The Risk of Too Much Air Safety Regulation: Regulators shouldn't endanger Americans in an effort to make air travel safer.

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Date: Spring 2020
From: Regulation(Vol. 43, Issue 1)
Publisher: Cato Institute
Document Type: Cover story
Length: 2,657 words
Lexile Measure: 1430L

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In 2019 the Boeing 737 Max aircraft suffered two catastrophic accidents that resulted in 346 fatalities. Those tragic events led the Federal Aviation Administration to ground the aircraft until the underlying cause of the crashes could be determined. As of this writing, the 737 Max remains grounded. Boeing is paying billions of dollars in compensation to the families of those who perished in the accidents and to its commercial airline customers who must let their 737 Max jets sit idle.

It is likely the FAA will make regulatory changes in light of the accidents. The compliance costs for those changes--which could be substantial--will add to the cost of the 737 Max accidents. While the ongoing investigation may indicate that changes are warranted, federal authorities are likely to reflexively overregulate air safety. That overregulation can increase transportation fatalities as compliance costs drive up airfares and cause consumers to substitute higher-risk highway travel for air travel.

THE AIR SAFETY CALCULUS

The 737 Max crashes have made for sensational headlines at a time when air fatalities among major commercial airlines have become exceedingly rare. The last fatal U.S. airline crash was a decade ago when Colgan Air Flight 3407 crashed near Buffalo, NY, killing all 49 passengers aboard and one person on the ground. This contrasts sharply with the 36,560 fatalities on the nation's roadways in 2018 alone, the most recent year for which data are available.

To put those numbers in perspective, in an average week the number of U.S. traffic fatalities represents more than twice the number of lives lost in the two Boeing 737 Max crashes. Because individuals "control" the car they drive but not the commercial plane they fly, they may underestimate the risk of highway travel vis-a-vis air travel. Fear of flying may serve to further distort their risk assessments.

The mortality rate for air travel is 0.07 fatalities per billion passenger miles as compared to 7.28 fatalities per billion passenger miles for automobile travel. These statistics imply that it is over 100 times more hazardous to drive than fly on a per-mile basis.

Despite the possibility of a troubling breakdown in regulatory oversight, the empirical fact that the risk of dying in an automobile crash is many times greater than dying in a plane crash should temper calls for unbridled increases in air safety regulation that also raise airfares. An increase in airfares will divert some portion of the traveling public from the air to the highways in what economists call the cross-elastic effect of airfares on the demand for automobile travel.

Suppose, for example, that the cross-price elasticity of highway travel with respect to air travel is [[epsilon].sub.H-A] = 0.2. This means that a 10% increase in airfares would result in a 2% (0.2 * 10%) increase in highway miles traveled. Hence, from a public policy perspective, it is possible for air travel to be "too safe" in the sense that lives saved in the air come at the cost of many more lives lost on...

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