Marketplace on WVTF, RADIO IQ & RADIO IQ w/BBC News
Marketplace with host Kai Ryssdal produced and distributed by American Public Media focuses on the latest business news both nationally and internationally, the global economy, and wider events linked to the financial markets.
The only national daily business news program originating from the West Coast, Marketplace is noted for its timely, relevant and accessible coverage of business, economics and personal finance.
Monday, April 27, 2015 5:36pm
Aid workers from all over the world are flying to Kathmandu, Nepal to provide services for those affected by Saturday's devastating earthquake.
Blackouts and scarce supplies are challenging, but the main concern is drinking water. If that shortage isn't addressed quickly, the government is concerned it could lead to the spread of disease, especially since people are already spending late nights out in the open. That, in turn, would present a whole new problem for authorities and aid agencies that are coming in.
The airport is packed with flights bringing workers, as well as commercial planes that have added trips to bring supplies into the region, and people out.
The BBC’s Sanjoy Majumder is in Kathmandu, where much of the city was reduced to rubble.
"There are a lot of agencies on the ground," he says. "You can see them and identify them, but the scale of the problem is quite big, so of course, it’s never going to be enough … certainly not now."
There was a lot of political turmoil in Nepal in the past decade, and the region was not equipped with a disaster management plan. That’s why the government was very quick to accept that this was too much for it to handle.
Majumder is staying in a hotel, but he says no one is sleeping in their rooms because there have been a number of aftershocks that are frightening. He and the others in town are sleeping near exits, by the pool, or in the hotel lobby.
Monday, April 27, 2015 5:04pm
In its work providing relief for refugees around the world, the International Rescue Committee has two daunting crises on its hands at the moment: the European migrant crisis and the situation in Syria.
IRC President and CEO David Miliband says in the aftermath of the latest tragedy involving migrants at sea, “European attention has been dragged back to what is a problem that hasn’t just occurred in the last three weeks. Obviously (those events) — 700, 800, a thousand people dying in the space of two days — refocused attention.”
He says the options in Northern Africa are limited, causing many people to move to Europe for a better life. Miliband believes that Europeans are not standing together on the issue — “Italians and Greeks are being expected to handle it on their own more or less, rather than as a united European response,” he says.
When he speaks to high level officials about getting Europe to join forces on the migrant issue, he says he often gets three responses: That they regret the end of the Mare Nostrum program last November, led by the Italian Navy, which saved thousands of migrant lives at sea. That it's very tough to tackle this issue at the source. And that the EU’s bandwidth is stretched as it is dealing with the euro crisis and the Ukraine confrontation with Russia.
As for hands on work, the IRC currently has over 2,000 workers in Syria and in neighboring countries focusing on health, education, and on some protection for women and girls. It's releasing a new website for refugees to find out about, and rate, resources to ease the transition to life a new country. “The refugees from Syria are educated people; they are tech-savvy people. Until now, there’s been no proper tech platform for them to find out what services are available to them. The IRC and US government are creating, for the first time, a kind of "Yelp for refugees" in Lebanon,” says Miliband.
The platform is called Service Info and will allow refugees to add comments on services, like, “This supermarket treated me well. This hospital treated me well.” That kind of feedback will improve the quality of services, as well as broadcast the services that are available, he says.
Currently Service Info is being piloted in Lebanon, a country of 5 million people — with 1.5 million of those who are refugees. It's the equivalent of Germany’s population moving to America.
Miliband left politics to take the position as CEO at IRC. Of this shift, he says, “I feel I’m helping people whose lives are affected by breakdown of politics, because what is a civil war other than the failure of politics? Now I’m out of politics. I’m at the other end of the telescope. What I always say to people is that the humanitarian sector can stanch the dying, but it takes politics to stop the killing and you need both.”
Monday, April 27, 2015 5:00pm
As part of our I’ve Always Wondered series, we answer questions and explain some of the economic mysteries brought to our attention by our listeners. Here, we turn to a question from Lamonte Freerks, who asks “I would like to know why airlines see the need to overbook planes, thus at times bumping paid passengers.” Marketplace’s Sabri Ben-Achour wondered the same thing recently.
Destination: Irony. Temperature at destination: Cruel
The irony was not lost on Danielle Sharp as the announcement came on over the loudspeaker at 5:30 a.m. at Newark airport.
“United, Flight 3454, is now boarding.”
Danielle Sharp was most definitely not boarding. Though paid and checked in for a trip to Oklahoma, her ticket had also been sold to someone else.
“The flight is overbooked, so we’re just sitting here waiting. The flight is leaving in 15 minutes and we’re just stuck here,” she says when reached at the airport. “It’s really stressful and aggravating. I got here at 3 a.m. for a 6 o'clock flight.”
Why would an airline do this? How hard is it to count the number of seats on a plane and not sell more than that?
“I have no idea,” Sharp says, resigned. “But it’s obvious they care more about their money than they care about us, 'cause they wouldn’t inconvenience us like this. It’s about a buck.”
Yes … and no.
Why do they do it?
“Contrary to what popular perception may be, airlines are not evil,” says Samuel Engel, who leads the Aviation Practice at consulting firm ICF international. It’s not an accident that airlines overbook their flights, and it boils down to one simple reason: “Some passengers don’t show up.”
In fact, some passengers are almost always not going to show up.
“So if you know that’s going to be the case, you’re setting yourself up for flying with empty seats and wasting them,” says Engel.
But wait, if people don’t show up, aren't the airlines then just selling the same seat twice and making gobs of money off of the poor jerks who are left behind when people actually do all show up?
No, says Engel, because the airlines “don’t get revenue for a seat that goes empty.” It’s true someone has paid for that seat, but in most cases that person will end up being given a free flight by the airline to accommodate them if they were just running late, for example.
“Some passengers will just not show up because they didn’t want to take the trip, but more cases than not, they arrived at the airport 15 minutes late 'cause there was traffic and they missed their flight and the airline is going to accommodate them on another flight.”
The guessing game
So if airlines didn’t overbook, they would lose money, so they actually put a lot of effort and money into guessing exactly how many people won’t show up on a given flight.
“Virtually all airlines these days have fairly sophisticated revenue management systems,” says Peter Belobaba, a research scientist at the International Center for Air Transportation at MIT. Revenue management system means really complicated computer models.
These models predict a lot of things: how many seats should the airline sell for cheaper to people who buy earlier? How many can it get away with setting aside in order to charge higher prices for last-minute business travelers? How many people won’t show up? In the event everyone with a ticket does show up, how many people will accept a voucher for free miles in order to take a different flight?
For the no-show predictions, “those systems have large historical databases of no-show rates on previous departures of the same time of day and in the same markets, used to build forecasts,” says Belobaba.
With the advent of big data, airlines can feed even more information into their models.
“People returning from a long weekend are more likely to show up as compared to people who are starting their trip for business. How long ago you bought your ticket, has it been ticketed, those all can be correlated with no show behavior,” says Belobaba.
The cutting edge models, says ICF International’s Samuel Engel, also take into account the competing fares at any given moment from competitor airlines. If every airline is eyeing what one another is doing, things can get quite complicated.
“It’s a field of very happy geeks mired in the data balancing the statistics and economics trying to make better decisions,” says Engel.
They are actually pretty good at guessing
It turns out, those models work pretty well.
“If you look back, you’ll see the U.S. airline industry has reduced the denied boarding rate almost in half in the last 15 years,” says Engel. “In 1999, 0.2 percent of passengers were denied boarding. Last year, it was under 0.1 percent. And only 1/10th of those were 'involuntarily denied boarding,' where passengers did not choose to take a different flight” in exchange for a voucher or incentive.
United Airlines, whose flight Danielle Sharp was bumped off of, says much of the 1/10th of 1/10th of one percent of involuntary denied boarding is due to grounded planes and not overbooking. The outliers usually occur when there is an unexpected disruption, like weather, a problem at an airport, or some other factor.
Maybe it’s a good thing
Many analysts argue that overbooking keeps ticket prices down.
“If you look historically when airlines were running with half their seats empty, fares were much much higher than they were today,” says Engel. “The nice way to look at all this is, the more effectively airlines can fill their seats and generate revenue with the seats they have, the better it is for all of us.”
Well, not all of us.
“I’m tired, I want to take a nap, and we’re stuck here,” says Danielle Sharp, still stranded.
While customers who voluntarily give up their seat in exchange for a ticket voucher are, all things equal, usually happy about it, customers who don’t volunteer and are forcibly bumped from a flight are not.
So in those cases, the airlines pay up — in cash. Government regulations actually require them to (you can see how they’re calculated here).
As Sharp waited in front of the desk in front of the gate she would have boarded on, the ticketing agent entered a few keystrokes into her computer with confident finality, and turned to Sharp with a resolution.
“We’ve got you on another flight later today, and you’re getting $1,100.”
Consternation transmogrified into joy, and Sharp burst out into laughter. Oklahoma must have seemed very far away indeed.
“Thank you lord! That is a blessing!”
Monday, April 27, 2015 5:00pm
Chipotle has proudly announced that its menu is now entirely free of genetically-modified organisms, the result of a two-year effort. To get enough GMO-free cooking oil — in this case, sunflower-seed oil — the company had to recruit a North Dakota supplier to plant acres of non-GMO sunflowers.
However, the project has not reduced the Chipotle menu’s “GMO footprint” to zero. Far from it.
Most genetically-modified crops end up as food for animals, including the cows, chickens and pigs that end up in Chipotle burritos. Those animals mostly eat corn and soybeans, which overwhelmingly come from genetically modified seeds.
Rounding up a supply of animals raised on a GMO-free diet "would be very, very difficult to do, short of going to organic meat," company spokesman Chris Arnold says. "And if we wanted to make that switch, you’ve got another tremendous price premium and an enormous supply constraint."
Chipotle already has problems with supply. The chain maintains “humane treatment” standards for the animals that end up in its burrito bowls — but it can’t always get enough. Right now, that means no carnitas at some Chipotles.
Organic meat would be a much tougher problem. Catherine Greene, an economist with the United States Department of Agriculture, calls the supply of organic beef "extremely limited."
As in, last time USDA ran the numbers, in 2011, it was 0.3 percent.
Even when demand goes up and price follows, supply doesn't immediately follow that. Farmers have to use organic practices for three years before they can sell the product as organic.
"That’s a pretty long time to commit to using organic production systems without tapping into the organic premium," Green says.
That’s a big disincentive, and when farmers do switch, there’s a long lag: the three-year transition period, plus the two years or more it takes to actually raise a cow for slaughter.
Meanwhile, the corn chips and tortillas at Chipotle are reliably GMO-free.
Monday, April 27, 2015 5:00pmRoughly 30 percent of Nepal's GDP comes in the form of remittances, money sent home by Nepalese working abroad.
Every day, around 1,000 Nepalese board flights for countries in the Gulf, North Africa and Asia; others go overland to India. They find jobs, most often, in construction or the services sector. And then, many send money home.
Dilip Ratha is the manager of the Migration and Remittances unit at the World Bank. He says remittances are crucial.
"At the very poor level," he explains, "it is really a lifeline that provides people with food, with shelter and with education and business investments."
Remittances have helped reduce Nepal's poverty rate, but there is a possible downside to so many young, able-bodied men working outside of the country. When it is time to rebuild damaged and destroyed homes and businesses, some analysts suggest Nepal may face a shortage of labor. On the other hand, money being sent home to the country will now be all that much more important.
March 31, 2015