Clearly, peak periods exist for a reason; that is, they are not random fluctuations but rather exist due to passengers’ desires for landings and takeoffs at certain choice periods during the day. As such, for fear of angering their customers, airlines will only shift flights to different period during the day if the costs of incurring peak charges outweigh the costs (in terms of lost revenue) of shifting flights to off-peak periods.
An operating expense breakdown for three airplane classes is listed in Exhibit 1. In addition, per passenger revenue for different aircraft sizes is listed in Exhibit 2. Assume all planes fly with 30% of passenger seats empty (i.e., assume a 70% load factor).
For which airplane types listed above (conventional jet, regional jet, and turboprop) would a peak-period landing fee of $100 have a significant economic impact? What about a $150 fee? What about $200?
Based on your answer to 2(a), whether peak period pricing has a significant effect on the magnitude of delays may depend on the particular mix of airplane classes utilizing Logan during a peak hour. Do you believe peak period pricing would have a significant effect if the typical airplane mix were 40% turboprop, 18% regional jet, and 42% conventional jet, as it approximately currently stands at Logan? What about 20% turboprop, 30% regional jet, and 50% conventional jet, as one future scenario for 2015 envisioned by Massport/FAA has it?
To what extent might savings in delay costs that result from demand management offset peak period fees?
