I'm writing this post from a hotel in Singapore, during an unscheduled day-long stopover during my return to New Zealand from Belfast. It has been a bit of an experience, but interestingly it highlights a number of things related to incentives, which I'll be covering in both my ECONS101 and ECONS102 classes in their first week coming up.
Today (technically, it was actually yesterday, due to the time zone changes) started in an eventful way. We travelled from Belfast to London Heathrow yesterday and stayed overnight in the Hilton Garden Inn, which overlooks one of the runways and Terminal 2. When we woke up and looked out the window, we could see a massive crowd of people outside, with police and ambulance vehicles lined up at the entrance to Terminal 2. It turns out that Terminal 2 had been evacuated after someone had left a 'suspicious package' at check-in.
Fortunately for us, the evacuation was all over in about 90 minutes, and before we had to check in for our return flights, via Singapore to Auckland. However, the reopening of Terminal 2 was the start of absolute chaos (which you can see in the articles linked above). The check-in and security system at London Heathrow is usually running at full capacity at the best of times. Now factor in a 90-minute backlog of passengers trying to get through in time for their flights.
My wife and I arrived in plenty of time and, thanks to the fast track (and arriving early) we made it to our flight on time. However, others were not so lucky. Singapore Airlines kept the flight at the gate for an hour and twenty minutes, waiting for the last 40 passengers to clear security and get to the gate. Our plane then missed its take-off slot, and the Heathrow air traffic control tower then kept us parked at the gate for a further half hour waiting for a new slot to open up.
Finally, we were underway, but nearly two hours late. That doesn't sound too bad, but my wife and I (and a not insignificant number of other passengers) were supposed to be connecting with an Air New Zealand flight from Singapore to Auckland, which was due to leave one hour and twenty minutes after the originally scheduled landing time of our Heathrow to Singapore flight. I thought the pilots might try to make up some time during the flight (which I have experienced on other delayed flights in the past), but these pilots did nothing. We arrived in Singapore, and our flight to Auckland had already left. So, Singapore Airlines rebooked us on a later flight, and put us up in a hotel for the day. And we were not alone. There were dozens of affected connecting flights, and dozens of passengers that were rebooked and sent to hotels.
So that's my story. What does this have to do with incentives? As I will note in lectures for ECONS101 and ECONS102 this week, incentives for decision-makers to change their behaviour arise when the costs and/or benefits change. In this case, there are a number of changes in costs that affected Singapore Airlines' decisions.
Think about my story from Singapore Airlines' point of view. There were several choices they had to make. First, when they realised that a number of passengers were running very late for the Heathrow to Singapore flight, they had (at least) two alternatives to choose from. They could have the original flight leave on time (or close to it) and re-book the 40 late passengers on alternative flights. Or, they could wait for those late passengers. Clearly, re-booking passengers is expensive and time-consuming, and especially so for long-haul flights with connections that might also be missed. So, Singapore Airlines chose the least costly option, which was to delay the departure of the Heathrow to Singapore flight.
Second, once the Heathrow to Singapore flight was in the air, they could choose to amble along at regular speed, or try to make up time. Both of these options were going to be costly to Singapore Airlines. Making up time would use more fuel, and jet fuel is expensive (according to this website, it costs approximately £205,000 or NZ$430,000 to fill an Airbus A380 full of fuel). However, ambling along at regular speed entails costs in terms of re-booking passengers, as well as taxi and hotel costs for passengers re-booked on much later flights. I don't know the real costs involved here of course, but clearly Singapore Airlines believed that it was less costly to re-book passengers and face those costs, rather than paying for additional jet fuel. [*]
Finally, there are some long-term incentives for passengers here, and Singapore Airlines' decisions could be counterproductive to their long-term interests. Airlines want passengers to arrive at the airport early, check in and clear security. This gives them some certainty over the number of passengers flying, and baggage weight, which need to be known for calculating the fuel load required for the flight. However, Singapore Airlines' decisions today were to the benefit of passengers who arrived at the airport later, and imposed additional costs on passengers who arrived early (like my wife and I). The expected costs and benefits of future airline travel have changed. Perhaps we shouldn't bother to be so early to the airport in future, if airlines are simply going to hold the plane for us if we are running late? In the meantime, we'll enjoy Singapore Airlines' hospitality during this unexpected stopover, and I'll be thankful that I will still arrive in time for teaching on Monday.
*****
[*] Of course, there may be another possibility here, which is that the A380 didn't have enough fuel to operate fast enough to make an appreciable difference to the flight time. I'd be surprised by this though, as planes are required to carry additional fuel beyond what is necessary for the journey.
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