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Airport capacity extension, fleet investment, and optimal aircraft scheduling in a multilevel market model: quantifying the costs of imperfect markets

Author

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  • Stefano Coniglio

    (University of Southampton)

  • Mathias Sirvent

    (Friedrich-Alexander-University Erlangen-Nuremberg, Discrete Optimization)

  • Martin Weibelzahl

    (University of Bayreuth & Fraunhofer FIT)

Abstract

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.

Suggested Citation

  • Stefano Coniglio & Mathias Sirvent & Martin Weibelzahl, 2021. "Airport capacity extension, fleet investment, and optimal aircraft scheduling in a multilevel market model: quantifying the costs of imperfect markets," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 43(2), pages 367-408, June.
    • Handle: RePEc:spr:orspec:v:43:y:2021:i:2:d:10.1007_s00291-021-00621-4
    DOI: 10.1007/s00291-021-00621-4
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