Sunday, January 02, 2011

Buy Boeing



Here’s a really interesting article on the horse trading that goes on in buying airliners, from The New York Times.

Diplomats Help Push Sales of Jetliners on the Global Market

Among the numerous items you’ll want to think about as you read through the article....a name:

”The United States economy, said Robert D. Hormats, under secretary for economic affairs at the State Department,...”

”“That is the reality of the 21st century; governments are playing a greater role in supporting their companies, and we need to do the same thing,” Mr. Hormats, a former top executive at Goldman Sachs, said in an interview.”

It’s amazing how often Goldman Sachs shows up in our government. Almost as much as Lockheed. Or Boeing.

”To a greater degree than previously known, diplomats are a big part of the sales force, according to hundreds of cables released by WikiLeaks, which describe politicking and cajoling at the highest levels.”

I knew I should have searched through the WikiLeaks cables for the FAA. I figured they would be a lower priority to most other folks so that most of the media wouldn’t get around to them for awhile. It looks like the FAA was a little higher up than I thought. And it’s about one of my pet subjects too.

”Bangladesh’s prime minister, Sheik Hasina Wazed, was equally direct in making a connection for the landing rights at Kennedy Airport, as a condition of the airplane deal, which was then at risk of collapsing.”

As I’ve pointed out before, landing slots are big money. And the ability to dole them out holds great power.

And speaking of pet subjects, how’s this one?

”But he went on to say that authorizing the F.A.A. to help Turkey improve its aviation safety and space exportation programs could benefit both nations.”

Like I said, it’s an interesting article. You’ll want to read all of it.

Don Brown
January 2, 2010

8 comments:

Stephan Ahonen said...

By making landing slots into a scarce resource that only those who can afford the highest bids can attain, aren't you creating a barrier to entry for smaller players in the aviation market? From my point of view, the last thing we need is another way for bigger players to shove around the smaller ones.

There is also the possibility that the revenue from selling slots may discourage airport owners from building more runways, since building capacity in line with demand could reduce their total revenue.

If (preferably when) slots are implemented, it seems to me that you need to be able to make sure that everybody, not just the major players, gets a shot at getting them, and that there is still sufficient incentive for the airports to increase their actual capacity.

P.S. You may remember talking to me, my father introduced me to you to discuss a pursuing a career with the FAA. I got a 100 on the AT-SAT exam and didn't even get an interview. You want to make a fuss about the FAA's stance on safety, you talk about how they're not even interviewing people who get the maximum score on their own aptitude exam.

Don Brown said...

Stephan,

Who said anything about giving slots to the highest bidders? Not me.

Sorry you didn't get on. I hope things work out for you in the future.

Don Brown

Comrade Misfit said...

Eisenhower was right.

Comrade Misfit said...

Anyway, I did see that story this morning in the Times and I have a post partially drafted on it. It'll have to wait, though, until this afternoon for me to finish it.

Stephan Ahonen said...

In your post that you linked (http://gettheflick.blogspot.com/2009/04/reason.html), it mentions an airline bidding several million dollars for 14 slots at LGA... Is this a different definition of "bid" than what I'm thinking of? Or were you providing that as an example of how it should *not* work?

Don Brown said...

Stephan,

The point was that when you make $535,714 per slot, all sorts of calculations start taking place besides what should be taking place -- serving the American people.

If you restrict the number of slots to the average weather capacity of the airport (as I advocate) you're talking about a government (city, county, whoever runs the airport) losing a million dollars in revenue for every two slots. It's hard to say no to a million in revenue.

But if you don't, the whole system falls apart as soon as there is a slight glitch in the weather. And there is always a glitch.

There are many other factors but -- in the end -- the transportation system works better when there is some "give" in it -- a cushion to absorb the inevitable problems.

Don Brown

Stephan Ahonen said...

Don't get me wrong here, I completely agree that slots are necessary, I agree that they should be limited to less than the actual theoretical maximum capacity to allow for unforeseen events.

My question is, given the inevitable temptation that you brought up yourself to try and maximize revenue regardless of the consequences... How do you keep the politicians and businessmen in charge of the airports from, you know, doing what politicians and businessmen do? Who do you put in charge of this who can be assured of having the greater good in mind? This is a problem that needs to be solved before slots can be practical.

Don Brown said...

Stephan,

Search this blog for "institutional memory" and "good government". There is no substitute. Human nature is what it is. Greed and graft never go out of style. It's a matter of making sure the "good" people are in charge instead of the greedy. Governing is hard.

Don Brown