Interesting Links for 14-06-2013

[andrewducker]

• Scan predicts whether therapy or meds will best lift depression
  (tags: neuroscience psychology depression )
• Who are the most popular Dr Who companions/villains of all time?
  (tags: poll drwho )
• Supreme Court blocks patenting of genomic DNA
  (tags: law genetics win patents )
• The House of Commons continues to behave like spoiled six-year-olds
  (tags:

Comments

[danieldwilliam]

I think there are two questions on the Ryan Air subsidy thing.

Firstly, is Ryan Air or AN Other, actually creating some wealth i.e. are they being paid to provide a public good that has large externalities which benefit individuals only indirectly and so some of the benefit has to be collected through tax and passed on to the service provider. Or are they just extracting rent?

Secondly, if the answer to Q1 is that they are being paid for providing a public good shouldn’t other firms be eligible for bidding to provide that public good?

[andrewducker]

I agree - if there was bidding system set up, with airlines set against each other to see who would run the flights with the least subsidies, then that would be much fairer.

As it is, they can use that money to run their other flights at a loss, and thus keep competitors out.

[danieldwilliam]

Exactly so.

[steer]

Presumably, at least informally, such is possible. That is, if A.N.Other showed up and said "we'll take the same route for a smaller subsidy and guarantee X flights for Y years" then the governments would go for it as soon as the existing contract expired?

[andrewducker]

Yup. It's basically a transparency problem - if other airlines didn't realise that this subsidy was going on then they wouldn't compete.

[steer]

If they didn't realise (they likely did) they surely do now.

I think more the problem is that they would need to outcompete Ryan air on price to those destinations (unless governments would accept on faith that a higher fare but better quality airline could pull more tourists) which they can only do by shaving margins... better than Ryanair.

[danieldwilliam]

I wonder if EU rules would allow a formal auction process.

"Marketing assistance per passenger delivered" or similar.

Might be a bit complicated to run perfectly. The value to the local economy of tourists from a rich German town might be a bit more than the value of tourists from poorer ascension countries.

[steer]

The cities involved could set up such an auction without need for EU intervention. That's how a lot of contracts are made.

[danieldwilliam]

I wasn’t thinking of the EU running the auction. Just wondering if EU rules would allow a formal city by city auction or for all of the airports to run a joint auction.

[steer]

I am in no sense a lawyer but putting a contract out to tender (which appears to be what you are suggesting) is an absolutely standard way for a city authority to hire a firm to provide a service.

[danieldwilliam]

I think there are two things that making me scratch my head over what does appear to be a fairly straight-forward auction.

The first is that giving tax payer money to a private firm and a state owned airport might be seen as a subsidy rather than a payment for providing a public good or payment for marketing and promotion services.

Second, there was a suggestion that this would be easier to do if the auction was between all of the airports in Spain jointly and all of the low-cost carriers individually because this would stop one airline playing off each of the airports against their rivals and therefore might be seen a cartel of state owned airports.

You’re right, there’s probably no bar to each airport running an individual open auction with all the low-cost carriers bidding to provide marketing services or whatever and letting market forces find the best price for this over 50-100 or so airports.

[steer]

The first is that giving tax payer money to a private firm and a state owned airport might be seen as a subsidy rather than a payment for providing a public good or payment for marketing and promotion services.

This is fairly standardly done across europe for many transport modes. E.g. subsidised buses and trains. It's not always a good idea but it is commonly done.

The clearest example that it can happen is that it *is* happening -- that is how Ryan air is getting its money right now.

You’re right, there’s probably no bar to each airport running an individual open auction with all the low-cost carriers bidding to provide marketing services

You run a sealed bid tendering process, not an open auction. It doesn't have to go to the lowest bidder, you are free to set a range of criteria (e.g. providing quality service at a competitive cost which includes promotional budget for city). A group of city authorities could come together to do this in concert should they so choose. Nothing to prevent any of this happening.

[danieldwilliam]

Right, you’ve persuaded me. The killer point being that it’s already being done. 

By open auction I meant open to all-comers rather than a series of public bids. You’d definitely want to set a range of criteria. Cost, number of flights and frequency of service, number of cities newly connected. I fear thinking about this tender process might mean a lost afternoon.

[steer]

*heh* I wouldn't think about them too deeply, that way madness lies for sure. In my recollection (though I've only been tangentially involved) they make the targets "soft" rather than coming to an equation like "Number of flights divided by price + passenger comfort" -- set up a bunch of things the company has to provide and how important each is.

[bart_calendar]

The thing is RyanAir does offer a benefit. For example, we used to get very few UK tourists in Montpellier. But now that RyanAir flies here we get tens of thousands a year which has created a shit ton of tourism/bar/restaurant related jobs. I suspect the that city of Montpellier would be quite happy to pay RyanAir for any loses the airline incurs.

[andrewducker]

Oh yes.

It's just a shame it's _all_ RyanAir.