Landing fees, dentists, and bean-counters’ underpants

As reported in the Saipan Tribune on Tuesday, the idea of cranking up landing fees here is being test flown by some financial types.

That, friends, is the difference between finance and economics. Financial bean-counters can easily pencil in a price increase and think they’ve created more money out of thin air.

Economists, by contrast, understand that the quantity of a good purchased will decrease when prices rise, and that a price increase will only boost revenues if the price elasticity of demand is small (below 1.0, to be precise), an observation that makes the bean-counters scratch their heads in confusion, because they think calculus is something a dentist removes from your teeth, and the only elasticity they’ve ever studied is the elastic in their underpants.

As I pointed out last year (or was it the year before? — time flies, eh?), airline service is a critical issue here because sagging demand for tourism will result in reduced supply of airline service, as airlines search for greener pastures. This reduced supply makes the market less likely to cut costs (is ANYONE listening to this?), which, in times of slack demand, makes it all that harder to compete for tourists. Result: tourism slides even more, the supply side (e.g. airlines) cuts back even more, and the death spiral continues.

And, in the middle of this economic firestorm, we’re supposed to crank up fees and pour more kerosene on the fire? Talk about suicide. What a textbook case of it!

We’ve already lost one small airline, Marianas Air. Marianas Air hired a lot of local workers and now they’re jobless. The aircraft are being flown back to the states (maybe they already took off. I talked to the ferry pilots a few days ago who were getting the aircraft ready for the long, trans-Pacific flights). Isn’t that great news? Workers unemployed before
Christmas. Capital leaving the island. Another business gone. What better time to increase landing fees?

Other airlines have chopped their schedules, and I expect most of them to consider cutting back even more.

Consider this: Fuel prices are at an all time low. I never thought I’d see the day when oil cost under ten bucks a barrel. Has anyone (ANYONE) considered the potential impact of higher oil prices (and they will go up some day)? If we combine such scenarios with higher landing fees, it doesn’t look pretty. Now is the time to reduce prices for businesses, not increase them. Duh.

Has anyone (ANYONE) looked at a newspaper and realized that Boeing is laying off as much as one out of every five workers? Why is this happening? Because of slack demand for airliners in Asia. This is a “leading indicator” for the future, as airlines have calculated that it isn’t bright to buy airplanes for passengers who aren’t going to be there.

Oh, yeah, a great time to increase landing fees.

Perhaps we can change our marketing theme from “blue, blue, blue” to “The Mariana Islands — you can’t get there from here.”