Tuesday, 31 December 2013

Airport rapacity: an economics lesson. And, by the way, Happy New Year.

Airports: they’re so much more than just the places we go through to get somewhere else.

Socially, they play a key role in our lives. They’re funnels: because huge numbers of us go through them, they’re where coincidental meetings aren’t that much of a coincidence. Our sons belong to the English community in Madrid, and one of them, travelling back to this country just before Christmas, ran into three acquaintances taking the same plane. 

The airport was funnelling the homebound expats.

But they also illustrate key economic principles. They demonstrate, in particular, that prices have nothing to do with costs, and everything to do with demand.

Take airport parking. What’s the cost of a car park? Well, initially a bit of land, but the airport probably already owns that, having acquired rather a lot of the stuff when it first put in terminals and runways. And then, unless you’re going to build something on multiple storeys, all you need for a car park is a bit of asphalt.

Not a lot of cost. And for many years, airport parking was pretty easygoing. You used to be able to drive right up to the terminal and drop people off. You could even stand chatting to them before they headed indoors.

‘See you at Easter, then?’

‘Sure. And if you do find my scarf/glasses/ipad [delete as applicable], just bring it with you.’

Relaxed. Easy. Congenial.

Well, that experience has become a luxury these days. Airport authorities have worked out that demand vastly exceeds supply, and they can start to exploit that imbalance in their (financial) favour.

In Luton, where we live, the pickup/drop off area isn’t even next to the terminal any more. But, as though to compensate for that additional inconvenience, the authorities decided to charge of a pound to stop there for ten minutes. Overstay your welcome, and you’re in for an eye-watering penalty.

You don’t have to pay that fee. There’s a parking area rather further away where you get half an hour free of charge. Brilliant, especially as it has a shuttle bus service. Except that by the time you’ve waited for the bus and reached the terminal, you’ll have used up ten or more minutes, which is about the same time as it takes to walk. If you spend more than another ten minutes tracking down your friends, you won’t be back at the car before the half hour’s up, and then you
’re in for a fee worthy of a far larger airport.

’s the perfect trap.

But the stroke that really won my admiration came a few months ago. The one-pound fee at the pickup area went up to two pounds. A 100% increase. At a time when inflation is under 3%. Now that takes truly outstanding brazenness.

And a market wholly skewed towards the seller.

But Luton is special. Today we dropped off our Madrid delegation, two sons and a daughter-out-law, for their flight back home. But we were at Liverpool not Luton.

The yellow submarine at Liverpool John Lennon Airport
I’ve had a certain fondness for ‘John Lennon’ airport ever since the year Liverpool was European City of Culture. At the time, the terminal sprouted posters announcing that it was the official airport of the culture festival. I loved that. I wondered what the competition had been. Heathrow, maybe, a few hundred miles to the south? Or perhaps Edinburgh, much the same distance in the opposite direction?

Liverpool hasn’t quite caught up with Luton’s financial genius. It still allows a free drop-off period. But for just five minutes. I’ve never said goodbye to anyone so quickly, and I noticed the people in most of the other cars were being just as brief. Nothing’s so painful as a long farewell, so I suppose one might feel that Liverpool Airport was doing us a favour.

Or it hasn’t yet quite caught up with how markets really work.

The boys and the girl got home fine, if an hour or so late, and are now making ready for their New Year’s festivities. As we should. So it only remains for me, after sharing this edifying insight into the working of economic law, to wish the same to you.

Happy New Year.