Capacity investment model for airport facilities under demand uncertainty

This paper addresses strategic airport facility planning under demand uncertainty. Existing studies are improved by (1) allowing capacity contraction and (2) adopting more flexible delay functions. A mixed‐integer nonlinear program, which incorporates scale economies in construction, time value of money, nonlinear congestion effect, and other factors, is proposed for optimizing the capacity expansion/contraction decisions over time for multiple airport components. The stochastic problem is converted into its deterministic equivalent because the number of demand scenarios considered is finite. A discrete approximation technique is used to remove the nonlinearities. Numerical studies are presented to demonstrate the capability of the proposed model and the computational efficiency of the solution method. The “Flaw of Averages” due to faulty decisions based on the average future condition is illustrated, and trade‐offs among various costs are discussed in the numerical analyses. Copyright © 2016 John Wiley & Sons, Ltd.