An economic analysis of the determination of congestion tolls at commercial airports

Abstract

This report examines the problem of determining runway fees at major commercial airports when the objective is the maximization of social benefits. Unlike most of the analytical work that has been performed to date, the economic model used here takes into consideration time variations in airport demand and extends earlier results to this more realistic case. As with earlier models, the one used here demonstrates clearly the differences in the optimal tolls that result from assuming different regulatory environments. An alternative model, based on the concept of Pareto optimality, not only leads to the same results as the traditional approach, but also allows consideration of some additional factors such as frequency of service and average load factors. In particular, it is shown that when low load factors are sufficiently valued by passengers, optimality does not require that aircraft fly full, even in the presence of sizable delays. An example is worked out in detail, illustrating many of these points and especially how an appropriately determined peak hour surcharge can reduce substantially congestion and result in increased social benefits from the airport facility. Finally, the experience of the Port of New York Authority in New York airports and that of the British Airports Authority at Heathrow is discussed briefly and compared with the conclusions of this report.