Operational Management Final Case - Delay at Logan Airport

Delay at Logan Airport

MGCR 472 Operation Management, Case Study Assignment

Professor Derek Wang

Nov 17th, 2014

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Shaofei Ji         260556975

Danna Lin         260554863

Shen Ren          260508971

Xue Zhang         260500645

Meilin Zhu         260555059

Executive Summary

This report aims to analyze and attempt to reduce Logan airport’s delay problem in 2000. The airport was experiencing unacceptable numbers of delays due to three main problems: 1.weather conditions, 2. Mix of aircrafts and 3. Over-scheduling. The high delay rate has led to increased delay costs and dissatisfied customers. It is imperative that Logan finds an effective solution to have enough capacity in the long run to handle this projected demand.  

  This report examines two possible alternatives proposed to reduce Logan’s delay problems: build a new runway and implement peak-period pricing. Upon analysis, we found that building a new runway was too expensive, costing around $100 million and causing environmental noise pollution. As the result, peak-period pricing was identified as a more feasible solution by decreasing the variability of inflow rates – delay times decrease to 12.52 minutes (which according the FAA doesn’t constitute a delay) and delay costs are reduced to $927,737 per hour. Additionally, a landing fee of $150 is the optimal fee to implement due to its smallest economic impact on revenue from all three types of plane. Lastly, this alternative shows extraordinary profitability, we expect it can maximize profit to $973,296.62 per hour.

Problem analysis

Boston’s Logan airport, which ranked as the fifth most significantly delayed airport in the United States in 2001, is facing this server problem continuously. The further expected increases in passengers and annual operations may exacerbate this situation if there is no effective long-term solution coming up. There are many factors that contributed to the current situation; however, the most two significant reasons are adverse weather condition and over-scheduling.

The adverse weather conditions, which notably lower the number of operations per hour, are the primary cause of delay in Logan Airport. Moreover, because of the strong northwest winds, the existing three runways cannot be fully occupied. In general, when northwest winds are moderately strong or severe, only two or one runway can be remained in operation respectively. Under this kind of weather condition, the delay situation in Logan airport becomes worse. Additionally, the popularity of small and non-jet airplanes used in Logan airport, is also a problem that increases passengers’ waiting time, since non-jet airplanes carry less people per operation and require greater distance to takeoff. Another issue that leads to the potential delay situation is over-scheduling.  The demand is almost high enough to reach the capacity levels under good weather conditions. Passengers treat Logan as the airport where they start or end the journey rather than a transition stop. Because of this, the flights tend to arrive more uniformly over each hour, which may take Logan Airport a longer period of time to recover the plane one by one.

Due to the serious delayed problem that Logan airport is currently facing, a huge loss can be reasonably expected. Both potential profits and customer goodwill will decrease if there is no long-term solution for the problem. Although Massport (Massachusetts Port Authority is a port authority in the Commonwealth of Massachusetts.) tries to help mitigate delay problems by renovating terminals, runways and air traffic control facilities, a further solution still need to be discovered in order to increase the efficiency and reputation of Logan Airport. Several alternatives will be discussed later with the intention of solving the problem appropriately and maximize the profit for the Logan Airport.

Recommendation

We came up with 3 alternatives to address the issue of delays at Logan Airport:

The first possible solution is by making better use of regional airport. Increasing use of T.F Green Airport in Providence and Manchester Airport makes Logan Airport less occupied than before. From 1996 to 1999, 27% of growth in passengers occurred at Logan Airport while 73% of the passengers choose other regional airport.

Second alternative consists of adding a new runway to increase the capacity at Logan airport and to ensure there are at least two runways during severe weather condition. The new runway, which costs $100 million, results in a lot of controversies: the critics believed that the construction would make the area less attractive and lower the pace of economic development. Community activists claimed that delays would only be mitigated when the weather condition is unpredictable, as the demand for good weather capacity is not sufficient. Furthermore, the regional jets, comprising the majority of the airplane mix at Logan, are not able to use this new runway. Although the EIR forecasted that the new runway would service 118-126 operations per hour, the consultant reported the actual operations were only around 98 operations per hour. As a result, building a new runway is not the optimal solution.  

Rather, implementing a peak-period pricing is the most efficient strategy for Logan Airport. Peak-period pricing will smooth the runway demand by charging users higher price during periods of high usage. This strategy was successfully launched at Sydney and reduced 28% of the peak-period flights

If the Logan Airport did not adopt the peak period pricing, the arrival rate increases during peak times, same as the delay time and delay cost (table 1). For example, the delay cost per 15 seats Turboprop, when the arrival rate is 50, is calculated by using $3560.38(Appendix 1) divided by 50, given $71.21.

Table 1: Delay cost for each type of plane

When Logan Airport uses peak period pricing, however, arrival rate and delay time are significantly reduced as shown in Table 2.

Table 2: Delay Time for different level of landing fee