Airport Capacity Extension, Fleet Investment, and Optimal Aircraft Scheduling in a Multi-Level Market Model : Quantifying the Cost of Imperfect Markets

Title data

Coniglio, Stefano ; Sirvent, Mathias ; Weibelzahl, Martin:
Airport Capacity Extension, Fleet Investment, and Optimal Aircraft Scheduling in a Multi-Level Market Model : Quantifying the Cost of Imperfect Markets.
In: OR Spectrum. Vol. 43 (2021) . - pp. 367-408.
ISSN 1436-6304
DOI: https://doi.org/10.1007/s00291-021-00621-4

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Abstract in another language

We present a market model of a liberalized aviation market with independent decision makers. The model consists of a hierarchical, trilevel optimization problem where perfectly-competitive budget-constrained airports decide (in the first level) on optimal runway capacity extensions and airport charges by anticipating long-term fleet investment and medium-term aircraft scheduling decisions taken by a set of imperfectly-competitive airlines (in the second level). Both airports and airlines anticipate the short-term outcome of a perfectly-competitive ticket market (in the third level). We compare our trilevel model to an integrated single-level (benchmark) model in which investments, scheduling, and market-clearing decisions are simultaneously taken by a welfare-maximizing social planner. Using a simple six-airports example from the literature, we illustrate the inefficiency of long-run investments in both runway capacity and aircraft fleet which may be observed in aviation markets with imperfectly-competitive airlines.