Comments of the Competitive Enterprise Institute to the Federal Aviation Administration on its Proposed Rule to Increase Regulat

The Competitive Enterprise Institute (CEI) hereby submits these comments on the proposal of the Federal Aviation Administration (FAA) to impose the more stringent regulations of 14 CFR part 121 on certain commuter operators that now operate under part 135.

CEI is a non-profit public interest group dedicated to the principles of individual liberty and limited government. CEI has a longstanding interest in government health and safety regulation, especially in the area of transportation.1 For example, CEI testified on the airline child safety seat issue before a congressional subcommittee in 1990, and has been actively involved in this and related aviation issues since then.2

In CEI's view, the proposed regulations are unnecessary and would, in fact, result in a net decrease in safety if implemented.

Under the FAA's proposal, certain commuter airplane operators that now use airplanes of 10 to 30 seats under the less-stringent part 135 would be required to conduct those operations under part 121 instead. Certain small airports currently operating under the part 139 standard would also be affected.

Among the requirements which would be added by part 121 are: reducing pilots' annual flight time from 1200 hours to 1000 hours; imposing duty-time limits for maintenance personnel; and mandatory inclusion of such items as weather radar, protective crew breathing equipment, lavatory fire protection, medical kits, a third artificial horizon, and flame-retardant seat cushions.

For the following reasons, CEI believes that these proposed rules should not be implemented:

1) Contrary to FAA's claims, there is no demonstrated need for these regulations. As FAA's notice makes clear, the safety of part 135 airlines has not fallen; to the contrary, it has increased. FAA's notice is not a response to a problem of safety, but to an alleged issue of media coverage and public perception.

FAA's summarizes the reason for its proposal in the following words: “Recent part 135 commuter accidents have focused public, government and industry attention on the safety of commuter operations. While the safety level of part 135 operations has continued to improve, accident data, public perception, and recent government inquiries show a need for additional measures.” 60 FR 16,231/3 (emphasis added).

This improvement in the safety record of part 135 operations is not a statistical fluke. To the contrary, this improvement has been significant in its magnitude and long-term in its duration. According to FAA, the “accident rate per 100,000 departures was one-fourth the accident rate in 1980.” 60 FR 16,232/1.3

Given this improvement, it appears that the real reason for FAA's proposal has to do not with safety, but with something entirely different: media coverage and public perception. In the agency's own words: “Media attention to [several] commuter-type accidents has increased concern about the safety of these operations. …. Some members of the public are questioning whether they are receiving an appropriate level of safety in small propeller-driven airplanes as compared to the level of safety they receive in large jets.” 60 FR 16,232/1.

As FAA well knows, clusters of airline accidents will occasionally occur purely by chance. When they do, they will be the focus of intense media attention and, undoubtedly, of political attention as well. In allowing one such cluster to become the rationale for an expansion of its regulations, FAA is setting a dangerous precedent.

This is especially true, given the admitted public misperception of the cluster which led to this rulemaking, and of airline safety in general. As the agency notes, “some of the accidents that are categorized by the media as “commuter” accidents occurred in flights that were being conducted under part 121; that is in airplanes with over 30 passenger seats.” 60 FR 16,232/2.

Similarly, FAA admits that “most passengers probably do not realize that some differences in standards are necessary because of differences in the airplane and operation”. Id. Yet the agency has made little attempt to clarify this issue to the public. To the contrary, its initiation of this rulemaking suggests that it is more interested in obscuring these differences than in educating the public about them.

FAA argues that, if part 121 were not expanded to commuter airlines, then “there would … be no improvement in benefits and the level of safety would remain the same for the commuter operators.” 60 FR 16,276/2. This claim is simply false; the improvement in commuter airline safety noted above did not result from any past expansion of FAA regulation, but from the same forces that have led to improved safety in transportation generally, such as the accumulation of operational and mechanical experience, growth in technical expertise, and growth in the public demand, and ability to pay, for higher levels of safety. FAA has not provided any rationale for thinking that these basic trends would not continue in the absence of more stringent regulation.

2) The alleged change in public expectations regarding commuter airlines does not justify FAA's proposal.

FAA argues that the “combined effect of a continuing growth in the commuter industry and the ever-growing relationship between major carriers and their commuter counterparts will progressively blur the distinction between commuter and major air carriers. In other words, passengers will no longer readily distinguish between one type of carrier and another …. Therefore, it is important to establish a common approach toward regulatory safety. Air carrier accidents affect public confidence in air transportation perhaps more than accidents in any other mode.” 60 FR 16,273-74.

If the public is in fact truly concerned about the safety of small planes, particularly those used under “code sharing” arrangements, then there are clear alternatives to FAA's proposal. For example, airlines that wished to operate small planes under standards stricter than those required by federal regulation could do so, and they could advertise that fact. They could, for example, publicize that their small planes meet the same high standards as their large planes. (If there any provisions in FAA's regulations that prevent such compliance, then the agency should take steps to amend them.) If there is real consumer demand for such high levels of compliance, this is but one market mechanism that would allow that demand to be met.4

Airline owners have strong incentives to operate as safely as feasible. Most have not waited for government regulations to force them to do this. They are well aware that “air carrier accidents affect public confidence in air transportation, perhaps more than accidents in any other mode”. 60 FR 16,273-74. As one regional airline operator said, “no one is objecting to enhanced safety. The economic impact of accidents is severe– the crashes last fall caused our revenues to go down 12%. And those planes were flying under [the stricter] 121 rules” which FAA intends to impose on most smaller planes.

3) FAA's calculation of the safety benefits of its proposal is inadequate, and FAA neglects to calculate this ruling's effect on overall safety.

Even though the safety of commuter airplanes is improving, it is indisputable that “there are inherent differences between the 6-seater and the jet” (60 FR 16232/2), which contribute to the different safety records of commuter planes. Although some of these differences might conceivably be rectified by the proposed operations and equipment requirements, smaller carriers are still inherently riskier than larger carriers. For example, “the smallest carriers… experience a substantially higher rate of fatalities from weather-related incidents.”5

Consequently, FAA's calculation that “the proposed rule has the potential to prevent approximately 94 accidents” (60 FR 16,274/2) is highly questionable; as FAA itself admits, this calculation is based on a “broad-based accident rate”, in contrast to the “specific types of [preventable] accident” approach taken in past rulemakings. Id. FAA's calculation of the number of potentially prevented accidents assumes that 10-to-30 seat airplanes, if operated under part 121 rules, would match the accident rate of 31-to-60 seat airplanes. But although the agency admits that it is “not certain how effective the proposed rule would be in completely closing the accident gap” (60 FR 16,275/1), it evades any discussion of the implications of this assumption.

More importantly, FAA inexplicably ignores how its proposal would affect net safety, in terms of raising ticket prices and thereby leading potential passengers to instead use riskier modes of transportation. There are many reasons to question FAA's estimate that the average one-way fare would increase by only $2.00 under its proposal. Nonetheless, even if one accepts it, FAA has still ignored the substitution effect of even a slight change in ticket prices.

In fact, this effect would become even more important if the actual fare increase is more than $2.00. Aside from certain communities in Alaska, commuter airliners compete directly with cars for the typical 200-500 mile trip. FAA has emphasized, in other contexts, the extreme sensitivity of consumers to changes in ticket prices.6 For trips under 500 miles, nearly 70% of diverted passengers will drive instead.7 This will unequivocally put these people at a much higher risk of death, yet FAA has neglected this effect in its cost-benefit analysis.

Consider the following unexceptional situation: One airline, consisting of six Beechcraft 1900s (19-seat aircraft), handles the only routes from Boston to Bar Harbor and Rockland, Maine. These planes operate under part 135, and the small Maine airport is uncertified.

If the costs of FAA's proposal are too high for the carrier, or if, more likely, the State of Maine is unwilling to fund the upgrading of its airport, then travellers will lose the option of flying between these two cities, leaving driving as the only realistic alternative.

The drive between Boston and Bar Harbor is about five hours (roughly 250 miles); between Boston and Rockland, four hours (roughly 200 miles). The planes carry approximately 1250 people per month year-round on these routes, including during the winter when Maine roads are icy and dangerous.

If this route is closed due to higher costs, then the total number of people who would be unable to fly is 1250 people each month, or 15,000 per year. According to FAA's statistics, 70% of these passengers, or 10,500 people, will be diverted to automobiles each year. By being forced onto the road, these passengers would be put at nearly 40 times the risk of death or injury than they would be if they were flying.8

The death of one such passenger on a highway would have a far lower political impact than an airline fatality, and would never be traced to FAA's action in this proceeding. Nonetheless, it is a risk that this agency must take into account.

Similarly, FAA failed to calculate the safety and financial losses that communities would sustain with the loss of an airport. Business and tourism will certainly be affected by the loss of a major form of transportation. Most importantly, because “travel is safer for those passengers switching from autos to commuter airlines as a result of improved air service,”9 federal regulations which cause people to switch from planes to cars must result in less, rather than more, safety.

As one federal appeals court noted in another case involving a potentially lethal regulation, “Even if the [rule at issue] kills 'only' several dozen people a year, [the agency] must exercise its discretion; that means conducting a serious analysis of the data and deciding whether [the rule's benefits] are worth the lives lost.”10 FAA has failed to do this.

4) FAA failed to take other costs into account. FAA admits that the proposed rule “would result in a significant economic impact on a substantial number of small” commuter operators (60 FR 16,275/3), but it ignored numerous aspects of this impact.

• The opportunity cost of this regulation. The effects of the diversion of capital within the industry, or what else the commuter airlines, as well as the localities responsible for upgrading airports, might have done with the money spent on these requirements, are not explored;
• The economic cost to the communities which depend on air service for business and tourism. In certain areas in Alaska, air transport is the only viable option. “Many of the scheduled points served on a daily basis are totally reliant on air service for their mail, freight and transportation needs;”11 and
• The cost to certify airports. FAA estimates that 200 airports in the United States would have to be upgraded, but the number could be as high as 300 if airports with limited certification requirements were also affected, and “will result in a staggering increase in airport operating costs.”12

In conclusion, FAA has failed to take into account a significant number of costs: financial, opportunity, and, most importantly, human. Its rulemaking proposal appears to be the result not of a safety problem, but of a public relations problem: a desire to “act” in the face of a cluster of airline accidents, some not even involving the very planes this ruling would affect. It would be politically easy for FAA to enact its proposal; it would be somewhat harder for the agency to acknowledge that there is, in fact, no need for government action in this case.

We submit that FAA should not take the easy way out, but should instead rescind its proposal. Such a course of action is the only one that truly serves the public interest in this case.

Respectfully submitted,

Julie C. DeFalco, Policy AnalystSam Kazman, General Counsel

DATED: June 27, 1995.

1 See, e.g., CEI and Consumer Alert v. National Highway Traffic Safety Administration, 956 F.2d 321 (D.C. Cir. 1992) (adverse safety effects of federal fuel economy standards); CEI v. U.S. Department of Transportation, 856 F.2d 1563 (D.C. Cir. 1988) (regulation of airline computer reservation systems).

2 See Testimony of S. Kazman, Hearing on H.R. 4025: Child Restraint Systems on Aircraft, before the Subcommittee on Aviation of the House Committee on Public Works and Transportation, 101st Cong., 2d Sess., at 106, 310 (July 12, 1990); J. DeFalco, “Putting Child Safety Seats On Airplanes Might Cost More Lives Than Are Saved.” The Columbus Dispatch, Dec. 13, 1994, at 9A; J. DeFalco, “Unnecessary Panic In The Sky.” Boston Sunday Herald, Jan. 1, 1995, at 28.

3 FAA notes that the commuter airline accident rate is still higher than that of domestic part 121 airlines. 60 FR 16,232/1. Even this difference, however, may be overstated. “While an NTSB study released in April 1994 quoted a commuter safety record for 1993 of 0.509 accidents per 100,000 departures compared with 0.297 for the major airlines….for 1994, the figures show a rate of 0.3 accidents per 100,000 departures for commuter airlines and 0.24 per 100,000 for the majors. But when you eliminate the high risk flying done by bush pilots in Alaska and oil rig flying and other higher risk flying, it turns out to be 0.26 accidents per 100,000 commuter departures.” K. Harrison, “New 'Commuter Safety Rule' from FAA Draws Plaudits and Brickbats.” Aviation International News, June 1, 1995, at 23. Moreover, FAA's allusion to domestic part 121 airlines suggests that foreign airline accident rates may be significantly higher; if so, then the agency has failed to explain why the alleged commuter airline safety problem needs to addressed through regulation, while that of foreign airlines is left to individual passenger choice.

4 In fact, there is great reason to question whether the public truly demands equal safety levels from large and small planes. For example, the public willingly accepts differences in levels of safety between car models that are far greater than the differences in accident rates between commuter planes and large airplanes. The “death rate in single-vehicle crashes of the smallest cars is almost four times the rate in the largest cars. Insurance Institute for Highway Safety, Shopping For A Safer Car p.2 (Sept. 1994).

5 Oster, Clinton, et al. Why Airplanes Crash: Aviation Safety in a Changing World. New York: Oxford University Press, 1992, p. 36.

6 For example, for one-way travel distances of less than 500 miles, price elasticities were -1.7 for households with annual income greater than or equal to $40,000, and -2.3 for those with incomes less than $40,000. Report of the Secretary of Transportation to the United States Congress Pursuant to Section 522 of the Federal Aviation Administration Authorization Act of 1994, P.L. 103-105, May 1995, Volume 1, p.2-16. Nearly the entire first volume of this report is devoted to elasticity and diversion issues. The summary states that “the most significant factor affecting [family] passenger volume is the number of diversions from air travel. These diversions are the result of increased costs experienced by” the families (p. 8-1). Later, the report concludes that although mandating child restraint systems on airplanes could prevent a few fatalities, “passenger diversion to other, less-safe modes could cause a net increase in fatalities” (p. 8-4).

7 Ibid., p. 2-24. Of all air passengers diverted to other modes of transportation for trips of less than 500 miles one way, 69.1% will drive, 2.9% will take bus or rail, and 28.0% will forego traveling.

8 Deaths per billion passenger-miles are 0.6 for air and 24 for road travel. Morrison, S.A. and C. Winston. The Brookings Review. Washington, D.C.: Brookings Institution, Winter, 1988, p.10-15.

9 Oster, p.40.

10 CEI v. National Highway Traffic Safety Administration, 956 F.2d 321, 327 (D.C. Cir. 1992).

11 Joint Statement of Ketichikan Air Service, Inc., Taquan Air Service, Inc., Wings of Alaska, to the FAA Commuter Rule Public Meeting, Anchorage, AK, May 18, 1995.

12 State of Alaska Department of Transportation and Public Facilities, Position Paper in response to the March 29, 1995 NPRM on commuter airline regulations.