The Airport that Rent Seeking Built

washington_dulles

Passengers at Washington Dulles International. Photo credit: Washington Post.

by James A. Bacon

The Washington Post has taken notice of the fact that Washington Dulles International Airport, widely regarded as an economic engine of Northern Virginia, is in trouble. Sometime next year, notes Lori Aratani, more passengers will be traveling through Reagan National Airport in Arlington, than through Dulles, an airport with fourteen times the land mass.

Dulles suffers from the perception that it is a hassle to use. Indeed it is, compared to National, which is located in the metropolitan core. But, then, Dulles, located on the metropolitan fringe, has always been a hassle to use. When growing up in Washington, D.C., in the 1960s, I once went on a joy ride (no alcoholic beverages consumed) to Dulles and I remember driving through miles and miles of empty countryside. Since then, the dairy farms along the Dulles Access Road have been transformed into one of the nation’s leading technology corridors. The center of gravity of development in Northern Virginia has migrated steadily closer to Dulles over the years, so it’s hard to imagine that getting to Dulles is more of a hassle today than it always has been.

No, something else is responsible for Dulles’ woes. Officials with the Metropolitan Washington Airports Authority, which runs both Dulles and National airports, blame Congress for tinkering with the decades-old rule that limit the number of takeoffs and landings at National. Restrictions at National effectively capped passenger traffic there, pushing traffic out to Dulles. Since 2000, Congress has weakened those restrictions. Between 2011 and 2013, Dulles lost nearly 200,000 seats to National. Sequestration also has clobbered the Washington economy, especially among government contractors along the Dulles Corridor who are most likely to choose to fly out of Dulles. United Airlines, which accounts for about 65% of the flights at Dulles, says it lost 10% of its traffic due to sequestration.

MWAA’s response, according to Aratani’s story, has been to staunch the flow of passengers to National. A new agreement with airlines would require airlines to compensate MWAA, she writes, if Congress opens the door to more long-distance flights out of National. In other words, MWAA’s strategy for Dulles is to restrict National’s competitive advantage in the marketplace and restrict the choices of Washington-area travelers.

Aratani neglects to mention the recent Bloomberg survey indicating that Dulles scores third highest among all major U.S. and Canadian airports for traveler frustration on metrics that include security, restrooms and shopping. Apparently, MWAA has acted on the latter concern by adding high-end shopping and dining options, including Montblanc and the District Chophouse, but there is no indication in Aratani’s story that the board even acknowledges the other problems.

Also, MWAA been a major driver behind the building of the Silver Line extension from Washington’s Metro system. The second phase , expected to be completed in 2018, will include an airport station. MWAA will pay for only a tiny sliver of the capital construction costs of the multibillion-dollar project, the financing of which represents a massive wealth transfer from commuters on the Dulles Toll Road and general taxpayers to the riders of the rail line. Rail passengers to Dulles will pay a fraction of the fare to travel the same distance as the toll road commuters who are actually paying for the rail.

MWAA and its allies in the air cargo business also have lobbied for hundreds of millions of dollars worth of road and highway improvements, including, most notoriously, the controversial Bi-County Parkway designed to facilitate air cargo traffic.

It strikes me that MWAA has focused its attention overwhelmingly on building Dulles through rent seeking — restricting flights from National, building the Rail-to-Dulles project at others’ expense, and dunning Virginia taxpayers to subsidize a highly speculative air cargo boom — rather than tending to the nuts and bolts of creating an airport that passengers want to use. Maybe the board needs to spend more time thinking about enhancing the visitor experience through such mundane things as tighter security, cleaner bathrooms and more dining options.

Update: I am reminded by Reed Fawell’s comment on this post of the catastrophic over-expansion of Dulles in the 2000s, leaving the airport saddled with enormous debt and high costs. In that high-stakes gamble, Dulles built “perhaps the world’s largest useless vestibule” as well as “a ridiculously expensive underground transport system,” both of which were compounded “by a long history of duplicate work, horrendous  cost overruns, and throttling of customer demand.” Reed has documented some of these disastrous decisions on this blog, but the full story has never been written.

A question that Ms. Aratani — or others — might ask is how those high embedded costs are reflected in ticket charges to passengers and terminal charges to airlines.

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27 responses to “The Airport that Rent Seeking Built

  1. If a business has excess capacity, it generally tries to fill as much as it can. So long as it can make sales at prices that recover incremental costs, it should work to make those sales. Dulles has too much capacity and matching high costs. MWAA should control its operating costs and push to get low-price airlines to serve the airport. Flights that cost $200 less than at Reagan will attract passengers.

  2. It can’t control its costs, keeping them within reason, because its locked into its gross mistakes committed between 2000 and 2010.

    So Dulles is stuck despite the enormous subsidies its already received from a variety of sources, including those I believe from Reagan Airport landing fees. For a major root cause see comment 16 at baconsrebellion.com/2014/11/dulles-gets-high-scores-in-at-least-one-metric-frustration.html

  3. In my continuing contrarian role – I will point out how the folks who are unhappy with Dulles are also similarly unhappy not only with VDOT and their projections for highways.. the Universities for their financial and operational mis-behaviors… the clown-show in Richmond passing out film incentives and tax breaks for shooting ashes into oblivion – but beyond govt – we have wonderful examples of Dominion controlling the General Assembly and infiltrating the SCC… then we have businesses that screwed the proverbial pooch for their investors, Kodak, Blockbuster, … the Motorola chip plant that went belly up… etc – oh and don’t forget the feckless media (that did do good report on Dulles…. forget that – look at what they did not do).

    long story short – there’s a whole lot of trouble in River City these days – people are unhappy – across the board.. with govt and rent-seeking, crony capitalists, et al.

  4. Let’s see if we can straighten out some facts. First, Reagan National Airport is in Arlington County not Alexandria. Interestingly, given the amount of landfill used to expand Reagan National Airport over the years there is some debate whether part of the airport is actually in the District of Columbia.

    The FAA ran both National Airport and Dulles Airport until 1987. In 1987 legislation passed control from the FAA to the MWAA. However, all decisions regarding the airports were subject to review by a Congressional committee. Twice this arrangement has been taken to the US Supreme Court and the Supreme Court has twice ruled the congressional oversight unconstitutional. However, the federal government continues to interfere in the airports’ operations by restricting the distance flights can fly but then passing various exemptions to their own rules so that Congressmen and Congresswomen can fly home from the closer airport.

    The simple truth is that Reagan National Airport should be closed and the land sold for development (at what would be a huge price). The postage sized airport can’t be expanded and remains one of the most dangerous airports for approaches based on its size, the Potomac River and flight restrictions since 9/11. Here is a good article on safety – http://jethead.wordpress.com/2011/12/24/why-you-should-never-fly-into-washington-national-airport/

    I have had many pilots tell me that Reagan National, LaGuardia and Boston Logan are the three airports they like the least.

    But asshats like John McCain want to fly to and from Phoenix without the inconvenience of going to Dulles so they keep creating exemptions to the flight perimeter and allowing bigger and bigger jets to maneuver in the cramped airspace over DC.

    Congress handcuffs the MWAA and then people like Bacon howl about rent seeking. The MWAA should close Reagan and expand Dulles. Now, what do you think the “free market advocates” like John McCain would say about that?

  5. FYI – Another article about Congress’ unconstitutional meddling in the operations of Reagan Airport.

    http://greatergreaterwashington.org/post/7195/senators-threaten-mwaa-over-dca-flight-restrictions/

    “MWAA officials said adding flights at National and replacing other short-range flights with flights to the west will reduce traffic at Dulles and impact revenue expected from the Silver Line. They also argued that the airport’s parking, security screening and baggage handling couldn’t handle the additional demand.”

    Guess what? MWAA officials were right.

    “For example, Kay Bailey Hutchison (R-TX) included tried to include a provision requiring four small carriers to fly to West Texas, likely not the area with the highest travel demand to and from DC.”

    Yet another buffoon Republiclown pretending to be pro free enterprise while trying to mandate unnecessary flights to and from her home state.

    If Jim Bacon wanted to write something useful about DC’s airports he’d write about the idiot Republicans in Congress who consider those airports their own personal playthings.

    • First, thanks for pointing out the careless error regarding the location of Reagan National. I’ve made the correction.

      As for Republiclowns pretending to be free-market and then using their office to mandate unnecessary or uneconomical flights, what can I say? Republiclowns who do that are hypocrites. I’m sure both Dulles and National have been saddled by unreasonable demands from Congress that other airports don’t have to contend with.

      That still doesn’t explain Dulles’ over-expansion, its high embedded costs or its poor Bloomberg survey ratings.

    • It’s my recollection that the federal legislation that transferred control over Dulles and then National Airports did so under a 50-year lease, with ownership remaining with US DOT. MWAA took over the buildings and land under this lease and has constructed a number of improvements and new buildings. I’m not sure what happens to the improvements should the lease not be renewed, but, often, title transfers to the landowner.

      If the feds still own the two airports, isn’t it reasonable for Congress and the President to become involved in their operation? As my Dad always said, until you are fully self-supporting, you need to listen to him.

      I would think that, unless MWAA or the Commonwealth were to buy out the federal investment with the approval of Congress, the feds can make a legitimate case it can stick its nose into the operation of the airports. And, of course, Congress always puts strings on any money it transfers to the nation’s airports. For example, the FAA restricts construction of radio towers near any airport served by the FAA.

      • If I lease you office space and you set up a dental clinic I don’t get to tell you how to operate your dental shop. The US Supreme Court has twice ruled against Congress in this matter but Congress continues to meddle.

  6. Joel Klotkin pretty well demolishes Jim Bacon’s “everybody is moving to the urban core” theory. Beyond that Klotkin paints an interesting political picture of the Democrats losing the suburban vote.

    http://joelkotkin.com/content/001006-progressives-war-suburbia

    “Yet, as census data and electoral returns demonstrate, the demographic realities are nothing like what Donahue and the administration insist. The last decennial census showed, if anything, that suburban growth accounted for something close to 90 percent of all metropolitan population increases, a number considerably higher than in the ’90s. Although core cities (urban areas within two miles of downtown) did gain more than 250,000 net residents during the first decade of the new century, surrounding inner ring suburbs actually lost 272,000 residents across the country. In contrast, areas 10 to 20 miles away from city hall gained roughly 15 million net residents.

    Since 2010, suburban growth has slowed as young people, hampered by a weak economy and tougher mortgage standards, have not been able to buy houses. But while population growth in the same time period has been roughly even between the suburbs and core cities, the suburban population, which is so much larger to start with, has continued to expand at a faster rate . According to demographer Morrill, since 2010 the suburbs have added 4.4 million people compared to fewer than 2 million in core cities.”

    Jim Bacon and Barack Obama – odd bedfellows in the war on suburbia.

  7. Most all the major older urban areas have both “inner” and “outer” airports .. Midway in Chicago, Hobby in Houston, Love in Dallas, etc and they all have similar issues with regard to volume and type of service. Denver international is 30 miles east of Denver…and the original Rocky Mountain Airport.

    The smaller – inner, older airports have the advantage of close-in convenience but at the same time a number of disadvantages – not the least of which – bringing in airliners over densely developed land… the bigger the airliner the bigger the risk and impacts..

    I just don’t think Dulles is partially egregious .. it does have “gates” far from the terminals but I think this is not uncommon is the bigger regional airports but anyone who has been to the bigger international airports will tell you that there can be a lot of walking between different airlines if you’re connecting that way…

    and I’d take Don’s perspective here as a true world traveler… comparing Dulles to other international airports here and over seas.

    and I think trying to predict and project a regional airports future capacity and use is just as problematic as VDOT trying to project a toll road demand.

    • Old Stapleton Airport in Denver was a joy. 20 minutes from the time I got my bag, I was in downtown Denver via taxi. A little longer if I rented a car.

      • in terms of “ownership” I don’ see MWAA as owners but rather a govt agency … I don’t see MWAA selling the two airports to some private entity to operate.

        I don’t see any airport in the country being privately operated even though critics will continue to say that the govt is unfit to operate things like airports.

        I do not see a company called American Airports coming into existence with their first PPTA acquisitions being National and Dulles.

    • Denver is a good example. When DIA was finally completed (along with plenty of accusations of Clinton Administration graft) Stapleton was closed and developed. Chicago and Houston are much, much bigger than DC. Meanwhile, BWI adds a third major airport to the mix.

      You can’t fly international from Reagan. They don’t have a US Customs facility (yes, you can clear US Customs in Toronto and fly in but that’s the only exception I believe). The runways are short and the big planes can’t get in and out.

      Dulles is an awkward airport. The original design of lounges going from the terminal to the planes was badly flawed. Retrofitting a train system into a 50 year old airport was a major pain (and expense).

      However, we are where we are. Reagan can’t be expanded. Almost all international flights have to use Dulles or BWI. Dulles is still the 9th largest international airport in the US.

      The air cargo gimmick doesn’t seem very likely to work to me. I’d like to know how Dulles compares with Memphis and Louisville before I went very far down that road. Louisville, in particular, seems to be quite the rail hub. I am not sure Northern Virginia can compete.

      The best answer would be to shutter Reagan, a la Stapleton. Barring that, I’d decommission some or all of Terminal C or D at Dulles. The gates can be put into mothballs until more demand appears.

      As for United Airlines – they have way, way too much market share at Dulles. They have effective route monopolies to Chicago, Denver, San Francisco and Los Angeles. That is a failure of the MWAA.

  8. James A. Bacon wrote:

    As for Republiclowns pretending to be free-market and then using their office to mandate unnecessary or uneconomical flights, what can I say? Republiclowns who do that are hypocrites. I’m sure both Dulles and National have been saddled by unreasonable demands from Congress that other airports don’t have to contend with.

    Don’t forget that all members of the U.S. House of Representatives and U.S. Senate (and their families) get free, attended parking at both National and Dulles. And yes, a lot of Members do park their vehicles at Dulles.

  9. Good article and good comments. Does anybody think that the Silver Line Phase-2 extension to Dulles could be in jeopardy due to the situation?

    • Some kinds of flights cannot fly to/from Reagan and if not mistaken it closes at 10pm … so Dulles competes more with BWI – which has Amtrak from DC I believe.. (don’t know how frequent)…

      I no longer fly much but Dulles usually had the flights I needed and often Reagn not.. BWI was too far when starting 50 miles south of DC but I would think people on the beltway might

      I wonder how Dulles compares with other similar “outer” airports – I don’t think co,paring it to Reagan is apples to apples.

      • Larry,
        Here’s what MWAA states about noise and the hours of operation at Reagan National. “Under Reagan National Airport’s nighttime noise rule, established in the 1980s, certain aircraft that are prone to higher noise output – as determined by FAA-approved configurations related to aircraft type, weight and engine model – may not take off or land at Reagan National between 10:00 p.m. and 7:00 a.m. However, most modern passenger jets comply with the regulations and are permitted to fly during the nighttime hours.”

        If I’m still awake, I routinely hear planes flying near my house after 11 pm. They are not as bad as helicopters. Planes landing south/taking off north are supposed to stay over the Potomac River between the Airport and the American Legion Bridge.

    • I don’t think the Silver Line will be canceled due to a lack of demand at Dulles. It provides a lot of access to the western suburbs as well as a station at Dulles.

      However, sequestration and reduced government spending might dampen overall demand in NoVa to put the logic of the Silver Line into question.

  10. For example, today (11/29/14), checking ORD only, the last flight to DCA arrives at 11:49 pm.

  11. From the Washington Post, January 18, 1948:

    The Civil Aeronautics Administration is considering a site near Chantilly in Fairfax County for a Federal airport to relieve traffic congestion at National Airport.

    With the Nation’s Capital already one of the major air transport centers of the world. the need for a well-coordinated regional airport plan to guide development and avoid overlapping facilities is· obvious, a summary of the prelirninary study explains.

    At the same time. air facilities must be carefully integrated with
    other elements of Greater Washington’s regional plans. according to the summary.

    A Federal airport in Fairfax County would be developed mainly
    to handle industrial freight. although passengers would be handled there when National Airport was closed in by weather conditions, a CAA spokesman said.

    • thanks for posting that. some folks seem to think that when you start something like Dulles that there has to be a well-defined plan and projections are almost guaranteed facts…

      Most of these things get started for a reason – how they play out can be different than envisioned.. and if one is looking for exceptional competence..on the projections and ways forward – I think they ought to think about how private corporations handle these same challenges.. it’s ain’t so pretty.

      the main difference is corporations can go broke and disappear but the govt does not..

      trying to figure out where freight goes or not is like VDOT and the Port Authority trying to figure it out… it’s like private corporations trying to figure it out.. some of it is seat-of-pants ..

      once upon a time there were two competitors in database technology – Oracle and Ingres.. according to the half-glass empty folks the management at Ingres is incompetent.. and an Oracle – can make no mistakes.. eh?

      Apple used to make LISA and NEXT – anyone know what happened?

      Sun Microsystems used to be the workstation of choice, now?

      someone thought an air freight capability was needed at a regional airport…

  12. A friendly reminder: The value of the Silver line is to move commuters from Loudoun to Tysons and DC. Just about all of those pesky ‘Silver Line’ users subsidized by commuters are indeed commuters themselves.

    BTW, it was last reported that ridership on the Silver line is running about 60% above estimates. Sorry that I don’t have a link handy.

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