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E IntroDELAYS AT LOGAN AIRPORT Boston’s Logan airport is one of the busiest airports in the United States. In the late 90s, despite three runways in service, the airport was increasingly concerned about rising landing delays. The airport began to strategize on how to reduce the rising delay times and costs associated with them. Out of the few strategies that they developed, we believe that peak-period pricing will be the most effective way in reducing delay times in the short run.
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Recommendation In the short run, peak-period pricing will be an effective measure in managing runway demand and reducing delay times and costs. In our analysis, we found that when the arrival rate increased by merely five planes per hour in a system without peak-period pricing, large delay costs were incurred. These delay costs then rose exponentially as demand increased. When we applied peak-period pricing, and reduced the arrival rate by 5 planes, delay times and total costs were reduced drastically. However, we would like to note that the effectiveness of peak-period pricing also depends on the plane mix (percentage of planes using the runway) used by the airport. Computing this requires more data than is given in the case.
However, in the long run, after examining Logan’s projected operations for 2015, peak-period pricing will certainly not be enough to reduce the delays at the airport. Fuel and other operational costs will continue to rise in the coming years and Logan will be forced to raise its fares as well. This rise in price, as with peak-pricing, will never be enough to reduce the demand at Logan in the long run. As demand grows, the only way Logan Airport will be able to cope with demand it effectively will be by expanding its capacity by building more runways. Although community activists have contended that the
5 Formatted: Centered Formatted: Centered Formatted: Centered Formatted: Font: Bold Formatted Table Formatted: Indent: First line: 0. we found the following delay times in minutes for various capacities: Good Weather Delay Time Capacity 50 planes per hour 55 planes per hour 59 planes per hour Delay Time in minutes 6.18 $467.35 $893. Analysis1 Operating under the assumption that a small plane takes as much time to land as large plane. Massport will have to assure that their promises of soundproofing homes will be fulfilled and other measures will be taken to appease the community members before a new runway can be built.95 $396.5" Formatted: Font: Bold Formatted Table 1 See attached excel sheet for our mathematical work.25 $207. .545 12.33 Formatted: Indent: First line: 0.33 $5485.27 $2.459. the estimated delay costs associated with the three plane sizes.addition of a new runway would increase noise. and decrease the appeal to waterfront development. big) with the various landing capacity would be: TABLE A Type of Plane Small Plane Medium Plane Big Plane 50 Planes per hour $75.5" Assuming a 70% load factor for each plane and good weather at the airport.90 59 Planes per hour $843. medium . (small.521 60. this is the only viable solution if Boston wants to continue to be a major airline hub.26 55 Planes per hour $143.
Assuming the other same factors as above.5" TABLE B Type of Plane Small Plane Medium Plane Big Plane 50 Planes per hour $0 $0 $0 55 Planes per hour $0 $0 $0 59 Planes per hour $843. we ran an analysis to find what would happen to the delay costs if Logan implemented peak period pricing. the delay costs associated with the three planes sizes with the various landing capacities’ would be: Formatted: Indent: First line: 0. assume a 70% load factor for each plane type and assume good weather at the airport.27 $2.5" Formatted: Font: Bold .If we use the FAA definition of delay. Space After: 10 pt Formatted: Indent: First line: 0. Indent: First line: 0.33 $5485. TABLE C Formatted: Indent: First line: 0. We also assumed thatAs mentioned in the case there would be a 28% reduction in demand caused by peak pricing.5".459.5" Formatted: Justified. that delay cost adds up to be quite a bit of money.33 Formatted: Font: Bold We don’t believe that the FAA definition is reasonable because as Table A shows. there is some cost to being late and that can’t be ignored because over time.
29 $243. Peak period pricing does represent an effective means of reducing the costs of over scheduling.04 As you can see from comparing Table C with Table A. Refer Exhibit .This shows that a peak period pricing will affect TurboprobTurboprop flights.84 $305.18 39 Planes per hour $42.47 $108.60% Landing fee as a % of revenue $ 100 3. is less than the present value. 11 pt $ Formatted Table 200 Formatted: Font: (Default) Times New Roman.Please refer the Excel sheet that I have sent you . Any landing fee associated with peak period cost would totally be worth it with these sharp reductions in costs.390 $42. the reduction in demand caused by peak period pricing causes a sharp drop in delay costs.90 $269.Type of Plane Small Plane Medium Plane Big Plane 36 Planes per hour $38.059 $ 5.71% Formatted: Font: (Default) Times New Roman.8% of the operating expense and revenue.80% 7.54% Formatted: Font: (Default) Times New Roman. 2 .27%. landing fee of $150 will amount to 4.9% and $200 will amount to 6.210 Landing fees as a percentage of Operating Expenses.54%.b>The effect on delays would depend on the particular mix of airplanes during the peak hour.24% $ 150 4. If Logan .47% Formatted: Font: (Default) Times New Roman.K Formatted: Font: Not Bold Type of plane Turboprop Regional Jet Convention Jet Seating Cap 19 50 150 Estimated Revenue revenue per plane at per 70%load passenger factor 230 154 402 $ 3. regional jet and conventional jet will not be affected as the percentage of landing fee. 2. 11 pt 11 pt 6.a>Currently the landing fee for TurboprobTurboprop is 2.90% 2.78% 0.5" 2.86% 0. However.36% Formatted: Font: (Default) Times New Roman. A landing fee of $100 will increase this percentage to 3. as can be seen in the table.25 42 Planes per hour $48. 11 pt 11 pt 0.5" 2. Formatted: Justified.59 $119.40% 5. 3.tab 2 Formatted: Indent: First line: 0.27% 1.26 $135. Indent: First line: 0. if peak pricing is used.
c> The potential savings in delay costs that result from demand management can potentially offset pealperiod fees.93 minutes while the delay costs.67 Formatted: Justified.252 as seen in the excel sheet attached (Refer Exhibit – I and Exhibit-O) ( Exhibit O and Exhibit I). To conclude. it must be noted it is the conventional jets which will benefit the most from the peak-period pricing. Space After: 0 pt . For Example.5" Formatted: Justified Formatted: Justified. If we assume that the weekday peaking pattern resembles the 2000 case that is shown in Exhibit 8 of the case. then the total costs that conventional jets (big planes) incur reduction from $113. Further. Formatted: Font color: Auto Formatted: Justified If the arrival rates exceed service rates during any one period at Logan. Space After: 0 pt Formatted: Justified. and a peak period price can reduce the demand by 28%. then the peakperiod pricing will have an insignificant effect on the demand and thus the delays. 2. 42 planes. This would reduce the delay times during peak hours. However. they may want to shift their operations to other times as the landing fees during peak hours is more than what is currently charged. and this would cost everyone tremendously. Indent: First line: 0. but only if the initial demand is high and usually only in the case of conventional jets.has 40%turboprop then as seen in calculations above. the savings in delay costs that result from demand management can offset peak period fees. we expect that there would be a huge back up in planes.884 to $5. if the demand is only 50 planes then the reduction will not be as drastic as 59 planes. the estimated delay time for a plane landing at hour 17 would be 6. if there is only 20% turboprop using the runways. However. if the current peak period demand is 59 planes. assuming 70% capacity and good weather would be: Type of Plane Small Delay Cost $79. A line would grow until planes would have to be diverted to other airports or would have to wait in the air.
Space After: 0 pt Formatted: Justified Now if Logan drops to two total runways in operation.Medium Large $219. with a capacity of 22.37 $494. or to one runway with an average of capacity of 30 arrivals per hour then the delay costs and delay times will be astronomical and they will have to divert planes to other airports.5 arrivals per hour each. .74 Formatted: Justified. Space After: 0 pt Formatted: Justified.