A new era for airport regulators through capacity investments

Private and public airports’ optimal actions may not coincide. While private airports usually pursue profit maximization, publicly owned airports look for maximum social welfare. Thus, the prices charged by private airports may differ from the socially optimal charges and public intervention may be needed. In this paper, we analyze airport charges when an increase in frequency produces positive or negative externalities and carriers have market power. We use the methodology of game theory to show that there may exist a level of capacity for which private and social objectives coincide, so no price regulation is needed. Thus, the usual role of regulators and planners could be modified in order to decide the appropriate capacity investments for which airport regulation is no longer necessary.     

Revenue sharing with multiple airlines and airports

This paper investigates the effects of concession revenue sharing between an airport and its airlines. It is found that the degree of revenue sharing will be affected by how airlines’ services are related to each other (complements, independent, or substitutes). In particular, when carriers provide strongly substitutable services to each other, the airport has incentive to charge airlines, rather than to pay airlines, a share of concession revenue. In these situations, while revenue sharing improves profit, it reduces social welfare. It is further found that airport competition results in a higher degree of revenue sharing than would be had in the case of single airports. The airport–airline chains may nevertheless derive lower profits through the revenue-sharing rivalry, and the situation is similar to a Prisoners’ Dilemma. As the chains move further away from their joint profit maximum, welfare rises beyond the level achievable by single airports. The (equilibrium) revenue-sharing proportion at an airport is also shown to decrease in the number of its carriers, and to increase in the number of carriers at competing airports. Finally, the effects of a ‘pure’ sharing contract are compared to those of the two-part sharing contract. It is found that whether an airport is subject to competition is critical to the welfare consequences of alternative revenue sharing arrangements.     

Airport privatization in congested hub–spoke networks

This paper investigates the airport privatization issue. One congested hub and two linked local airports serve symmetric hub carriers. Passengers valuate the congestion delay cost and benefit from greater frequencies. The government considers privatizing either the hub or local airports. We find that in each privatizing scenario, welfare-maximizing public airport(s) set a charge below their operating costs in order to fully coordinate the high charge of privatized airport(s). If this fiscal deficit is not allowed, each scenario causes distortion. Interestingly, the distortion—and hence welfare losses—in privatizing a hub are smaller (larger) than those in privatizing both local airports when both passengers’ valuations are small (large); this is exactly the case when privatized local airports are strategic substitutes (complements). We also surprisingly find that retaining the hub airport as public and privatizing one or both local airports achieves the same market outcomes. We further find that if all airports are privatized, welfare becomes worse than the other scenarios; the hub airport charges lower (higher) prices than local airports when both local airports are strategic substitutes (complements).     

Effects of passenger characteristics and terminal layout on airport retail revenue: an agent-based simulation approach

This paper examines the effect of passenger characteristics and terminal layout on airport retail revenue using an agent-based simulation approach. Simulation results show that passenger mix (that is, the mix of shopper types according to a typology of airport shoppers) has a profound effect on airport retail revenue; the larger the number of ‘shopping lovers’ there are among passengers, the higher the airport retail revenue. Results also reveal that group travel can lead to negative effects on retail in certain terminal layouts, and that the amount of free dwell time that a passenger has can affect spending due to less retail engagement. This paper shows a combined effect of passenger characteristics and terminal layout on airport retail revenue, and discusses the implications of these results for future airport terminal design that aims to maximise retail potential.     

How could the collaboration between airport and high speed rail affect the market?

This paper discusses the possibility of collaboration between airport and high speed rail (HSR) to improve the airport’s gateway function. We apply the model which consists of three players, carriers, passengers, and the airport. In order to estimate the impact of the collaboration, we carry out some numerical computations with the model under the twin hub three zones network. Our results show that the collaboration between HSR and the smaller demand airport can reduce the congestion at the bigger demand airport, which suggests the collaboration can be preferable for carriers and passengers; it would improve the social welfare.     

On the relationship between airport pricing models

Airport pricing papers can be divided into two approaches. In the traditional approach the demand for airport services depends on airport charges and on congestion costs of both passengers and airlines; the airline market is not formally modeled. In the vertical-structure approach instead, airports provide an input for an airline oligopoly and it is the equilibrium of this downstream market which determines the airports’ demand. We prove, analytically, that the traditional approach to airport pricing is valid if air carriers have no market power, i.e. airlines are atomistic or they behave as price takers (perfect competition) and have constant marginal operational costs. When carriers have market power, this approach may result in a surplus measure that falls short of giving a true measure of social surplus. Furthermore, its use prescribes a traffic level that is, for given capacity, smaller than the socially optimal level. When carriers have market power and consequently both airports and airlines behave strategically, a vertical-structure approach appears a more reasonable approach to airport pricing issues.     

Intercontinental-airport regulation

This paper analyzes strategic interaction between intercontinental airport regulators, each of which levies airport charges paid by airlines and chooses its airport capacity under conditions of congestion. Congestion from intercontinental flights is common across intercontinental airports since departure and arrival airports are linked one to one, while purely domestic traffic also uses each airport. The paper focuses on two questions. First, if both continents can strategically set separate airport charges for domestic and intercontinental flights, how will the outcome differ from the first-best solution? Second, how is strategic airport behavior affected by the extent of market power of the airlines serving the intercontinental market? We see that strategic airport pricing and capacity choices by regulators lead to a welfare loss: the regulators both behave as monopolists in the market for intercontinental flights, charging a mark-up and decreasing capacity. This welfare loss even overshadows possible negative effects from imperfect competition within the intercontinental airline market. We further discuss how the presence of multiple regulators on one continent or a simple pricing rule might constrain the welfare loss created by strategic airport regulation.     

Comparing aircraft noise pollution and cost-risk effects of inland and offshore airports: The case of Dalian International Airport,Dalian, China

China’s Dalian International Airport is taken to compare the aircraft noise pollution and the cost-risk effects of the expanded an existing inland and a proposed offshore airport. The findings show that the aircraft noise pollution of the offshore airport is much less than that of the expanded inland airport; the land-use cost, noise reduction charges and other risks of the offshore airport are also much less; the creation of the offshore airport may be more favorable to the city’s development.     

Investigation of environmental justice analysis in airport planning practice from 2000 to 2010

Municipal airport owners and the Federal Aviation Administration (FAA) regularly evaluate capacity and demand to decide if and when airports need more infrastructure. New infrastructure can alter the profile of noise, emissions, and land use, which may affect the quality of life for airport-adjacent communities. When the FAA and airport owners initiate infrastructure expansion, they must conduct environmental justice analysis to measure the distribution of negative externalities on nearby communities. This research investigates the environmental justice methodologies and narratives reported in planning documents for nineteen airport capacity expansions planned or deployed from 2000 to 2010 in the United States. The mixed-methods approach analyzes airport operations data, spatial demographic data, and planning artifacts to determine whether the environmental justice analyses were robust. This research proposes alternative metrics, the ‘Risk of disproportionate impact’ and ‘Capacity strain’, to further contextualize the presence of protected population groups alongside capacity needs. The main finding of the study is that the planning documents did not consistently detect environmental justice impacts, nor did they consistently confer importance to those impacts when high proportions of protected populations were detected. As a result, the social costs of collective airport expansion are unclear and likely underestimated. This study identifies two limitations that undermined the environmental justice analysis throughout the airport sample: (1) inconsistent methodological choices impeded the detection of impacts and, (2) narrative interpretations tended to ‘null’ the finding even when impacts were detected.     

Performance based clustering for benchmarking of US airports

Managing service operations is gaining significant attention in both academic and practitioner circles. In this broad area, performance evaluation and process improvement of airlines and air carriers has been the focus of several studies. Although efficient airport operations are critical for improved performance of airlines and air carriers, few studies have focused on airport performance measurement. This study evaluates the operational efficiencies of 44 major US airports across 5 years using multi-criteria non-parametric models. These efficiency scores are treated by a clustering method in identifying benchmarks for improving poorly performing airports. Efficiency measures are based on four resource input measures including airport operational costs, number of airport employees, gates and runways, and five output measures including operational revenue, passenger flow, commercial and general aviation movement, and total cargo transportation. The methodology presented here can be generalized to other industries and institutions.     

Freighter operators' choice of airport: a three‐stage process

With increasing levels of congestion at the major cargo hubs and further restrictions on noise and night‐time flying, freighter operators' airport choice is a complex and important issue. The aim is to identify the factors that affect the airport choice of freighter operators through a review of the published literature. The literature reviewed includes work relating to passenger hub location, airport quality and airline network configuration, and other works relating to airport choice to paint a full picture of the current research in this area. The literature shows that freighter operators initially choose a shortlist of possible airports based on geography and then investigate any restrictions in place, such as capacity caps or noise limits that might block operations from that airport. Only when these hurdles have been cleared do freighter operators consider attributes of airport quality such as charges and terminal facilities, as well as other influences such as freight forwarder presence and airport marketing. Of particular prominence is the impact of legislation on airport choice.     

Modeling taxi drivers’ decisions for improving airport ground access: John F. Kennedy airport case

Taxi service is an important component of airport ground access, which affects the economic competitiveness of an airport and its potential positive impact on the surrounding region. Airports across the globe experience both taxi shortages and excesses due to various factors such as the airport’s proximity to the city center, timing and frequency of flights, and the fare structure. Since taxi drivers are independent entities whose decisions affect the taxi supply at airports, it is important to understand taxi drivers’ decision mechanisms in order to suggest policies and to maintain taxi demand and supply equilibrium at the airports. In this paper, New York City (NYC) taxi drivers’ decisions about airport pick-ups or cruising for customers at the end of each trip is modeled using logistic regression based on a large taxi GPS dataset. The presented approach helps to quantify the potential impacts of parameters and to rank their influence for policy recommendations. The results reveal that spatial variables (mainly related to proximity) have the highest impact on taxi drivers’ airport pickup decisions, followed by temporal, environmental and driver-shift related variables. Along with supplementary information from unstructured taxi driver interviews, the model results are used to suggest policies for the improvement of John F. Kennedy (JFK) airport’s ground access and passenger satisfaction, i.e. the implementation of taxi driver frequent airport server punch cards and a time-specific ride share program.     

Airport obstacle surfaces

The most commonly used criteria to determine complicated airport obstacle surfaces are FAR Part 77 imaginary surfaces, TERPS, and the one engine inoperative obstacle identification surface for air carriers. For each obstacle surface there are tradeoffs encountered in our practice between the obstruction penetration and extension of runway, change of flight profile, and allowable aircraft maximum payloads. For the purposes of both airport engineering and airport planning, a better understanding of these different obstacle surfaces and their application is important. In this paper, the differences and relationships between these surfaces are addressed. The conditions for the use of each criterion are discussed. In addition, the FAA's Obstruction Evaluation / Airport Airspace Analysis (OE/AAA) process is reviewed.     

Airline delays,congestion internalization and non-price spillover effects of low cost carrier entry

This paper develops an econometric model of flight delays to investigate the influence of competition and dominance on the incentives of carriers to maintain on-time performance. We consider both the route and the airport levels to inspect the local and global effects of competition, with a unifying framework to test the hypotheses of 1. airport congestion internalization and 2. the market competition-quality relationship in a single econometric model. In particular, we examine the impacts of the entry of low cost carriers (LCC) on the flight delays of incumbent full service carriers in the Brazilian airline industry. The main results indicate a highly significant effect of airport congestion self-internalization in parallel with route-level quality competition. Additionally, the potential competition caused by LCC presence provokes a global effect that suggests the existence of non-price spillovers of the LCC entry to non-entered routes.     

A Heuristic Algorithm for the Allocation of Airport Runway System Capacity

Abstract

This paper develops a heuristic algorithm for the allocation of airport runway capacity to minimise the cost of arrival and departure aircraft/flight delays. The algorithm is developed as a potential alternative to optimisation models based on linear and integer programming. The algorithm is based on heuristic (‘greedy’) criteria that closely reflect the ‘rules of thumb’ used by air traffic controllers. Using inputs such as arrival and departure demand, airport runway system capacity envelopes and cost of aircraft/flight delays, the main output minimises the cost of arrival and departure delays as well as the corresponding interdependent airport runway system arrival and departure capacity allocation. The algorithm is applied to traffic scenarios at three busy US airports. The results are used to validate the performance of the proposed heuristic algorithm against results from selected benchmarking optimisation models.     

Apron capacity at hub airports—the impact of wave‐system structure

At hub airports, dominant airlines/alliance coordinate their flights in time with the aim of increasing the number (and quality) of connections, thus producing a wave‐system in traffic schedules. This paper addresses the impact of concentrating aircraft into waves on airport apron capacity. Existing models for apron capacity estimation are based on the number of stands, stand occupancy time, and demand structure, differing between representative groups of aircraft served at an airport. Criteria for aircraft grouping are aircraft type and/or airline and/or type of service (domestic, international, etc.). Modified deterministic analytical models proposed in this paper also take into account the wave‐system parameters, as well as runway capacity. They include the impact of these parameters on the number of flights in wave, stand occupancy time, and consequently apron capacity. Numerical examples illustrate the difference between apron capacity for an origin–destination airport and a hub airport, under the same conditions; utilization of the theoretical apron capacity at a hub airport, given the wave‐system structure; and utilization of the apron capacity at a hub airport when point‐to‐point traffic is allowed to use idle stands. Furthermore, the influence of different assignment strategies for aircraft stands in the case of hub airports is also discussed. Copyright © 2016 John Wiley & Sons, Ltd.     

Competition and deregulation: Do air passengers get the benefits?

It is well established that increased airline competition can produce benefits to passengers, and it is generally assumed that airport deregulation, as part of the same process of liberalisation, will produce similar benefits. But this paper shows that this may not be the case. The potential benefits to passengers from increased airline competition will in general be partially absorbed by increased airport charges at unregulated airports, and in some circumstances this may even result in increases in overall charges, not reductions. This problem is sometimes tackled by putting regulated price caps on aeronautical services, but if these are not extended to the complementary commercial services (such as retailing) which airports also provide then the adverse effects may still occur. Similarly, unilateral deregulation leading to increased airport competition in one country may just lead to the majority of the gains going abroad. Overall, the conclusion is that claims of big passenger gains from deregulation and competition may be exaggerated, and achieving these gains in reality may need subtle and quite far-reaching government intervention.     

枢纽机场航线网络优化研究

枢纽机场航线网络优化主要解决由于航线网络结构与功能定位不匹配而导致的机场连通性低、航线网络同质化竞争严重、运行效率低下的问题。通过改进引力模型对城市对间的客流量进行预测,以此为预测的客流量为依据之一,以提高机场连通性为目的,构建航线网络优化模型,并进行求解。实现提高枢纽机场连通性、构建符合功能定位的层级网络的目标。并以位于我国中部,具有"连接南北,贯穿东西"地理优势的西安咸阳国际机场为例进行分析。由于国际航线受客观因素较多,本文主要研究国内客运航线,国际及货运不在本文研究之列。     

Effect of slot trading on route-level competition: Evidence from experience in the UK

This paper examines the effect of airport slot trading on route-level competition using data on slot trades in the UK. The estimation results suggest that the slot trades among partner carriers contributed to slightly increased competition measured in terms of the number of competitors per route, whereas the slot trades between rival carriers had a negative effect on the number of competitors at the route level. The results suggest that carriers seem to have used the slots obtained from their rivals not to compete with each other but to strengthen their dominance on their existing routes. This behavior is considered to be derived from the bilateral nature of slot trading, which facilitates mutual forbearance among competitors. To cope with the potential anticompetitive effect of mutual forbearance, it would be worthwhile to explore slot-trading schemes that make it harder for carriers to take advantage of multimarket contact as well as alternative methods of primary slot allocation.     

Airport congestion pricing and terminal investment: Effects of terminal congestion,passenger types,and concessions

None of the airport-pricing studies have differentiated the congestion incurred in the terminals from the congestion incurred on the runways. This paper models and connects the two kinds of congestion in one joint model. This is done by adopting a deterministic bottleneck model for the terminal to describe passengers’ behavior, and a simpler static congestion model for the runway. We find that different from the results obtained in the literature, uniform airfare does not yield the first-best outcome when terminal congestion is explicitly taken into account. In particular, business passengers are at first-best charged a higher fare than leisure passengers if and only if their relative schedule-delay cost is higher. We further identify circumstances under which passengers are, given a uniform airport charge scheme, under- or over-charged with respect to the terminal charge. Furthermore, when concession surplus is added to the analysis, the airport may raise (rather than reduce) the airport charge in order to induce more business passengers who in turn will lengthen leisure passengers’ dwell time and hence increase their chance of purchasing concession goods. Finally, the impacts of terminal capacity expansion and time-varying terminal fine toll are discussed.