Airport congestion pricing and passenger types

We consider a public and congested airport served by airlines that may have market power, and two types of travelers with different relative values of time. We find that in the absence of passenger-type-based price discrimination by airlines, it can be useful to increase the airport charge so as to protect passengers with a great relative time value from excessive congestion caused by passengers with a low relative time value. As a result, the socially efficient airport charge can be substantially higher than what we learned from the recent literature on congestion pricing with non-atomistic airlines.     

How to mix per-flight and per-passenger based airport charges

This paper investigates the questions of why carriers advocate for higher per-passenger airport charges and lower per-flight charges, and whether and when this proposal is welfare-enhancing. Specifically, the paper compares the optimal mix of per-flight and per-passenger based airport charges from both a monopoly carriers’ and the social viewpoints conditional on airport cost recovery. It focuses on the trade-off between price and frequency (i.e., schedule delays) when time valuations are uniform, or differ, between business and leisure passengers. We identify an easy test for the evaluation of the mix of per-passenger and per-flight based airport charges by policy makers, which is simply to check whether the carrier’s preferred per-flight charge is zero. Our analysis suggests that there is no need for immediate regulatory corrections of the current trend towards the strong use of per-passenger based airport charges.     

A choice model of airline passengers’ spending behaviour in the airport terminal

This study examines the influence of passengers’ travel-related factors, their intention to shop and the impact of socio-economic factors on their consumption behaviours while at the airport terminal. Three categories of consumption model – shopping, dining and airport entertainment – are developed to analyse different consumption behaviours. The results show that free time is the main factor that influences passengers to choose entertainment while waiting at the terminal, and the use of airline lounges has a negative influence on the extent of engagement in all three types of passenger consumption behaviour, especially dining. Furthermore, passengers’ dining expenditure has a positive effect on the extent of engagement in entertainment, but a negative influence on the extent of engagement in airport shopping. Passengers’ preferences of airport shopping area after they have cleared security is positively associated with the extent of engagement in both shopping and entertainment but negatively associated with the extent of engagement in dining activities.     

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).     

Bottleneck congestion: Differentiating the coarse charge

The traditional bottleneck model for road congestion promotes the implementation of a triangular, and time varying, charge as the optimal solution for the road congestion externality. However, cognitive and technological barriers put a practical limit to the degree of differentiation real world implementations can handle. The traditional approach to accommodate for this concern has been a step toll, with the single step coarse charge as its simplest case.In this paper we study how efficiency of the coarse charge can be improved by differentiating its level and timing across groups of travellers. We use the traditional bottleneck model to analyse how the coarse charge can be differentiated over two groups of travellers assuming inelastic peak-hour demand.The results of our analysis indicate that differentiating the coarse charge across two groups of travellers considerably improves its efficiency without increasing cognitive effort and decision making costs for the individual traveller. A numeric illustration reveals a welfare gain of 69% of the first-best charge, up from 53% for the generic coarse charge. This increase is similar to what is obtained by moving from the coarse charge to a generic two step toll. Once different groups have been defined, one could in fact achieve the same gains by temporal separation of drivers, for example by use of licence plate numbers.The presented charging regime has a considerable degree of flexibility with respect to the share of travellers to attribute to each scheme, which further adds to its merits in practical applicability.     

Optimal assignment for check-in counters based on passenger arrival behaviour at an airport

Establishing how to utilize check-in counters at airport passenger terminals efficiently is a major concern facing airport operators and airlines. Inadequate terminal capacity and the inefficient utilization of facilities such as check-in counters are major factors causing congestion and delays at airport passenger terminals. However, such delays and congestion can be reduced by increasing the efficiency of check-in counter operations, based on an understanding of passengers' airport access behaviour. This paper presents an assignment model for check-in counter operations, based on passengers' airport arrival patterns. In setting up the model, passenger surveys are used to determine when passengers arrive at the airport terminals relative to their flight departure times. The model then uses passenger arrival distribution patterns to calculate the most appropriate number of check-in counters and the duration of time that each counter should be operated. This assignment model has been applied at the Seoul Gimpo International Airport in Korea. The model provides not only a practical system for the efficient operations of time-to-time check-in counter assignments, but also a valuable means of developing effective longer-term solutions to the problem of passenger terminal congestion and delays. It also offers airlines a means of operating check-in counters with greater cost effectiveness, thus leading to enhanced customer service.     

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.     

Knowledge based decision support in airport terminal design

The state of the art in airport terminal design has essentially remained unchanged since the 1970s, relying on the use of detailed simulation together with empirical and statistical formulae for sizing the terminal. Air transport has altered considerably since then, with increased use of air travel for both business and leisure, together with the increased use of ‘hub’ terminals in which the terminal acts as an interchange stop on a journey involving several flights. The use of simulation involves a detailed analysis of the terminal design under one set of conditions. To change the design or operating conditions involves a complete resimulation using the new design parameters which is time consuming and computationally expensive.

By using a knowledge based approach, a system can be provided which has the flexibility and speed required to explore the consequences of implementing design decisions in a variety of conditions, together with the ability to use and alter facility sizing methodologies to reflect current and future design guidelines.     

Bottleneck congestion and distribution of work start times: The economics of staggered work hours revisited

Since the seminal work of Henderson (Henderson, J.V., 1981. The economics of staggered work hours. Journal of Urban Economics 9 (3), 349–364), a number of studies have examined the effect of staggered work hours by analyzing models of work start time choice that consider the trade-off between negative congestion externalities and positive production externalities. However, these studies employed flow congestion models to describe traffic congestion. This study develops a model of work start time choice with bottleneck congestion and discloses the intrinsic properties of the model. To this end, this study extends Henderson’s model to incorporate bottleneck congestion. By utilizing the properties of a potential game, we characterize equilibrium and optimal distributions of work start times. We also show that Pigouvian tax/subsidy policies generally yield multiple equilibria and that the first-best optimum must be a stable equilibrium under Pigouvian policies, whereas the second-best optimum in which policymakers cannot eliminate queuing congestion can be unstable.     

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.     

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.     

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.     

Determinants of airport retail revenue: a review of literature

ABSTRACT

As the airport retail industry continues to grow due to increasing travel demands, airport operators are increasingly developing their retail revenue potential to ensure financial viability. This study aims to provide a review of airport retail literature and identify the salient factors associated with passenger shopping behaviour. The paper presents a review of contemporary airport retail literature, covering a total of 50 studies from 1998 to 2018. The review identified 26 factors, which could broadly be grouped into five categories: airport/operator related; passengers' demographic related; passengers’ travel related; passengers’ psychological related and passengers’ resources related. In addition to providing a summary of the statistically significant factors across studies, the review identifies and discusses potential approaches for future research. These include the importance of considering both “to spend or not” decision and how much to spend and how most empirical studies focussed on the former; the gap in empirical analysis on the impact of airport terminal design layout on retail performance; and the gap in application of general consumer shopping behavioural models to airport retail problems. The paper concludes with the suggestion that we can build on the existing studies to develop a hybrid approach to solve several of the identified gaps simultaneously.     

Dynamic user equilibrium in public transport networks with passenger congestion and hyperpaths

This paper presents a dynamic user equilibrium for bus networks where recurrent overcrowding results in queues at stops. The route-choice model embedded in the dynamic assignment explicitly considers common lines and strategies with alternative routes. As such, the shortest hyperpath problem is extended to a dynamic scenario with capacity constraints where the diversion probabilities depend on the time at which the stop is reached and on the expected congestion level at that time. In order to reproduce congestion for all the lines sharing a stop, the Bottleneck Queue Model with time-varying exit capacity, introduced in Meschini et al. (2007), is extended. The above is applied to separate queues for each line in order to satisfy the First-In-First-Out principle within every attractive set, while allowing overtaking among passengers with different attractive sets but queuing single file. The application of the proposed model to a small example network clearly reproduces the formation and dispersion of passenger queues due to capacity constraints and thus motivates the implementation of the methodology on a real-size network case as the next step for future research.     

Effect of advanced traveler information systems and road pricing in a network with non-recurrent congestion

The effect of the application of advanced transport information system (ATIS) and road pricing is studied in a transportation system under non-recurrent congestion. A stochastic network deterministic user equilibrium model (SNDUE) with elastic demand is formulated and used to evaluate the welfare and private impacts of different market penetrations of ATIS, together with road pricing for a simple network. Both marginal first-best road pricing and a second-best fixed road pricing are considered. The incentives of private users to use ATIS are analyzed and the characteristics of optimum tolls as a function of ATIS market penetration are shown. We conclude that ATIS is an efficient and necessary tool to reduce the effects of non-recurrent incidents in a transportation network, especially when non-recurrent congestion causes a significant deterioration of operational conditions of the network. If the impact of non-recurrent incidents on free flow costs is small or is reduced only to congestion effects, the use of road pricing would be more efficient. Social benefits obtained when jointly implementing ATIS and road pricing are practically the same whether first-best or second-best road pricing is used. Considering the private costs perceived by the network users, and the benefits experienced by equipped users, the maximum level of market penetration achieved could be limited because private benefits disappear after certain market penetration is obtained.     

Existence of self-financing and Pareto-improving congestion pricing: Impact of value of time distribution

This paper considers a static congestion pricing model in which travelers select a mode from either, driving on highway or taking public transit, to minimize a combination of travel time, operating cost and toll. The focus is to examine how travelers’ value of time (VOT), which is continuously distributed in a population, affects the existence of a pricing-refunding scheme that is both self-financing (i.e. requiring no external subsidy) and Pareto-improving (i.e. reducing system travel time while making nobody worse off). A condition that insures the existence of a self-financing and Pareto-improving (SFPI) toll scheme is derived. Our derivation reveals that the toll authority can select a proper SFPI scheme to distribute the benefits from congestion pricing through a credit-based pricing scheme. Under mild assumptions, we prove that an SFPI toll always exists for concave VOT functions, of which the linear function corresponding to the uniform distribution is a special case. Existence conditions are also established for a class of rational functions. These results can be used to analyze more realistic VOT distributions such as log-normal distribution. A useful implication of our analysis is that the existence of an SFPI scheme is not guaranteed for general functional forms. Thus, external subsidies may be required to ensure Pareto-improving, even if policy-makers are willing to return all toll revenues to road users.     

Impacts of highway congestion on freight operations: perceptions of trucking industry managers

To better understand how road congestion adversely affects trucking operations, we surveyed approximately 1200 managers of all types of trucking companies operating in California. More than 80% of these managers consider traffic congestion on freeways and surface streets to be either a “somewhat serious” or “critically serious” problem for their business. A structural equations model (SEM) is estimated on these data to determine how five aspects of the congestion problem differ across sectors of the trucking industry. The five aspects were slow average speeds, unreliable travel times, increased driver frustration and morale, higher fuel and maintenance costs, and higher costs of accidents and insurance. The model also simultaneously estimates how these five aspects combine to predict the perceived overall magnitude of the problem. Overall, congestion is perceived to be a more serious problem by managers of trucking companies engaged in intermodal operations, particularly private and for-hire trucking companies serving airports and private companies serving rail terminals. Companies specializing in refrigerated transport also perceive congestion to be a more serious overall problem, as do private companies engaged in LTL operations. The most problematic aspect of congestion is unreliable travel times, followed by driver frustration and morale, then by slow average speeds. Unreliable travel times are a significantly more serious problem for intermodal air operations. Driver frustration and morale attributable to congestion is perceived to be more of a problem by managers of long-haul carriers and tanker operations. Slow average speeds are also more of a concern for airport and refrigerated operations.     

A generic system dynamics based tool for airport terminal performance analysis

Decision making for airport terminal planning, design and operations is a challenging task, since it should consider significant trade-offs regarding alternative operational policies and physical terminal layout concepts. Existing models and tools for airport terminal analysis and performance assessment are too specific (i.e., models of specific airports) or general simulation platforms that require substantial airport modelling effort. In addition, they are either too detailed (i.e., microscopic) or too aggregate (i.e., macroscopic), affecting, respectively, the flexibility of the model to adapt to any airport and the level of accuracy of the results obtained. Therefore, there is a need for a generic decision support tool that will incorporate sufficient level of detail for assessing airport terminal performance. To bridge this gap, a mesoscopic model for airport terminal performance analysis has been developed, that strikes a balance between flexibility and realistic results, adopting a system dynamics approach. The proposed model has a modular architecture and interface, enabling quick and easy model building and providing the capability of being adaptable to the configuration and operational characteristics of a wide spectrum of airport terminals in a user-friendly manner. The capabilities of the proposed model have been demonstrated through the analysis of the Athens International Airport terminal.