Airport Effort to Charge More During Peak Times Could Hurt Passengers

(MoneyWatch)  After a great deal of legal wrangling, airports have finally won the right to begin charging airlines more for flights that go during peak times. The idea is to reduce the number of flights traveling at peak times. While it may sound good in theory, I think it's going to be pretty ugly in practice.

Airports charge airlines based on aircraft weights, and until now, the rule has allowed only a flat amount to be charged regardless of the time of day. Before President George W. Bush left office, he pushed a rule change which would allow for peak pricing. It's been in the courts ever since.

The appeals court has now ruled and the Department of Transportation is allowed to vary pricing during peak times at congested airports. As you might imagine, airports are cheering loudly. They have long been unhappy about the inability to charge more during peak times so that airlines have an incentive to fly more at off-peak times. With this rule, airports will now be able to try to discourage airlines from flying during the peak times, but that will have consequences.

Want to guess what the airlines say about this? Of course, they aren't happy. Airlines would be happy to fly at off-peak times if people actually wanted to fly then. But that's why they're off-peak times. They're not when people want to fly.

If you're an airline that focuses on leisure travelers, you might like this rule. My understanding (and someone can correct me if I'm wrong), is that if airlines raise prices during peak times, they have to lower them during off-peak times. They can't just put out a fee hike, because airports have to base their total airline costs on actual costs of operating the field. Since leisure travelers are less time-sensitive, those budget airlines can save some money by operating at off-peak times. (Though, they're probably doing it already at the busiest fields.)

But airlines that focus on business travelers won't be happy, and neither will business travelers themselves. Don't expect Bloomington, Ill., to implement peak pricing. Even if it could do it, there is no peak there and the last thing that airport would want to do is raise fees and risk losing service. In fact, there are only a handful of the most crowded airports that have any issues with peak demand, and those are the ones that will be theoretically be able to implement this rule.

Let's look at perennial gridlock poster-child New York's JFK International Airport. There is a morning peak, but the real peak is in the late afternoon when all the European flights start to go. It's easy to imagine JFK looking to implement peak pricing, but what will that do?

Airlines that fly to Europe have their flights set up to feed into hubs so people can connect throughout Europe. The same thing happens in New York for flights throughout the US. So you won't see those flights simply change times. Instead, the fees will just go higher and passengers will need to pay more in order for that flight to make money. If it doesn't, it might go away.

What about domestic flights? Let's say a flight from New York to Jacksonville falls into the peak window. There are still business travelers who want that flight to operate, but there will be a higher percentage of leisure travelers on the Florida run. The higher cost to operate may mean the airline will lose money. That means the flight will be canceled or moved to an off-peak time.

So let's say that the flight is rescheduled to another time. It will now, first, no longer be optimal for connections, and second, will not be optimal for the business traveler. That could result in the loss of the flight altogether, if there aren't enough people to support the off-peak time.

I know that I sound pretty negative here, but I don't feel that way entirely. It is possible that some airlines will be able to move a couple flights to other times in order to open up capacity . . . but then what happens? Someone else will likely move in and fill the hole.

As I've said before, if there really is a problem of too many flights being scheduled, change the number of slots available during those times. There's no sense in having more slots than are physically possible to fly. That's the best way to regulate that an airport operates within its capacity constraints. I am not the one to decide what that number is, but that's the government's job. That approach will provide the greatest benefit to passengers.

Of course, we can talk about this all we want, and the reality is that there is no actual method on how this will or even could be implemented. Maybe the airports will come up with some dazzingly-amazing way to make this work while addressing the concerns I've raised. If so, that's great, but I'm very skeptical.

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Photo via Flickr user Doug Letterman