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Sep 22, 2022

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Transportation Secretary Pete Buttigieg is being touted as presidential material again. And that has raised a series of questions about what he is doing to actually improve transportation in the United States, right now, in this job.

At Vox Media’s Code Conference, held at the Beverly Hilton in September, Buttigieg was asked about future presidential aspirations.

“Who knows?” the transportation secretary said. Then he added, “I think you run for an office because you notice something about the office and something about yourself and something about the moment that adds up.”

The comment immediately spawned a wave of headlines about Buttigieg's presidential aspirations, in 2024 and beyond.

Buttigieg checks a lot of boxes for Democrats. At 40, he’s relatively young, gay, well spoken, and has shown that he can connect with many of the party’s progressive voters.

His political instincts have been spot on. The former South Bend, Indiana, mayor managed to parlay an early strong showing in Democratic primaries, combined with a clutch endorsement of Joe Biden, into a significant Cabinet position.

Yet observers do not believe he has distinguished himself in that job.

Take air travel, which falls significantly under Buttigieg’s purview as ultimate boss of the Federal Aviation Administration. The cost of tickets skyrocketed earlier this year and has only gradually come down, and the number of flights canceled has angered many passengers.

Matt Stoller, director of research at the American Economic Liberties Project, is typically skeptical of the practices of big businesses. In this case, he is just as skeptical of the airlines’ chief regulator.

A tool transportation secretaries can use to bring the airlines to heel is called an aviation enforcement order, and it can carry significant fines.

“Trump’s Secretary of Transportation Elaine Chao, in 2020, her final year, issued just 6 aviation enforcement orders, a record low,” Stoller wrote in August. “How many did Buttigieg issue in 2021? Only 4. This year? So far he's issued ... 3. He’s just not regulating the industry, and it shows.”

Gary Leff is author of the influential View From the Wing website. Though he doesn’t necessarily agree with Stoller’s general political outlook, they're on the same page that many of the problems with domestic air travel are related to poor choices made by U.S. airlines.

“The [airlines are] short-staffed because — despite government bailouts meant to ensure they kept their staff and were ready to fly when customers returned, they did not keep their full staff and remain ready to fly when customers returned,” Leff told the Washington Examiner previously. “They took the bailout money and encouraged early retirements and used the threat of dismissal from a gap in bailout funds to push people to leave ‘voluntarily.’”

Moreover, outside the Beltway and progressive circles, there appears to be real anger over how airlines are treating passengers, coupled with a general agreement that Buttigieg is unlikely to do much about it.

This skepticism was reflected in a late August letter signed by a bipartisan group of 38 state attorneys general to Congress noting, “Over the past couple of years, our offices have received thousands of complaints from outraged airline passengers about airline customer service — including about systematic failures to provide required credits to those who lost travel opportunities during the pandemic.”

This supermajority of the states’ chief prosecutors urged Congress to “pass legislation that would authorize state attorneys general” — that is, themselves — “to enforce our state and federal consumer protection laws governing the airline industry.”

The attorneys general made some noise about enforcement being a bipartisan problem but then indicated that Buttigieg is highly unlikely to be part of the solution. In fact, they went so far as to urge Congress to “consider shifting the authority for federal investigations of patron complaints” to a federal agency that is actually likely to do something about it, “such as the U.S. Department of Justice or the Federal Trade Commission.”

Buttigieg had done some things to try to head the attorneys general off. He wrote a sternly worded letter to the airlines, and in interviews, he has played up the fact that he issued a “record fine” against an airline.

Stoller points out that there is more to that “record fine” story, however. Buttigieg’s Department of Transportation issued a “$2 million fine in 2021 against Air Canada … because the airline openly said it wouldn’t adhere to the law” on issuing refunds for canceled flights.

The initial amount of the fine was more than 10 times higher. However, not long “after announcing a $25 million amount and getting lots of headlines for being ‘tough,’ the DOT then negotiated it down to $2 million of cash owed, and just half of that immediately (the rest after a year).”

“The amount was so low Air Canada didn’t have to report the fine to investors,” he pointed out. “Yet Buttigieg is out there on TV bragging about his record fines against airlines. He also said, sternly, they concluded 10 separate investigations on refunds while neglecting to mention there were no results from those investigations.”

It’s possible the airlines view the transportation secretary as essentially toothless. In June, Buttigieg asked the heads of several airlines why so many flights were being canceled. The next day, his own flight was canceled. He had to drive from Washington, D.C., to New York City.

However, Buttigieg has undertaken two initiatives that might leave a long-term impact on air travel. The first was a draft rule, issued in August, that would force airlines to give prompt cash refunds to travelers whose flights are canceled and possibly give them recourse to sue if not.

American Prospect editor Robert Kuttner is a critic of this approach. “It sounds great,” he concedes, “but in practice, the rule could actually give the airlines two more years to continue their anti-consumer behavior.” Moreover, added Kuttner, the rule would do “nothing to force the airlines to refund the roughly $10 billion still owed to consumers for canceled flights since the pandemic began in 2020.”

The second initiative dropped the day after the attorneys general letter. On Sept. 1, the DOT rolled out the Airline Customer Service Dashboard on its own website. The dashboard gives travelers a list of things that each of the airlines has committed to in the event of “controllable cancellations” and “controllable delays.”

All the airlines have committed to rebooking passengers on the same airline at no extra cost when controllable cancellations occur, according to the dashboard.

Additionally, Alaska Airlines has promised meals or vouchers when people have to wait more than three hours for a new flight, a free hotel room in the event you have to stay overnight because of this class of cancellation, and free transportation to and from said hotel. Alaska will not, however, rebook you on another airline at no cost.

American Airlines will do all five of those things. Frontier will only rebook you on one of its flights and give you a meal voucher. On the upside, many airports are open all night to accommodate stranded travelers.

The dashboard can be a useful tool for passengers, though many will likely wish that their flight wasn’t canceled in the first place.

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New York is now the nation's busiest port in historic re-routing of trade away from West Coast

The MOL Maneuver container ship sails into port under the Verrazano-Narrows Bridge in the lower bay of the New York Harbor on March 25, 2021 in New York City.Gary Hershorn | Corbis News | Getty Images

Historic import and export container processing in the month of August pushed the Port of New York and New Jersey to the No. 1 spot outpacing both the ports of Los Angeles and Long Beach.

This comes as the flow of trade continues to move away from the West Coast with logistics managers worried about a labor strike or lockout. The Port of Los Angeles ranked third in the nation in August, moving 805,314 total containers. That was 37,877 less than the Port of New York and New Jersey, which moved 843,191. The Port of Long Beach came in second, moving 806,940 export and import containers.

"We are exceeding pre-Covid numbers. It is astonishing, and it is a credit to the men and women who are moving the cargo with such efficiency," said Kevin O'Toole, chairman of the Port Authority. "Our planning with rail to complement the actual infrastructure and the dredging are allowing this added capacity that would not have happened four or five years ago."

This August was the busiest August in the history of the Port of New York and New Jersey and the fourth busiest month ever. The port's five busiest months have all occurred in 2022.

More East Coast trade, and more port congestion

The CNBC Supply Chain Heat Map for the U.S. shows how the continued increase in trade has East Coast ports and Gulf port as the winners in this movement of freight. Logistics companies and warehouses that serve these ports are also reaping the benefits of the additional containers. CSX and Norfolk Southern rails move the import and export containers on the East Coast. BNSF, owned by Berkshire Hathaway and Union Pacific move the containers in and out of the Port of Houston.

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The increase in container processing is adding to the wait off the East Coast and Gulf ports. The congestion adds to delays in arrival times for manufacturers needing components to complete their products or to place finished products on store shelves to be sold.

During the week of September 19, MarineTraffic has monitored 28 container ships waiting off of the Port of Savannah with an average wait of 9.9 days. For the Port of New York and New Jersey, 12 container vessels are waiting for an average of 9 days. The Port of Houston has 25 containerships anchored, waiting on average eight days.

"While volumes are up, the congestion at the East Coast ports may be at an inflection point after months of record-breaking import levels," said Josh Brazil, vice president of supply chain insights for Project44.

Project44 data shows that the number of vessels queued at the Port of Savannah has dropped from over 30 last month to only 16 today. New York congestion is also slightly down. However, Houston is still backed up with 20 vessels, roughly the same number as last month.

"During Q4 the backlogs at ports might continue to ease by a drop in vessel numbers resulting from consumer demand slowing down," Brazil said.

Maritime prices falling

The flow of trade away from the West Coast has decreased the demand for vessel space, leading Far East to West Coast maritime freight prices to fall.

"When taking out the inflation in retail sales, U.S. retail sales were flat from last month so demand has not fallen sharply," said Peter Sand, chief shipping analyst for Xeneta. "Shippers are still bringing in a lot of containers, on the East Coast and West Coast and Gulf Coast as well."

Xeneta has tracked a new record divergence between spot rates from the Far East to the coasts.

"That is a sign of congestion all but cleared on the West Coast, with volumes coming in being manageable for ports and terminals," Sand said. That has caused rates to fall faster on the transpacific route than for East Coast-bound cargo.

Logistics prices are one of the key inflationary triggers the Federal Reserve has no control over.

"Congestion on the US East Coast is keeping rates elevated, in a combination with added disruption to that coast coming from troubles in North Europe," he added, referring to recent labor strikes by port workers in the U.K. that have stressed Europe's port network.

Shippers are still hesitant to return re-routed cargo to the U.S. West coast, Sand said.

The CNBC Supply Chain Heat Map data providers are artificial intelligence and predictive analytics company Everstream Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third-party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; maritime transport data company MDS Transmodal UK; ocean and air freight rate benchmarking and market analytics platform Xeneta; leading provider of research and analysis Sea-Intelligence ApS; Crane Worldwide Logistics; and air, DHL Global Forwarding; freight logistics provider Seko Logistics; and Planet,  provider of global, daily satellite imagery and geospatial solutions. 

watch nowVIDEO8:0708:07Why ports are such a headache for the U.S. supply chainState of Freight

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