Can more flexibility in Air Navigation Service Provider capacity provision really reduce delays? A multi-stakeholder analysis

Policy makers and industry experts repeatedly have called for more flexibility in the provision of air navigation services in order to mitigate persistent delay problems especially in Europe. However, increasing flexibility not only comes at a cost, it might also lead to unexpected and even detrimental results that have not attracted much attention in the literature yet. This paper evaluates the economic impacts of flexibility that is achieved through overtime hours of air traffic controllers (ATCOs). In our model, the air navigation service provider (ANSP) is facing uncertainty in demand and decides on user charges as well as on capacity provision. We compare two scenarios in which the ANSP is either able or unable to use overtime ATCO-hours in a high demand environment. In general, more flexibility in capacity provision increases expected economic welfare only slightly (0.13% in our base case). Moreover, more flexibility only reduces expected en-route delays if the ANSP aims at maximizing welfare (constrained by a zero-profit-regulation). For a profit-maximizing ANSP, more flexibility even increases expected en-route delays. Taking the decisions of airlines and passengers into account, we show that more flexibility also leads to additional (‘induced’) demand, contributing to higher costs of capacity provision. Whereas flexibility in capacity provision reduces delays in a high traffic environment, it increases delays in a low traffic situation, as the ability to increase capacity provision if traffic is high also provides a (strategic) incentive to reduce the number of ATCOs that are controlling the airspace in a low demand environment.