Wednesday, April 27, 2011

Double whammy: High Gas Prices and Fuel Efficient Supply Chain Disruptions

The Toyota Prius is the new fuel efficient leader, again.  After a brief tarnishing from the sudden acceleration fiasco, Toyota Prius is once again the darling of car buyers.  According to APM's Marketplace, Toyota of Hollywood was paying their sales force a $500 bonuses for every used Prius they produced.  Prices of fuel efficient cars increased with the cost of gasoline. 

The price of a gallon of gas in California was at $4.22/ga as of April 25, 2011.  Not long ago, the price of a gallon of gas was over $4.00, and then just as now we bought primarily fuel efficient cars.  The recession helped ease the demand of oil, and the price dropped.  That dropped resulted in Americans once again buying bigger cars.  Now that oil is reaching new heights in the markets again, we will see more people buying fuel efficient cars.  This increased demand alone is enough to boost prices for the more desirable cars.

However, Japan is reeling from the earthquake and its aftermath.  Japan suffered its worse drop in industrial production ever: a 15.3% drop.  Toyota's production alone dropped 63% in March.  Experts don't expect production to return to normal levels until October.  This is the supply side hammer that will send the price of fuel efficient vehicles through the roof.  If you own a fuel efficient vehicle, it appears the best time to sell it will be in about two months, what with fear mongers suggesting $6 plus/gallon this summer.  However, the best bet might be to just hang onto that fuel efficient car and just save a buck or two on gas.

Friday, April 22, 2011

New Airline Passenger Rights Go Into Effect

The Department of Transportation issued new regulations to protect passengers on April 20, 2011.  The new regulations will go into effect in about 120 days (depending on when they are printed in the Federal Register).  The following is a summary of the salient new regulations:
  • Bumped Passengers are entitled to compensation of double their ticket price up to $650 when delayed domestically from 1-2 hours, and quadruple their ticket price up to $1300 when delayed longer.
  • An airplane must cancel a flight after a four hour tarmac delay.  After two hours, the airline must provide food, water and toilet facilities.
  • The list price of a ticket must reflect the actual cost (including bag fees, government fees, and other surcharges).
  • Ban post purchase fare increases (a very dubious practice).
To submit comments regarding the new regulations, or to read a detailed analysis of flight delays, passenger delays and costs go to

Tuesday, April 12, 2011

What caused the Southwest Boeing 737 to open in midflight?

Southwest grounded 79 Boeing 737 to perform inspection and maintenance of the outside skin of the aircraft after Flight 812 developed a hole while at cruising altitude.  The airline is concerned about a condition known as aircraft skin fatigue.  The crack developed through the body of the fuselage over the wings of the aircraft. 

Metal fatigue, a larger category to aircraft skin fatigue, is a known problem in modern aircraft design and maintenance.  Metal fatigue is a condition that occurs in airplanes because the exterior metal skin endures expansion and contraction of the aircraft every time it reaches cruising altitude and descends again.

The strange twist involving the Southwest Boeing 737-300 is that the manufacturer did not expect any metal fatigue, nor require any inspections for metal fatigue until the aircraft reached 60,000 takeoff and landing cycles.  The aircraft of Southwest Flight 812 had only about 40,000 cycles under its belt.  Boeing has since lowered the threshold from 60,000 cycles to 30,000 cycles to inspect the 737's skin for signs of metal fatigue.

Boeing does not have an explanation for how the crack in the skin of the aircraft developed, nor any rational for recommending additional inspections.  While many at the FAA believed Federal Regulations solved the metal fatigue problem, this recent Southwest incident raises concerns over the current inspection regimen.  I once heard an aviation crash investigator make the obvious but profound comment that "aviation does not like mysteries."  In other words, until we solve the mystery of exactly why the skin of the Boeing 737-300 failed on the Southwest flight over Arizona we are at risk to repeat the incident, but with far worse consequences.

Friday, April 1, 2011

Car Crash deaths at their lowest since 1949

When I was in high school, getting your driver's license at age sixteen was a rite of passage; And so was experiencing the tragedy of losing a friend to a car accident. We lost nine students, most to car and motorcycle crashes my senior year of high school. The fact is the roads are safer now than they have been since 1949. Recently, the U.S. Department of Transportation released statistics showing the number of car crash deaths dropped again in 2010. The U.S. Department of Transportation estimates that the largest drop in car crash deaths came in 2008 when the death rate plummeted 9.7%. California was amongst the states with the steepest decline: traffic related deaths were down by 11% in the state. Many attribute the significant drop in 2008 to the stark downturn our economy took. First, people were buying less goods, and the number of semi-tractor trailers on the road plummeted. Big-rigs travel legally at 75 mph in many states, and they weigh approximately 80,000 lbs when fully loaded. The result of fewer big-rigs is fewer wrecks. Experts also attribute the drop to fewer teens being on the road. Since jobs all but disappeared, the high school summer job did not materialize for most in the summer of 2008. Parents were not in a position to provide cars, insurance and gas money for their children in the face of daily bank closings, mass layoffs and multi-hundred point swings in the stock market. The result was that high school kids left the freeways en-masse. Some evidence exists that in the second half of 2010 death rates from traffic accidents began increasing, which corresponds to the economic up-tick. However, Secretary of Transportation Ray La Hood promised to "continue our efforts" to ensure the safety of our highways.