Canceled. (Courtesy sashapo/Flickr)

We've all heard the saying, "Time is money." But exactly how much money do flight delays and cancellations cost travelers? Answer: $37 an hour, for business and leisure travelers, on average.

When valuing a typical flier's time, researchers at the Department of Transportation (DOT) use the $37 an hour figure, based on Labor Department figures and other data.

This money adds up. The Federal Aviation Administration wanted to know by how much. So the agency asked economists and mathematicians at MIT, George Mason University, University of California, Berkeley, and other top schools, to crunch the numbers.

The answer was announced last month: Passengers lose about $16 billion a year because of "schedule buffer, delayed flights, flight cancellations, and missed connections.

(Study downloadable as a PDF, $37 figure explained on p. 35).

"Hidden" delays are also a problem. Airlines pad their schedules, meaning they build anticipated delays into their itineraries. Case in point, courtesy of the Wall Street Journal: "Delta Air Lines Flight 715 from New York to Los Angeles now takes more than seven hours to fly across the country. That's an hour longer than the same flight in the same type of aircraft took in 1996."

Schedule padding costs airlines an additional $4 billion in fuel and wages, claims the study. That money could have instead been used to lower fares or improve service.

A fast way to slash air traffic delays would be to clean up the overcrowded runways at New York City airports. One out of every four flights are delayed, on average, at Kennedy, La Guardia, and Newark airports—the worst record in the nation. These delays ripple throughout the system, as planes have to pass through these airports on toward other destinations. In other words, the Big Apple is the bad apple that is rotting the barrel of our nation's air traffic control system.

Who's to blame for delays in NYC? The FAA.

So said the inspector's general office for the DOT in a report last month. The FAA could cut delays in NYC airports by about 20 percent by using known and proven methods (study, PDF, here).

The Inspector General's office recommends that the FAA learn from British airports. London airports fly out more passengers—in worse weather—than New York City airports do, on average. But London airports have 20 percent fewer delays on average. The British secret is to limit how many planes that can fly in and out of the airports at very low numbers—much lower than the limits currently in place in New York City.

Capping the number of flights in and out forces airlines to fly larger planes to handle the same number of passengers. The airlines then stop using smaller, regional jets, which currently clog up the airspace over New York City.

Can you keep airfares low if you cut service out of New York City? It's a case of bad news, good news. The bad news is that some routes to smaller cities, such as Buffalo, will be hurt. Passengers in these smaller cities would face higher fares as service was cut. But the good news is that the average traveler nationwide should see lower fares. The cost of air traffic delays ($16 billion) is so incredibly high that any increase in rates on some routes to smaller cities would be more than compensated for by cost savings systemwide (including those smaller cities).

Looking beyond New York City, how could the FAA cut down on delays? The report recommends that the nation upgrade the technology in its air traffic control system. Right now, we rely on radar, which is a World War II era technology. The FAA says that what's needed is new GPS technology. Satellites could precisely pinpoint where planes are, and allow air traffic controllers to fly planes closer together while still maintaining safety. But a full GPS system will cost about $10 billion. Given today's soaring deficits, it's not clear if all of the funding will come through on time. The projects to stop air delays may end up being delayed.

It should be said that not all flight delays are bad for the economy. If your flight is canceled and you have to pay, let's say, $80 for a night's stay at an airport hotel that you weren't planning on, the hotel is profiting from your flight delay. If an airline has to spend more on fuel, that is bad for the airline but good for the energy company.

Lastly, what is the true cost to the economy of air delays, when you calculate all of the winners and losers? Well, if the government could use a magic wand and wave away all air traffic control delays tomorrow, the national economy (meaning gross domestic product) might expand by about $4 billion a year, says the FAA-sponsored study. It's hard to put faith in that particular number, though. If flights arrived on time (and were presumably cheaper), that would stimulate demand for them, and we don't know what the true effect would be. But the general conclusion seems right. Air delays hurt our nation's economy.

FUN FACT: Delays are worse than reported. The government only counts a flight as "delayed" if the plane leaves more than 15 minutes behind schedule. Airlines pad their schedules on top of this.

FUN FACT #2: The problem is not mainly that "the skies are more crowded today than decades ago." Delays on the ground have increased faster than delays in the sky. Flights now take 10 minutes longer on the tarmac than they did in 1977. They only take 6 minutes longer now in the air, in comparison, says economics professor Steven Morrison at Northeastern University and quoted in the WSJ.

UPDATE Dec. 6: Frequent flier and economist Gary Leff responds to this post at A View From the Wing.

What do you think about airline delays? Sound off in the comments.

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