that authorizes their successful intercity bus service. Gene helped explain how their program works in California so we can learn how to apply it in Illinois.

The key insight is that a rail ticket purchased by someone who took a connecting bus is new revenue. That passenger would not have had access to the rail network, and thus would not have been able to buy the train ticket, without the connecting bus. Therefore, the revenue from the rail ticket can be allocated to the cost of providing the bus service without a loss to the rail service. It's not taking money out of the rail fund because it's new money.

How does California pay for the bus service? They pay for it with the proceeds from the bus ticket and the rail ticket. That's how we can pay for the bus service in Illinois: use the funds from the bus ticket and the rail ticket.

The buses also have to, in the words of Senator Michael Bond (D-Grayslake), "look and feel like one system". They need Amtrak Illinois signage (so the bus becomes a rolling billboard for Amtrak Illinois service). Passengers need a seamless ticket and transfer between bus and train. Fortunately, Amtrak already runs an excellent program called Thruways that allows for private bus operators to issue and honor Amtrak tickets for rail-bus connections. In Illinois, there is Thruway bus service between Chicago, Rockford and up to Madison, Wisconsin, as well as a few east-west routes that randomly slice through the state (with schedules that are not at all integrated with the train schedule). So Amtrak already has the administrative ability to issue joint tickets with private bus companies.

In committee, there were a few concerns expressed. It's our job as policy advocates to translate the concerns -- not fully articulated by Senators who, after all, are just thinking out loud and sharing their sentiments as the debate progresses-- into amendments. That's how we add value.

One concern expressed by Senator Gary Dahl (R-Peru) was why there was any governmental role at all. Why couldn't the private bus companies simply provide this service?

The main reason is that there's not a very strong incentive for a bus company to coordinate their schedule with Amtrak service, so these connections are left untapped. That's how the Illinois Department of Transportation -- which contracts with Amtrak to provide the intercity rail service -- can ensure that any private provider that wants access to the revenue from new rail passengers will run bus service that directly connects with the train service. Only IDOT (working with Amtrak) can deliver to the bus companies the ticket revenue from these new rail passengers, and that should be a strong enough inducement to the bus companies to participate as a feeder bus.

Another concern raised by both Senator Larry Bomke (R-Springfield) and some other passenger rail advocates, like the United Transportation Union, is whether the funds used for an intercity bus program are better spent running trains instead of running buses.

Here, we face a choice whether to finance all the costs of running buses from ticket revenue in the first year or allow a ramp-up period of a few years to get the program off the ground. Ultimately, the ticket revenue from bus passengers (both from the buses and the trains -- remember, they wouldn't be able to use the trains were it not for the buses) will cover all of the cost of running the buses. In California, it comes out to something like $2.00 per mile to run an intercity bus. So if that figure is about right for Illinois, let's work out the numbers. (By the way, some of the Senators wanted some numbers, so developing projections for a program is also helpful to implement it).

One of the key corridors that needs intercity bus service is Springfield-Decatur-Champaign along I-72. That would connect two Amtrak lines and make both networks stronger as well as bring Decatur into the Amtrak network as well. It's about 80 miles between Springfield and Champaign, so at $2.00 a mile, it's $160 for each one-way trip. If that bus carries 8 passengers who each pay $10 for a bus ticket and at least $10 for a train ticket, it's a break-even proposition. And the more often that bus runs to connect people to trains, the more likely people will know about it and come to rely upon it for infrequent trips which means we'll get the ridership of 8 people per one-way trip to make the bus worthwhile. Maybe we can start with those mini-buses of 15 seats that shuttle people around to airlines.

[UPDATE: Thanks to the idea from a commenter, I've played with Google Maps and created the embedded map to show two of these proposed routes.]

View Larger Map

Another key corridor is I-74 that connects Peoria, Bloomington-Normal and Champaign-Urbana. There should be intercity bus service between two of our largest university towns for lots of good economic development reasons. And Peoria currently doesn't have any Amtrak service, so a connection to two Amtrak lines makes a lot of sense. That's a 90 mile trip, so it's $180 for each one-way trip. 9 passengers who each pay $10 for a bus ticket and $10 for a train ticket make that a break-even proposition. If that route is extended northwest to Galesburg to connect to that Amtrak service (another 50 miles) we might find another 5 passengers to justify that additional $100 cost.

Note that there is currently Thruway service on the I-74 route offered by Burlington Trailways, but those two daily round-trips between Davenport, Iowa and Indianapolis, IN are not particularly designed around the Amtrak schedules.

Finally, the Quad Cities could use a connection to Amtrak rail service until we spend the capital dollars to extend rail service there. As it turns out, the Amtrak rail service to the Quad Cities would come off the Galesburg line, so a bus connection to Princeton 60 miles away from Moline that will largely parallel the rail service that will hopefully be rolling in two or three years makes sense to me.

So the question is whether to try to require a 100% cost recovery in the first year of operation to find those passengers or to accept a lower cost recovery -- 50% or 75% of 90% -- to let word spread among potential riders for a year or so before we expect to find all the riders who would use this service. That will ultimately depend on whether legislators have an appetite for spending some money in this fiscal year on establishing intercity bus service or whether they are only willing to authorize such a program if ticket revenues cover all of the cost. That is ultimately a judgment for Senator Frerichs as the Chief Sponsor of the bill to make and it's our job as policy advocates to gather all the political intelligence we can by talking to other legislators and asking them what they think on the question.

One lesson for every other state: try to pass a law like this to authorize intercity bus service directly connected to the Amtrak network. One large benefit of establishing such a program is that the riders from Decatur and Peoria who come to rely on and enjoy Amtrak service is that we are growing the statewide constituency to improve Amtrak -- more frequencies every day, faster trains and better on-time performance.

We have to improve the Amtrak network every year in a substantial way. Improving (or establishing) a feeder bus network is a good way to do it.