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

: Coniglio, S.; Sirvent, M.; Weibelzahl, M.

Fulltext ()

OR spectrum 43 (2021), No.2, pp.367-408
ISSN: 0171-6468
ISSN: 1436-6304
Journal Article, Electronic Publication
Fraunhofer FIT ()

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.