Airline flight cancelations: another cost of government regulations

How well does government balance off the costs and benefits of its regulation? I would argue not very well. Indeed, in the context of people getting upset about having to sit on airplanes, I would argue that there is no reason for government regulation. How much do passengers want to get to their destination? How upset are they by sometimes having to wait on the runway in a plane? How much does it raise the price of fares to have trips cancelled so as to avoid getting people stranded? Airlines compete against each other for passengers. Airlines compete on numerous dimensions, including avoiding having people stranded on runways. If the airlines don't get the tradeoffs on these dimensions right, passengers will fly on other airlines. To use economic jargon, there is no externality problem here. Fox News has the story here:

Charges have been flying that airlines prematurely canceled flights ahead of the East Coast snowstorm because of new rules fining airlines for leaving planes standing idle on tarmacs, though transportation experts say that such claims are impossible to quantify.
In April, new rules went into effect that threatened airlines with a $27,500 per passenger fine if their planes didn't take off within three hours after pulling out to the tarmac. The move was aimed at reducing a spate of horror stories from people stuck in claustrophobic conditions on planes without access to bathrooms, water or food.
The regulation seems to have had its desired effect. According to the Department of Transportation, since new rules were enacted in late April, the number of tarmac delays over three hours has dropped considerably. From May to September 2009, 535 tarmac delays over three hours were reported; in May through September this year, the number was 12.
But after an East Coast storm threatened to ravage New York area and other airports, hundreds of flights to and from the region were cancelled – several even before the snow started to fall -- and complaints are mounting that the airlines were deserting their customers for fear of racking up fines.
"There's no doubt about it, airlines (were) pre-emptively canceling flights because they don't want to be stuck paying $27,000 per passenger," said Vaughn Cordle of Airline Forecasts.
"I think it's safe to say that there are many passengers who would have reached their destination, albeit with non-trivial delays, had the ... ruling not be in effect," said Amy Cohn, an associate professor of industrial and operations engineering at the University of Michigan and an affiliate at MIT's Global Airline Industry Program. . . . .

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