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

Stefano Coniglio, Mathias Sirvent and Martin Weibelzahl ()
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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

OR Spectrum: Quantitative Approaches in Management, 2021, vol. 43, issue 2, No 2, 367-408

Abstract: 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.

Keywords: OR in airlines; Mixed-integer optimization; Multilevel optimization; Market design; Long-run investments (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00291-021-00621-4

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