In light of the recent sequester in Washington, I thought it might be interesting to think a little about the relationship between transportation systems and public policy. To what extent should the government manage and fund the design, operation, and maintenance of transportation systems? In one sense, it is a very philosophical topic, but it is also inescapably tied to the practical.

Let’s be clear right up front. I think many people, myself included, often fall into believing the idea that “private transportation system” means “cars” while “public transportation system” means “trains and subways.” This is not correct. For example, although the cars themselves are privately owned, the interstate highway system is most definitely a public roadway network, while much of the tracks that make up the Northeast Corridor are owned by the private, albeit heavily subsidized, company Amtrak.

The very nature of Amtrak as a publically-funded, for-profit corporation brings to light another interesting fact related to our topic – namely that in the vast majority of cases, transportation systems are not strictly “public” or “private,” but rather some combination of the two. The question, then, is truly not, “Should the government be involved in the transportation sector?”, but rather, “To what extent should the government be involved in the transportation sector?” What role should the government play? What should be its responsibilities? Hard to definitively answer – but interesting to think about.

The question of public vs. private is especially interesting due to recent events in Washington. Congress, along with the American people as a whole, is very much divided on the issue of the role of government, especially in the areas of economic and fiscal policy. As alluded to above, the recent standoff between conservatives and liberals regarding government spending and taxation lead to the budget cuts known as the sequester. In addition, as one ASCE blogger points out, “Congress will need to pass another continuing resolution (CR) before March 27 to keep the federal government funded.” Although this bill will almost certainly be passed, it is unclear what provisions it will contain with regard to new or maintained government spending on transportation. On top of all this, the federal government is expected to reach its debt ceiling (again!) by May of this year.

What does all of this have to do with transportation systems? Very simply, it takes a lot of money to construct and maintain a transportation system. At this point in time, the US federal government does not have a lot of money to spend on, well, anything really.

So we’re confronted with this problem, and several solutions present themselves.

• Option 1: Enlarge the role of the federal government. Increase centralized planning, raise taxes, and encourage certain modes of transportation over others as a way to shape the future of the transportation system.
• Option 2: Give the states more power over their respective transportation systems. (Note: This is similar to our current system.) Or, go even further and give more power to local authorities.
• Option 3: Privatize the transportation system. Encourage companies to construct new infrastructure or take over responsibility for existing infrastructure using financial incentives or by decreasing existing regulations.
• Option 4: Push Public-Private Partnerships. Invest in the development of a publically-subsidized, privately-run transportation system. The degree of privatization can vary to meet the needs of the area.

Each of these options has pro’s and con’s. In general, they are tied to the two extremes of entirely public vs. fully private.

An entirely public system gets its strength from its centralization. The government has (at least the potential for) more capital than private firms, and can therefore invest in large projects designed to meet future needs. In addition, it can more easily obtain the land needed for a project through the use of eminent domain. The government can also plan a uniform system for a large area, and is more able to plan around needs, rather than practically limiting constraints.

Despite all of its advantages, public systems have their fair share of problems. Government-managed programs are notoriously slow and not especially cost-effective. Because of the high levels of bureaucracy often present in government projects and the lack of financial pressure, there is often a lack of challenging, defined goals, insightful and revolutionary ideas, and visionary leadership. In a sense, too much oversight breeds a lack of effective oversight.

Private systems have their own challenges and drawbacks. Transportation systems, by their nature, call for extensive organizational and technological unity. If a transportation system is too decentralized, without any major players, it cannot adequately perform its primary function of effectively moving people and goods from point to point. For example, think of medieval Germany, where a trip up the Rhine involved stopping every few miles to pay a toll to some feudal lord (robber baron) in return for the right to pass through his section of river. Or, consider the many cases in which two transportation systems are geographically very close, but not connected due to poor planning and a lack of oversight. Increased financial concerns also mean that private companies may be hesitant to take on projects that are necessary to society, but may not be able to generate enough revenue to be self-sustaining or profitable. In addition, critics suggest that lack of government oversight may result in the endangerment of public welfare due to the implementation of cost-cutting measures.

Despite these drawbacks, private systems have a host of advantages over public ones. A private company’s efficiency in managing financial resources, manpower, and project time-scales is probably the greatest advantage of such an enterprise over its public counterpart. In addition, although the government has vast resources available to it for large-scale planning, private firms are generally more in-tune to the actual needs of society because they closely monitor the market, which is a rather good indicator of society’s needs and/or wants. While the government may have “experts” that can make recommendations (be they good or not) about what will be good for society as a whole and in the long run, for-profit companies do an excellent job at determining what society wants, and meeting that desire. Plus, as an added bonus, taxes decrease.

In many cases, the best option is to blend the two extremes of public and private. The exact organization can be determined on a case-by-case basis in order to maximize the benefits of each, while avoiding the drawbacks. Public-Private Partnerships may take a variety of forms. The system organization used perhaps most commonly in the US features government-subsidized companies responsible for system maintenance and operation. For example, many train, subway, and bus systems are operated by heavily-subsidized for-profit companies. However, in other cases, political opposition prevents the implementation of such systems. For example, efforts to turn control of the Pennsylvania Turnpike over to a private company failed when it was revealed that the company being considered (because it had the most competitive bid) was foreign-based.

All told, the question of public vs. private is not an easy one. Many complex factors are involved, both practical and philosophical. However, it is a question that demands an answer one way or another. If no answer is intentionally and specifically given by society, the government, and private companies, the result will be the continuation of the status quo. Fortunately, in our society, we as citizens and consumers have a say in deciding the future of our transportation system. So, if you want to change something, work to make it happen.

———————————————————————————————————————

http://blogs.asce.org/govrel/2013/03/11/continuing-resolution-puts-transportation-funds-at-risk/

http://www.nffe.org/local2109/ht/display/ArticleDetails/i/63500

http://reason.com/blog/2012/09/27/study-public-transportation-can-succeed

http://www.virginiadot.org/business/ppta-default.asp

http://www.mysanantonio.com/opinion/commentary/article/Congress-should-embrace-public-private-3645792.php

http://www.wisegeek.com/what-is-the-difference-between-private-and-public-transportation.htm

http://kfarr.com/2008/07/10/when-should-public-transportation-systems-be-private/

http://reason.org/news/show/does-bus-transit-reduce-greenhouse

http://www.fhwa.dot.gov/ipd/p3/index.htm

http://www.inthepublicinterest.org/case/pennsylvania-turnpike

EasyJet and Ryanair are two of the largest European low-cost airlines.

In my opinion, one of the more interesting trends in modern transportation systems is the emergence of the budget airline as an effective and reliable means of transportation. Passenger airlines have been around for decades, but these companies have typically marketed themselves as the providers of a luxury service that includes novelties such as complementary meals served by flight attendants. Only recently has the low-cost business model truly taken hold, with companies such as Southwest and JetBlue in the US and Ryanair and EasyJet in Europe. It has been so effective, in fact, that many large, “traditional” carriers have, with mixed success, tried their hand at the establishment of low-cost subsidiary airlines.

When it comes to the success of the low-cost airline business model, the question “How do they do it?” inevitably comes to mind. The answer: In a nutshell, by cutting costs.

Before I delve into explaining how these companies do cut costs, I’d like to offer the assurance that this cost-cutting business strategy in no way implies that low cost airlines are unsafe. Budget airlines, like any airline, must comply with national and international safety standards. In fact, for reasons to be explained later, many low-cost airlines have fleets primarily composed of fairly new planes.

How then do these airlines cut costs? Budget airlines utilize a variety of cost-cutting techniques in order to provide lower fares to their customers. Although some of these techniques are directly visible to the customer, many of them are behind-the-scenes and deal with internal company workings. Here are a few examples of cost-saving techniques that budget airlines use:

• Perhaps the most obvious way in which low-cost airlines save money is by eliminating “luxury” customer services, such as complimentary in-flight food services. Exactly what services are cut varies from carrier to carrier. Many budget airlines have only economy class seating (more seats = more revenue), and allow seat reservation only at an additional charge. The uniformly arranged cabin operates on a first-come, first-served basis. This simplification reduces the number of personnel required to clean a plane and eliminates the need for expensive ticket-booking software. In addition, budget airlines often place strict limits on passenger baggage. This allows them to speed up the loading process and charge for extra bags/weight.

• Another major way that budget airlines save money is by cutting labor costs. This can be done by training employees to perform multiple tasks. For example, a flight attendant may help to clean the plane after a flight, or a pilot may help load baggage.

• Low-cost carriers can also save money by only selling tickets to customers directly through their website or ticket counter, instead of through travel agents and third-party websites. This technique of “avoiding the middleman” allows airlines to earn the sale price (less tax) of a ticket without some portion of the sale price going to another party.

• Because fuel represents a large portion of an airline’s operating cost, airlines employ several techniques to reduce their fuel costs and fuel-associated costs. For example, because longer flights require more fuel, budget airlines typically fly short, direct flights rather than long flights with many connections that require passengers to transfer planes en-route. Because the price of jet fuel fluctuates greatly, low-cost airlines also speculate on the price of fuel. When the price of fuel is low, an airline may enter an agreement with a fuel provider to “lock in” a certain price for a specified length of time, wagering on the expectation that fuel prices will rise over that period of time. Airlines Budget airlines have typically had great success saving money in these ways.

• Budget airlines also choose flight routes that save them money. This often means flying to secondary airports rather than a city’s main airport. Secondary airports typically charge carriers a smaller fee for using their facilities, even if they are no further from the city than the main airport. (This airport fee can also be reduced by scheduling flights at off-peak hours, such as the early morning.) In addition, as explained above, low-cost airlines also typically offer primarily point to point service, rather than having a main hub that serves as a transfer point for a large number of flights. This decreases the miles flown (think gas) while maximizing the number of flights offered. In addition, by limiting the number of connections, budget airlines reduce the frequency of compounded flight delays. This reduced “turn time” allows low-cost carriers to schedule more flights per day, which earns them additional revenue. (The lack of complementary food service and the cross-training of staff also decrease “turn time.”)

• One of the most effective techniques that budget airlines use in order to cut costs is the utilization of a homogeneous fleet of fairly new airplanes. In the airline industry, maintenance is an especially costly necessity. In fact, many engine companies make no money (or even take a loss) on the sale of a new engine, but generate the majority of their revenue through the maintenance and repair of aging engines. For this reason, it is in the best interest of airlines to decrease their maintenance costs as much as possible. By having only one or a few types of planes in their fleet, budget airlines can avoid buying and stockpiling costly spare parts for numerous plane models. Low-cost airlines typically purchase new planes and resell their “old” planes after only several years of heavy use. The large amount of flight time that these planes have seen (due to quick “turn time”) and the moderate resale value of the planes make up for the cost of constantly purchasing new planes. An additional benefit to using only one type of plane is that budget airlines only need to train their pilots and maintenance crews to operate and repair one type of plane. (Some low-cost airlines even train their own staff.) This saves on labor costs, and increases “turn time.”

The advent of the budget airline may herald a new era of global transportation. In the 19^th century, the steam locomotive revolutionized the way people thought about transportation by making it possible for many poor and middle class people to move great distances. This fundamental change in the world’s notion of a transportation system helped to restructure society itself. In many ways, the automobile had the same effect a century later. Will the airplane be the revolutionary technology of the 21^st century? If the plane becomes easily accessible to vast numbers of people who could previously not afford air travel, one can only guess what effect it will have. It will challenge not only our ideas about transportation, but also our concept of the world itself.

———————————————————————————————————————

http://money.howstuffworks.com/personal-finance/budgeting/budget-airline.htm

http://www.low-cost-airline-guide.com/en/articles/about-low-cost-airlines.htm

http://www.dnaindia.com/money/interview_how-can-a-low-cost-airline-not-work_1379995

http://money.cnn.com/magazines/moneymag/moneymag_archive/2004/05/01/367265/index.htm

http://en.wikipedia.org/wiki/Low-cost_carrier

http://www.reidsguides.com/nfa/how.html

http://professor-murmann.info/index.php/site/fullarticle/290/

http://money.cnn.com/magazines/fortune/fortune_archive/2002/12/30/334574/