November 28, 2016

Podcast: The Economics of Supersonic Flight and the Overland Ban

On Friday, I was honored to be a guest on the Economics Detective podcast with Garrett Petersen. We discussed the early history and economics of supersonic transport, how the FAA’s misguided ban on sonic booms overland has handicapped the industry, and how a series of technological breakthroughs have created the conditions for a supersonic renaissance.

It was also an occasion to discuss my paper with Eli Dourado, “Make America Boom Again: How to Bring Back Supersonic Transport,” and the Niskanen Center’s connected project, Our work in this area is part of our broader initiative to Free the Skies for Innovation.

You can listen to the podcast and read a full transcript here.

Here are some excerpts from our conversation:

Petersen: So the [supersonic] ban applies just over the United States. How do we know that that is what has stopped the progress of supersonic flight? After all, you’d think that there’s the whole rest of the world and maybe transatlantic or transpacific flights could sustain a supersonic aviation industry


Hammond: So, there’s a lot of variables going on. First of all—as I mentioned earlier—all the supersonic projects up to this point—except the Concorde—were abject failures. The US had one called the Boeing 2707. It just never got off the ground, in fact, in the industry aerospace engineers have a term for this. It’s called a “boomdoggle”—a play on boondoggle—because countries that tried to produce a supersonic jet just ended up pouring literally billions of dollars down the drain.


And you can’t blame that on supersonic per se. That’s a failure of central planning. I would say the same thing with the Concorde. The Concorde flew for 27 years. And at times it made money but you have to remember it was never designed with any commercial intent. It was designed to be a commercial airplane but it had no market testing. It was mostly a piece of a diplomatic or political gambit that Britain was using to try to get into the European Common Market.


And so when Kennedy proposed the 2707 as a competitor, he also didn’t do market tests or see what the demand was, he looked at the Concorde which sat about 100 passengers and said we need to do better than France so let’s make it 300 passengers. And instead of flying at Mach two—twice the speed of sound—let’s fly at Mach three—three times the speed of sound—so it was just the one-upmanship of nations, had nothing to do with whether it was market viable.


And so the case I make is that, if you had a private sector in airplanes—which at the time we didn’t really, at least in supersonic, it was all government driven—the first entry point, the natural entry point would be some kind of smaller business-jet. Because frankly if you don’t know which routes are going to demand the most passengers you want to start small. You don’t want to jump right to a 300-seat passenger jet. The Concorde was only 100 seats, as I said, and it routinely had trouble filling its cabin.


But the thing with business jets—and there have been about half a dozen rigorous market analyses done in the last ten years that have found there is a demand for supersonic business jets—the thing about business jets though is they fly overland about 75% of the time. You’re going from regional airports to regional airports.


And so if the natural entry point to sort of begin on the supersonic learning curve, learning which routes have the most to manned is a smaller business jet, you’re going to have to begin by flying overland. And then once you discover which routes will bear more people you can expand the capacity of the airplane and ultimately I think a private sector would work its way up to having a 100- to 300-seat passenger jet once it had established that the demand existed. And also big part of that is driving down costs, of course. The Concorde was the Concorde it never iterated it. The first model was the last model.


In commercial aviation more generally in subsonic aviation we’ve learned over time how to reduce costs. Even though we fly a slower today than we did 50 years ago, subsonic commercial airplanes are vastly more efficient and we’ve achieved that efficiency because we’ve learned over time.

I concluded by suggesting the FAA’s ban on supersonic is illustrative for understanding our broader productivity malaise:

Hammond: Supersonic overland is today feasible. It can be economical, there are companies chomping at the bit to try to develop something that will be quiet and affordable. The only thing standing in their way is the FAA and a public perception that the Concorde proved that supersonic is not viable. The FAA could act today, it could issue a noise standard and allow developers to shoot for that standard. Even if a bill is passed today, what the FAA wants to do is coordinate internationally with ICAO and ICAO is the UN body that—it’s not a regulator—sets standards


The FAA has a prominent role in guiding us towards standards, but it’s an incredibly slow process. ICAO meets every three years. If the FAA were told to remove the ban tomorrow and they wanted to coordinate internationally, would mean we have to wait about three years. ICAO is meeting this year, obviously they’re not going to talk about it this year—the agenda is all set. So they’re going to be talking about it three years from now and then they’ll be finalizing those rules three years from then. And then the FAA will take those rules, propagate them globally and then we will have another two or three year regulating period where there’s a notice and comment and everything else.


So we’re talking about ten years just to change this stupid ban that is obsolete and I think that speaks to a more fundamental problem in U.S. policy and regulation, which is, we create these massive bottlenecks. And it’s no surprise that it happens to an idea that is such a no-brainer, like creating a noise rule for supersonic instead of a ban. You can find other examples in every other industry of every other emerging technology, where there are these obsolete rules that are getting in the way of better, more efficient, more affordable, faster technology. And even if they can be rolled out tomorrow, have to go through at times a decadal process of approval. So, I think it’s no wonder that productivity innovation seems to be at a historical low.

Once again, you can find the full podcast episode and transcript here.