Exam 3: Transportation Regulation and Public Policy

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Transportation project planning is the process whereby federal,state,or local groups review the movement needs or demands of a region or population segment,develop transportation alternatives,and usually propose or implement and alternative. This process enables the development of new movement processes or allows existing ones to continue in an environment of change.
Transportation project planning is a public activity; purely financial returns and other concerns are not the overriding benefits sought. It is a major part of the public activity in the U.S.economy for several reasons.
First,public transportation processes can facilitate trade or movement where private actions have not or would not have been enticed to do so for financial gain alone.
Second,various cultural and political benefits often come from projects and programs provided publicly.
Third,transportation planning also lowers the cost of living or reduces the social costs of delay or congestion.
Finally,transportation planning provides services that are not remunerative but are deemed socially necessary or desirable.
Transportation planning has been a critical factor in the beginning of the 21ˢᵗ century. There are many areas of transportation investment from which private firms have withdrawn. Many forms of transportation today are no longer economically profitable or compensatory. Urban bus systems,commuter railroads,rail and urban research and development,and many rail services are examples of transportation forms that would not exist without public sector involvement.
Many forms of transportation require large capital investments that would normally discourage or basically prohibit private investment. Port dredging and development,as well as airport and highway construction,are examples of capital items that are not affordable by the carriers using them. Instead,the ability of a public authority to attract capital enables the asset to be built; cost is recovered through user charges.
Public planning of transportation is generally found in situations where environmental or social needs override financial ones. A major argument used in modern subway construction is that,although the system might not recover its full costs from passenger fares,the city as a whole will benefit by increased access to already existing downtown facilities,including buildings,offices,stores,and water utility systems.Constructing other facilities in developing suburban areas will not be necessary. Also,commuters save money because the subway eliminates the need for a second family auto,long driving,excess fuel consumption,costly parking in downtown areas,and so on. Public planning of transportation involves a different viewpoint and set of objectives than does capital investment analysis in private firms.

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The domestic air system receives the benefits of several government programs. Foremost is the Federal Aviation Administration's (FAA)air traffic control system. This system provides navigation and safety for every aircraft in flight within the United States. The system assesses no direct fee to the airlines for its use and captures its operating expenses from airlines and passengers through user charges.
Another direct airline benefit is the subsidy program. These subsidies generally apply to short and medium non-jet flights to cities that are unable to support high traffic volumes. The subsidy has been a significant support mechanism for regional airlines. In recent years,the growth of commuter airlines has enabled regional airlines to discontinue service to small cities. The Air Deregulation Act of 1978 accelerated this trend,which resulted in a lessened need for regional airline subsidies.
The U.S.Postal Service also provides substantial support to airlines. The prime source of income for airlines during their early years came from this subsidy program. In recent years,mail income has not been as significant,but this subsidy is a major revenue source for the industry.
State and local agencies help promote the airline industry through air terminal development and construction. Terminals represent substantial capital investments and would be difficult for the industry to finance and construct. State and local agencies are able to raise the necessary construction funds at reasonable municipal bond interest rates,often backed by the taxing power of the community. The airlines then rent terminal and hangar facilities and pay landing fees for each flight.
Many aircraft safety matters are handled by the federal government. The FAA provides aircraft construction and safety rules as well as pilot certification. In another capacity,the National Transportation Safety Board (NTSB)investigates accidents so that others might be avoided or reduced through aircraft specifications or flight procedures.
Another indirect form of promotion to the airline industry comes from the military. Defense contracts for military aircraft development often provide direct benefits to commercial aviation in the form of mechanical or navigational aircraft improvements. Without military-related research and development activity,advancements in this area would take place at a slower place and at a higher cost to the private sector.
A last form of airline promotion,which is not found in the U.S.system,is direct government ownership,operation,or subsidy of air service. This is common with foreign airlines that serve the United States. In these instances,African,Asian,Latin American,and many European airlines are subsidized so the countries can operate their airlines for purposes of national defense,have some degree of control over traffic to and from their nations,and gain balance of payment benefits and hard currencies through ticket revenues.