Organizational Behaviour

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OPERATIONS MANAGEMENT

PROFESSOR MOHAMMAD NIKOOFAL

“THE DELAYS AT LOGAN AIRPORT”

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Ana Guimarães 150111501

Leonor Lima Raposo 150113193

David Antunes 150113238

Matilde Meyrelles Do Souto

Pedro Godinho 150112201

Logan Airport

Logan Airport is an international airport located in Boston, United States. It has three runways in operation during good weather but only two of them are used for arrivals.

The airport’s concern is to have a strategy that reduces delay times and associated costs. In our opinion, the strategy will include peak-period pricing in order to reduce the late times in the short-run.

The impact of Peak Period Pricing on Delay Times and Costs

        During peak hours the arrival rate is between 44.5 and a little over 60 planes per hour. This analysis reflects the delay times and costs associated with each peak hour arrival rate for three plane types – Turboprop airplane, Conventional jets e Regional jets – in order to compare them.

        The total delay time for an arrival rate (λ) for 50 planes per hour is 6.55 minutes (0.109 hours) but when the arrival rate increases by 5 planes per hour, the delay is 12.52 minutes (0.209 hours) and the delay time is more than 1 hour (60.5 minutes) when the arrival rate increases to 59 planes per hour.

        These delays imply extra costs. These costs are the sum the passenger time cost and the delay time cost of the plane.

Table 2: Delay costs per aircraft per arrival rate

        The definition of Federal Aviation Administration (FAA) says that the plane is only late if the departure (or arrival) is 15 minutes or more after the scheduled time. These costs are not considered when the arrival rate is 50 and 55 planes per hour because the delay time is always less than 15 minutes, approximately 6.5 and 12.5 minutes respectively. Thus, the new cost plan will only apply with an arrival rate greater than 59 planes per hour, where the costs of turboprop airplanes will be $658.76, regional jets $1690.34 and conventional jets  $4641.43.

        However, this definition does not take the sum of the delay times into consideration, which imply costs. Regarding the peak-period pricing we see that in table 2 the greater the arrivals rate higher the costs. For all types of aircrafts the arrival rate of 50 planes per hour is 9.2 times less than λ = 59 planes/h.

Peak-Period Pricing and the Airplane Mix

Peak-period pricing is a form of congestion pricing where customers pay an additional fee during periods of high demand. In this paragraph, we will analyse the economic impact that the landing fee has on the aircraft revenues.

Table 3: Revenue per plane give a loading factor of 65% and the effect of PPP

In table 3 we can see the calculation of airplane revenue with fees and without fees. To understand which airplane will suffer the greatest economic impact as a result of landing fees, we divide each landing fee by the total revenue with load factor. All landing fees have a greater impact with turboprop planes. For a $150 landing fee we have 6.69% revenue, a $200 landing fee 8.92% revenue, and a $250 landing fee 11.15%. The turboprop is the most affected in demand since their companies transfer off-peak periods, increases prices, or even cancel flights. The conventional jets suffer the least.