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OCR for page 103
103 adopted reasonably allocates costs to the appropriate users on demand management as a legitimate alternative to capacity a rational and economically justified basis" (5). expansion as a means of ameliorating airport congestion prob- lems. Some parties within the aviation community continue to believe that congestion and delay are required to spur develop- 5.4.4 FAA-Proposed Changes ment of the aviation system both nationally and locally. in Rules/Regulations Demand management is perceived by such individuals as a Most recently, in the Notice of Proposed Rulemaking to palliative that inhibits the often difficult cure of capacity expan- amend its 1996 policy on rates and charges, the DOT pro- sion. In such a view, only when the pain becomes unbearable-- posed to explicitly allow airport proprietors to establish a two- as in the New York airports or Chicago O'Hare--should part landing fee that recognizes both the number of operations demand management be undertaken. And even in these cases, and the weight of the aircraft, in order to provide incentives the goal should be simply to reduce congestion to tolerable lev- for airlines to modify aircraft gauge or frequency to reduce els. Any further refinements, such as market-based slot alloca- delays at congested airport. According to the U.S. Govern- tion, again raise the specter of demand management becoming ment Accountability Office (GAO), the 2008 Amendment to a way of life, rather than a temporary expedient or last resort. the Airport Rates and Charges policy allows the following: There are certainly cases where capacity expansion is more desirable than demand management. But the time is long past Announced in July 2008, the policy clarifies the ability of air- when capacity expansion should be viewed as the inherently port operators to establish a two-part landing fee structure con- superior solution. At many airports, given current technology sisting of both an operation charge and a weight-based charge, and regulations, it may no longer be feasible to expand run- giving airports the flexibility to vary charges based on the time of day and the volume of traffic. It also permits the operator of a way capacity. At others, the costs of expansion may simply be congested airport to charge users a portion of the cost of airfield higher than those of demand management. And at yet others, projects under construction and expands the authority of an agreement on an ultimate capacity may be the price for secur- operator of a congested airport to include in the airfield fees of ing approval for expanding the airport to reach that capacity. congested airports a portion of the airfield fees of other under- In all of these instances, demand management could be a legit- utilized airports owned and operated by the same proprietor (6). imate tool for preventing or alleviating excess airport delay. Beyond legitimizing demand management, the approach The combination of these three new rules would give air- could be guided by two other principles. First, primary respon- port managers more control over the efficient use of their sibility for demand management should be at the local level. runway and landside facilities, "These amendments are Second, demand management should be anticipatory rather intended to provide greater flexibility to operators of con- than reactive. gested airports to use landing fees to provide incentives to air carriers to use the airport at less congested times or to use alternate airports to meet regional air service needs" (6). 5.5.2 Localization Airport operators have essentially no direct control of airline There are a number of reasons why the primary locus of activity at their airports, including whether the airline serves demand management responsibility and action would ideally the airport at all, the frequency or time of day of service, or the be at the local level. First, recent federal efforts to innovate aircraft type or size used to provide service. They do have pro- policy in this area have been met by strong resistance. The prietors' rights to use rates and charges to influence airline ser- FAA's attempt in the fall of 2008 to institute slot auctions at vice patterns, but those rights are still being refined. Building a modest scale at the New York airports was temporarily on the experience reviewed here, the following section will blocked by a federal court after an appeal by the PANYNJ. develop some potential demand management principles. Demand management at the local level would be immune to legal or political challenges. It is likely that slot auctions would 5.5 Guiding Principles for be opposed by airlines regardless of the body implementing the Demand Management auctions. Political hurdles would also exist. In 2007, the FAA proposed a pilot program to give select airport authorities flex- 5.5.1 Legitimation ibility to impose market-based measures at the local level with In light of the potential to reduce delay with innovative guidance; this proposal did not gain traction and was not freight management and the unclear role of aviation stake- included in recent reauthorization bills that were introduced. holders in managing delay, a demand management approach Another challenge to demand management policy localization, could be tried, to better align flight scheduling decisions with airport monopoly power, is touched on in Section the needs of society. The most fundamental, and therefore the There would likely be significant challenges to innovation in most difficult, would be for all relevant parties to recognize airport demand management whether it occurs nationally or

OCR for page 103
104 locally, subject to federal oversight. Nonetheless, the research related to demand management, it is appropriate for the team argues that the latter course would be the more promis- same entity to make both. ing one. Valuation of competing goals. Demand management Second, it would be very difficult to craft a federal demand involves complex trade-offs between competing goals, management program that would be effective across the wide including delay reduction, schedule convenience, competi- variety of circumstances that exist at different airports. Impor- tiveness, equity, and service stability. Different regions will tant differences in this context include the following: place different values on these goals. Localizing demand management policy increases the opportunity to design Airline/airport relations. Although in some cases airlines programs that reflect these differences. and airports maintain a straightforward landlordtenant Competitiveness. Demand management policies can reduce relationship, in other cases the relationship more closely competition between airlines serving a given airport as well resembles co-ownership. In the latter case, certain airlines as create entry barriers for airlines seeking to initiate service. have invested in both the airport itself and in developing Although such outcomes are rarely desirable, the severity of the markets that the airport serves. In the context of their consequences varies according to how competitive the demand management, this affects the manner in which airport is to begin with, the availability of alternative airports available capacity could be allocated: through a market nearby, and, in some cases, the availability of competitive mechanism based on willingness to pay, or through a modes. It follows that the weight given to preserving com- process that gives more consideration of established airport- petition in formulating demand management programs airline relationships. should vary from airport to airport. Financing mechanism. Airports are financed in one of two ways. In the residual approach, airlines agree to make up any A third rationale for demand management being deter- shortfall in revenues in return for having a strong role, often mined at the local level is that, for the most part, delay is a local including a veto, in airport capital expenditure decisions as problem. It is the local population and economy that experi- well as the agreement that any airport's non-airline revenue ence the brunt of delay impacts. Although high delays at one will go toward reducing the costs borne by airlines. In the airport can propagate throughout the system, most of the delay compensatory approach, the airport assumes the risk, and in experienced in the United States is not propagated. Moreover, return can earn substantial surpluses that can finance future the airlines that operate at a high-delay airport recognize the airport development, decisions about which it largely con- system-wide impacts of the delays and will certainly express trols. Residual airports face unique constraints in employing these--both explicitly and behaviorally--to local policy- market approaches to demand management because (a) any makers. There is also anecdotal evidence from places such as revenue from such charges is ultimately recaptured by the San Francisco, New York, and Boston that if demand manage- airlines in the form of reduced fees and (b) they typically have long-term usage agreements with airlines to which any ment were made a local responsibility, it would be embraced demand management program must conform. by many of the localities where it may be needed. Variability in capacity. Some airports have fairly similar To ensure that a solution developed to solve a local delay capacities under most weather conditions, whereas in others, problem does not have the effect of making the situation worse capacity is highly variable. In the latter cases, a decision must downstream at other airport(s), the delay modeling used to be made about what capacity scenario to assume in formu- develop the delay triggers at an airport would account for the lating the demand management strategy. If the capacity is set impact on other airports. too low, the airport will be underused much of the time; if Fourth, local responsibility would result in a variety of set too high, there may be severe delays much of the time. approaches being tried. Much can be learned from this process. There may also be cases where it is appropriate to assume dif- Just as states are the laboratories of democracy, airports could ferent capacities for different times of day or seasons of the become laboratories for demand management. Our limited year. Such trade-offs are best understood at the local level. experience with airport demand management in this country, Expandability. The appropriate mix of demand manage- as well as the limited success of attempts at it to date, suggests ment and demand accommodation depends on the cost that there is much to learn. and political difficulty of expanding an airport. Some fac- Finally, as the research team elaborates below, making tors that determine expandability, such as the cost and demand management primarily a local responsibility does not availability of land and the sensitivity of surrounding land mean that the federal government would have no recourse uses, can be assessed objectively, whereas others cannot. when that responsibility is performed improperly or not at all. This is one reason why airport planning and expansion Airports' increased latitude in developing demand manage- decisions have traditionally been made at the local level. ment programs could be accompanied by clear guidance and Given the close coupling between such decisions and those principles of accountability.