The time slot allocation problem under uncertain capacity

This paper presents two stochastic programming models for the allocation of time slots over a network of airports. The proposed models address three key issues. First, they provide an optimization tool to allocate time slots, which takes several operational aspects and airline preferences into account; second, they execute the process on a network of airports; and third they explicitly include uncertainty. To the best of our knowledge, these are the first models for time slot allocation to consider both the stochastic nature of capacity reductions and the problem’s network structure. From a practical viewpoint, the proposed models provide important insights for the allocation of time slots. Specifically, they highlight the tradeoff between the schedule/request discrepancies, i.e., the time difference between allocated time slots and airline requests, and operational delays. Increasing schedule/request discrepancies enables a reduction in operational delays. Moreover, the models are computationally viable. A set of realistic test instances that consider the scheduling of four calendar days on different European airport networks has been solved within reasonable – for the application’s context – computation times. In one of our test instances, we were able to reduce the sum of schedule/request discrepancies and operational delays by up to 58%. This work provides slot coordinators with a valuable decision making tool, and it indicates that the proposed approach is very promising and may lead to relevant monetary savings for airlines and aircraft operators.     

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.     

Airport and airlines competition: Incentives for vertical collusion

This paper develops a model of airport and airline competition in a three-stage game. We analyse incentives for vertical collusion between one airport and one airline that compete with another airport and another airline, by means of static and dynamic games. We find that incentives for collusion exist when airports and airlines have different market sizes and, under certain conditions, also when secondary airports and low cost airlines compete with main airports and full service airlines.     

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.     

Airport demand management: The operations research and economics perspectives and potential synergies

Airport demand management aims to mitigate air traffic congestion by limiting the imbalances between demand and capacity at busy airports through administrative measures (e.g., slot controls) or economic incentives (e.g., congestion pricing, slot auctions). This paper provides an integrated synthesis of the contributions of the fields of operations research/management science (OR/MS) and economics on the subject matter. From an operating standpoint, assessing the benefits of demand management requires estimates of airport capacity and models of airport on-time performance. From a managerial standpoint, the design of demand management mechanisms can be supported by decision-making models of flight scheduling. From an economic standpoint, the welfare impact of congestion pricing, slot controls and slot auctions depends on the market structure at the airport. This paper proposes an integrated framework that underscores the interdependencies between these operating, managerial and economic aspects to foster cross-disciplinary approaches toward more effective demand management policies at busy airports worldwide.     

Airline’s choice of aircraft size – Explanations and implications

When facing a growth in demand, airlines tend to respond more by means of increasing frequencies than by increasing aircraft size. At many of the world’s largest airports there are fewer than 100 passengers per air transport movement, although congestion and delays are growing. Furthermore, demand for air transport is predicted to continue growing but aircraft size is not. This paper aims to investigate and explain this phenomenon, the choice of relatively small aircraft. It seems that this choice is associated mainly with the benefits of high frequency service, the competitive environment in which airlines operate and the way airport capacity is allocated and priced. Regression analysis of over 500 routes in the US, Europe and Asia provides empirical evidence that the choice of aircraft size is mainly influenced by route characteristics (e.g. distance, level of demand and level of competition) and almost not at all by airport characteristics (e.g. number of runways and whether the airport is a hub or slot coordinated). We discuss the implications of this choice of aircraft size and suggest that some market imperfections exist in the airline industry leading airlines to offer excessive frequency on some routes and too low frequency on others.     

Slot misuse phenomena in capacity-constrained airports with seasonal demand: the Greek experience

Abstract

Airport slot misuse disturbs the efficient and continuous operation of capacity-constrained airports, leading to congestion and delay problems. Deviations from the coordinated schedule in regional airport systems that feature seasonal demand and delays in certain peak periods are studied in this article. The Greek airport system is considered as a case study. Deviations are quantified by computing the difference between scheduled and actual aircraft arrival times as well as the hourly slot capacity utilization ratio. Two collective indicators for airport benchmarking are proposed. An in-depth analysis of slot allocation deviations and the delays they cause is carried out for a representative sample of airports that are classified according to the proposed indicators. A brief discussion on potential measures to mitigate slot misuse is also presented.     

Measuring the energy efficiency for airlines under the pressure of being included into the EU ETS

In 2008, European Union (EU) announced that from 2012, each international flight taking off and landing in EU would be given an emission permit. Therefore, the period of 2008–2012 can be regarded as a buffer period for global airlines. Although EU formally decides to exclude non‐EU airlines from the EU Emission Trading System on March 4, 2014, it is necessary to investigate the impacts of the policy on airline energy efficiency in this period. Airline energy efficiency is divided into three stages—operations stage, service stage, and sales stage—and Greenhouse gas emission is treated as an undesirable output of service stage. Two models, network range‐adjusted measure model with weak disposability and network range‐adjusted measure model with strong disposability, are established to evaluate the efficiencies of 22 international airlines from 2008 to 2012. The results show that (i) most airlines' efficiencies have decreased in the period, and the EU Emission Trading System is not effective for the efficiency improvement; (ii) the average efficiency of European airlines is almost the same as that of non‐European airlines; and (iii) the model with weak disposability is more reasonable in distinguishing efficiency differences, while strong disposability is a more reasonable way in treating undesirable outputs. Copyright © 2016 John Wiley & Sons, Ltd.     

Congestion spill effects of Heathrow and Frankfurt airports on connection traffic in European and Gulf hub airports

We develop two stage fixed-effects single-spill and double-spill models for congestion connection spills of London Heathrow and Frankfurt airports on 9 hub airports in Europe and the Gulf. Our panel data covers connection traffic from 1997 to 2013 for Heathrow and 1997 to 2011 for Frankfurt. The single-spill results support strongly that the connection spills from Heathrow’s capacity limitations do strengthen competing hub airports of major alliance groups and to a lesser degree one Gulf hub. The double-spill model for Heathrow and Frankfurt shows nearly asymmetric overall spill characteristics between the two airports. Our results underline the influence of airline network strategies on congestion spills as European airline networks are shaped by alliances and umbrella mergers. Thus, the airline network perspective in airport capacity expansion decisions needs to play a greater role, as indicated by our asymmetric results for overall spill effects between Heathrow and Frankfurt airports.     

Impact of slot controls with a market-based allocation mechanism at San Francisco International Airport

This paper presents an empirical analysis of the possible impact of the application of slot controls as a demand-management measure at San Francisco International Airport (SFO). We examine the specific case of slot controls allocated with a market-based mechanism. The paper first describes the nature of the delay problem at SFO and how slot controls would work to manage demand, briefly reviewing their history in the US. We then describe the methodology used to analyze their potential impact given the assumption of a market-based allocation mechanism and present our findings on their predicted impacts on arrival delays and the nature and level of scheduled passenger air service at the airport. Finally, we present conclusions as to the overall potential of slot controls to alleviate delay at SFO and their non-delay consequences. The methods presented in the paper facilitate a detailed analysis of the incidence of the impact of slot controls on passengers, airlines and individual communities that depend on SFO for access to the national air transportation system.     

A three-stage least squares approach to the analysis of airline strategies for aircraft size and airline frequency on the north Atlantic: an airline case study

In response to increasing demand, airlines may increase capacity by increasing the frequency of flights or they may choose to increase aircraft size. This may yield operating cost economies. If the airports they operate from are capacity constrained, they will be limited in the extent that they can change frequency which will limit their ability to compete with the number of frequencies offered. This article focuses on this trade-off and pays particular attention to the practices of a specific airline. Conclusions are offered on the impact of inter alia competition, changes in aircraft technology, 9/11 and the impact of slot constraints. It appears that changes in size are more important than frequency, which is consistent with the presence of slot constraints and there is a significant impact of competition. As the concentration of carriers increases, so aircraft size falls. 9/11 also has a significant impact on traffic whereas the introduction of the Boeing 777, as an illustration of a change in technology, does not.     

Analysis of performance and equity in ground delay programs

The discrepancy between the projected demand for arrival slots at an airport and the projected available arrival slots on a given day is resolved by the Ground Delay Program (GDP). The current GDP rationing rule, Ration-by-Schedule, allocates the available arrival slots at the affected airport by scheduled arrival time of the flights with some adjustments to balance the equity between airlines. This rule does not take into account passenger flow and fuel flow performance in the rationing assignment tradeoff.This paper examines the trade-off between passenger delays and excess surface fuel burn as well as airline equity and passenger equity in GDP slot allocation using different rationing rules. A GDP Rationing Rule Simulator (GDP-RRS) is developed to calculate performance and equity metrics for all stakeholders using six alternate rules. The results show that there is a trade-off between GDP performance and GDP equity. Ration-by-Passengers (a rule which maximizes the passenger throughput) decreased total passenger delay by 22% and decreased total excess fuel burn by 57% with no change in total flight delay compared to the traditional Ration-by-Schedule. However, when the airline and passenger equity are primary concerns, the Ration-by-Schedule is preferred.     

Contract Design,Financing Arrangements and Public Ownership—An Assessment of the US Airport Governance Model

Abstract

US airports negotiate legally binding contracts with airlines and finance large investment projects with revenue bonds. Applying insights from transaction cost economics, we argue that the observed variation in contractual and financing arrangements at US airports corresponds to the parties' needs for safeguarding and coordination. The case evidence presented reveals that public owners set the framework for private investments and contracting. We suggest that airline contracts and capital market control result in comparative efficient investments and act as a check on the cost inefficiency typically linked to public ownership.     

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.     

Airline energy efficiency measures considering carbon abatement: A new strategic framework

In this paper, airline energy efficiency is divided into two stages: Operations Stage and Carbon Abatement Stage. This new two-stage operating framework is a modification of existing ones. Then the model, Network SBM with weak disposability, is presented to evaluate the efficiency of 22 international airlines from 2008 to 2012. The results show that: (1) Most airlines’ energy efficiencies have not declined in the period. (2) The average efficiency of European airlines is higher than that of non-European airlines. (3) Non-European airlines have smaller advancements in efficiency score than European airlines. (4) Most airlines’ efficiencies in Operations Stage are higher than Carbon Abatement Stage.     

Demand uncertainty and airport capacity choice

This study analyzes the effects of demand uncertainty on airport capacity choices. It shows that demand uncertainty will not change optimal capacity choice if demand variation is low and capacity cost is high; otherwise the optimal airport capacity under demand uncertainty will be larger than the case when a deterministic mean demand is considered. These conclusions are robust with respect to the different market structures considered in this study and hold for both profit-maximizing and welfare-maximizing airports. The moderating effects of commercial revenue, capital cost, and airport operation cost on airport capacity choice are qualitatively the same in the cases of uncertain demand and deterministic demand.     

Joint impact of competition,ownership form and economic regulation on airport performance and pricing

The combined impact of ownership form, economic regulation and competition on airport performance is analyzed using data envelopment analysis to measure cost efficiency in the first stage and regression analysis to measure the impact of the environment in the second stage. The empirical results of an analysis of European and Australian airports over a 10 year timeframe reveal that under relatively non-competitive conditions, public airports operate less cost efficiently than fully private airports. Irrespective of ownership form, regulation is necessary to emulate competitive forces thus pushing airport management towards cost efficiency and reasonable pricing policies. Under potential regional or hub competition, economic regulation inhibits airports of any ownership form from operating and pricing efficiently. Although public and fully private airports operate equally efficiently in a competitive setting, private airports still set higher aeronautical charges. Furthermore, mixed ownership forms with a majority public holding are neither cost efficient nor low price, irrespective of the level of competition.     

Airport capacity choice under airport-airline vertical arrangements

This study investigates the effects of airport-airline vertical arrangements on airport capacity choices under demand uncertainty. A multi-stage game is analysed, in which competing airlines contribute to capacity investments and share airport revenues. Our analytical results suggest that for a profit-maximising airport, such a vertical arrangement leads to higher capacity but may not increase its profit, whereas for a welfare-maximising airport, such an arrangement has no effect on capacity or welfare. Capital cost savings brought by airport-airline cooperation, if any, always lead to higher capacity, and to higher profit for a profit-maximising airport and higher welfare for a welfare-maximising airport. Numerical simulations reveal that win-win outcomes may be achieved for an airport and its airlines without government intervention.     

An aggregate demand model for air passenger traffic in the hub-and-spoke network

In this paper, we build an aggregate demand model for air passenger traffic in a hub-and-spoke network. This model considers the roles of airline service variables such as service frequency, aircraft size, ticket price, flight distance, and number of spokes in the network. It also takes into account the influence of local passengers and social-economic and demographic conditions in the spoke and hub metropolitan areas. The hub airport capacity, which has a significant impact on service quality in the hub airport and in the whole hub-and-spoke network, is also taken into consideration.Our demand model reveals that airlines can attract more connecting passengers in a hub-and-spoke network by increasing service frequency than by increasing aircraft size in the same percentage. Our research confirms the importance of local service to connecting passengers, and finds that, interestingly, airlines’ services in the first flight leg are more important to attract passengers than those in the second flight segment. Based on data in this study, we also find that a 1% reduction of ticket price will bring about 0.9% more connecting passengers, and a 1% increase of airport acceptance rate can bring about 0.35% more connecting passengers in the network, with all else equal. These findings are helpful for airlines to understand the effects of changing their services, and also useful for us to quantify the benefits of hub airport expansion projects.At the end of this paper, we give an example as an application to demonstrate how the developed demand model could be used to valuate passengers’ direct benefit from airport capacity expansion.     

The impacts of changing flight demands and throughput performance on airport delays through the Great Recession

Several significant events between 2007 and 2009 impacted flight demands and the abilities of the three major New York area airports to handle demand. This paper assesses the results of applying a probabilistic simulation method – which isolates the individual contributions of changes in flight demand and changes in airport throughput performance to changes in flight delays – to diagnose how these different events may have caused operational changes at these airports, and in turn, how the results may be used to inform policies for appropriate countermeasures. The analysis revealed two key observations. Firstly, certain patterns in throughput performance shifts caused the most significant delays, and were more likely to have been caused by controller staffing issues rather than caps. Secondly, relatively constant average delays from one year to the next may result from significant demand drops accompanied by large throughput performance degradations at an airport. This suggests that not only operational limitations on capacity encourage airlines to reduce schedules, but that changed demands can also impact throughput performance. Overall, the analysis indicates that caps may not have provided their fully intended delay benefits. Although they successfully reduced overall flight demands at LGA and JFK, they also directly limited throughput performance at critical times, in turn limiting delay benefits. In addition, demands at the busiest times of the day appear to be relatively inelastic to these operational limitations, insofar as demand profiles at EWR and JFK remained “peaky” in 2008 and 2009. Also, the recession was largely responsible for reducing demands at the airports in 2009, but the delay benefits of this were dampened by a corresponding throughput performance degradation. Based on the above observations, a more direct demand management policy combined with policies that focus on maintaining high staffing capabilities at critical times of the day may be considered, to reduce the likelihood of major queue formation on days that do experience sustained demands. The results also suggest that a more flexible caps system, particularly during times of heavy queues, could be explored. Although airport practitioners have keen understandings of how their airports operate, without the support of quantitative analysis tools, it can be more difficult to argue the need for appropriate countermeasures. An analysis such as the one presented here can provide the detailed quantitative substantiation required to build cases for these targeted policy directives and infrastructure investments.