Study suggests incentives for quiet planes at canyon

David Strow

Thursday, Aug. 19, 1999 | 10:09 a.m.

Offering Grand Canyon air tour operators incentives to use quieter aircraft is the only effective way to control noise over the national park, according to a new study from UNLV.

The study was requested by the Grand Canyon Air Tour Council and funded by the Clark County Department of Aviation and the Las Vegas Convention and Visitors Authority. The council intended to present the study today during a Federal Aviation Administration hearing in Las Vegas.

The FAA is considering capping the number of air tour flights over the Grand Canyon to 1997-98 levels in an attempt to control noise in the park. Air tour operators would receive quotas of flights based on the number of tours they flew in that period. Total flights would be capped at 88,000 per year.

"Because the (FAA) proposal does not include any incentive for acquiring quiet technology aircraft, higher capital costs associated with the uncertainty have the adverse impact of deterring investment in quiet aircraft," the study said. "Quotas are inherently inefficient in the long run when attempting to control environmental problems. Incentive-based strategies are preferred to quota systems because they almost always offer the same level of benefits at a reduced cost."

The cap is 15 to 22 percent below the long-run expected demand for canyon flights, the UNLV study says.

The study was authored as a response to the FAA's financial impact study, released with its flight cap proposal July 9. The FAA's study anticipates a financial impact of $17.7 million per year on air tour operators, but also believes the Grand Canyon area would see increased revenues of $7.3 million per year, as more tourists visited a quieter park. The FAA extrapolated this number from surveys of visitors, who were asked how much aircraft noise bothered them during their visit.

The UNLV study did not offer its own estimate, though the council has estimated the impact as high as $100 million per year in the past. But the study blasted the FAA's financial benefit assertion. "In short, pure conjecture unsupported by any theory or evidence provides no basis for reputable rulemaking," the study said.

Finally, the UNLV study projected widespread business closures if the FAA cap was imposed, because air tour operators would not be able to cover long-term capital and fixed costs based on uncapped projections. Air tour operators have purchased aircraft based on long-term demand, not the FAA caps, and would be unable to cover the costs of those aircraft with the new regulation, the study argued.

"Though the report recognizes that firms will fail as a result of the regulation, they don't allow for the possibility that the eventual outcome may be only a handful of firms supplying the entire market," the study said. "In the extreme, the regulation could create a monopoly, or eradicate the industry altogether."

Using the FAA's expected demand growth of 3.3 percent, the new regulations would turn away 230,000 air visitors over the next 10 years, increasing ground traffic to the canyon by more than 62,000, the UNLV study claims. This would hurt the area's air quality and strain its camping, service and waste disposal resources, according to the study.

The study was prepared by Mary Riddel and Keith Schwer, professors of economics at UNLV. Both are directors at the Center for Business and Economic Research.