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June 2, 2008
ECONOMIC NEWS: Consumption is Weak, Housing Market Still Ailing
Home sales data show a large volume of unsold properties. A Census Bureau release on new homes sales showed that the housing market continued its slump amid tighter credit conditions and weakened demand. New home sales in April were 42 percent below the level of April 2007. Although the seasonally adjusted April numbers were 3.3 percent above the March 2008 level, the unadjusted April numbers were lower than the March numbers. The April report also shows that the inventory of unsold homes remains at a historically high level of 10.6 months’ supply. (See Chart)
Revised GDP growth remains anemic. The Commerce Department revised its first quarter estimate of real Gross Domestic Product (GDP) to an annualized real growth rate of 0.9 percent, up from the advance estimate of 0.6 percent. The price index for gross domestic purchases, which measures the prices paid by U.S. residents, rose at an annual rate of 3.5 percent in the first quarter, down slightly from the 3.7 rate in the last quarter of 2007. Excluding the cost of food and energy, prices rose by 2.2 percent, down from 2.3 percent in the fourth.
IN FOCUS: Flight Delays Cost Passengers, Airlines and the Broader Economy Billions
Using data on over 10 million individual flights, the JEC found that flight delays accounted for 19.5 percent of total flight time, measuring from scheduled departure to actual arrival during 2007. This amounts to a total of 4.3 million hours of delay for aircraft. These aircraft delays in turn cost travelers 320 million hours of lost time. The estimated value of this lost time is $12 billion.
Aircraft delays also raised the operating costs of airlines. When a plane is delayed, the airline must pay more for crew, fuel and maintenance. The airline must also pay more in overhead costs, because a less efficient system requires a greater number of aircraft, support facilities, and related personnel. For 2007, the total estimated cost of operating delay is $19.1 billion.
In addition, delays impose costs on the broader economy. Air travel delays increase the production and distribution costs of other segments of the economy that rely on air travel as an input into their product, or use air travel to provide a service. For example, higher air passenger transport costs increase business and entertainment expenses and reduce the expenditure on food service and lodging when tourism in reduced. For the U.S. economy, these indirect costs totaled $9.6 billion in 2007.
Air delay also has measurable environmental impact. Delays burn additional jet fuel and that produces pollution. CO2 is the dominant gas implicated in the risk to the global climate from human-induced greenhouse gas emissions. The JEC has calculated that aircraft delays consumed at least 740 million gallons of jet fuel. This delay-related jet fuel burn emitted about 7.1 million metric tons of carbon dioxide, or about 5 percent of all carbon emissions from domestic commercial aircraft in 2006. The environmental damage done by this excess jet fuel burn is in addition to the $1.6 billion cost of the fuel itself.
Air delay also has measurable environmental impact. Delays burn additional jet fuel and that produces pollution. CO2 is the dominant gas implicated in the risk to the global climate from human-induced greenhouse gas emissions. The JEC has calculated that aircraft delays consumed at least 740 million gallons of jet fuel. This delay-related jet fuel burn emitted about 7.1 million metric tons of carbon dioxide, or about 5 percent of all carbon emissions from domestic commercial aircraft in 2006. The environmental damage done by this excess jet fuel burn is in addition to the $1.6 billion cost of the fuel itself.
With the Federal Aviation Administration (FAA) predicting that the number of paying U.S. air passengers will likely increase through 2025 at an annual rate of at least 2.7 percent, the costs to passengers, airlines, and the overall economy can only be expected to rise in the coming years.
Certainly, some air traffic delay is unavoidable. Flights can and should be delayed if safety issues arise as a result of severe weather or mechanical problems. Additionally, some level of air traffic congestion is desirable, particularly at “hub airports,” to allow airlines to cluster arrival and departure times to offer passengers the most efficient connections. However the staggering levels of delays experienced in 2007 and the significant costs associated with these delays are clearly troublesome and suggest substantial room for cost effective improvements. For further details about the costs of airline delay, see the recent JEC study entitled “Your Flight Has Been Delayed Again” available online at https://www.jec.senate.gov/index.cfm?FuseAction=Files.View&FileStore_id=47e8d8a7-661d-4e6b-ae72-0f1831dd1207.
