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5 CHAPTER 1 Introduction The recent volatility in aviation fuel prices since 2008 has In Task 2, a major data collection effort was begun, with placed stress on airline cost structures, reduced profitability emphasis on obtaining long-term histories of both national of particular aircraft types, and is coincident with a historic economic data--such as fuel prices--and airport-specific recession that has dampened overall economic activity and data--such as local income and airport activity data. A report air travel. This extreme volatility has contributed to large for Task 2 was delivered at the end of April 2009. swings in scheduled air traffic activity in the United States. Examination and analysis of the data that was gathered Overall seat offers in the domestic market declined by well formed the basis for determining how airport activity may be over 11 percent between April 2008 and April 2010. These affected via supply and demand impacts identified in Tasks 3 reductions are not uniform, with activity at some sizable air- and 4. The data and information obtained from these first ports declining by as much as 25 percent or more. The fiscal four tasks form the basis for the presentation in Chapter 2, impact on airports is large, but there may be more profound which discusses historical changes in airport activity and air effects on long-term airport planning and development. The services across the country, and how these observations can purpose of this project was to create tools to assist airports be correlated to overall economic activity in general and fuel with anticipating changes in air service due to external shocks prices in particular. (particularly fuel price changes) that have important impli- Building upon that foundation, Tasks 5 and 6 focused on cations for airport development and finance. building sound statistical models to identify the primary The proposal and final work plan for this project called for determinants of airport activity. A report summarizing the the work effort to be divided into two phases. The ultimate progress made on the air service models was delivered in June goal of the Phase I tasks was to develop a model of airport 2009. Chapter 3 provides a detailed technical description of activity which could be used to assess the uncertainty under- the development and specification of the models. lying future projections of airport activity, particularly as they In October 2009, the Task 7 report was delivered, detailing relate to large swings in fuel prices. For Phase II, the goal was the initial ideas for the software and describing the final ver- to embed the model inside a user-friendly software program sions of the statistical models. The Task 7 report was also pre- in order to allow airport planners and sponsors to more accu- sented to the project panel in January 2010. rately assess how fuel, economic, and other uncertainties may In Phase II, Tasks 8 and 9 were devoted to developing and affect their own airports. testing software that embeds the statistical model and is Exhibit I-1 provides a conceptual overview of the various designed to be used by airport professionals to help them activities during Phase I and Phase II of the work program. As assess uncertainty associated with activity forecasts at their indicated, substantial outreach was conducted in both phases individual airports. Chapter 4 describes the approach and to gather input from airports and other experts to inform the design concepts used in developing the software. Valuable analysis and modeling activities. feedback was obtained from various airport representatives During Task 1, industry-level data was gathered and a during the testing phase, along with additional feedback gath- review of the literature was conducted to assess the impact of ered from the project panel, which led to a number of revisions changes in fuel price and other parameters on the levels of and enhancements to the software. carrier service at specific airports. A report detailing the find- Chapter 5 presents suggestions for future research. An ings from Task 1 was delivered to the project panel in Febru- overview of how to use the final software product and a detailed ary 2009. A detailed summary of the literature review from software user manual for the Airport Forecasting Risk Assess- Task 1 is provided in the appendix to this report. ment Program are provided in Part II of this report.

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6 Exhibit I-1. Research program overview. Phase I Phase II Task 1 Task 2 Task 8 Literature Review Build Database Finalize Design Industry Level Data Identify Major Events Acquire Data Outreach Before-After Analysis Software by Airport Group Beta Test O O Task 3 Task 4 U U Assess Demand Aircraft Choice T T Task 9 Specific Airports Cost Changes Test Model at Business Models Fleets (TP, RJ, NB, WB) R R Various Airports Refinements E E A A Task 5 C C Identify Other Variables Task 10A Data Availability H H Draft Final Report Relevance/Magnitude Working Model Draft Manual Task 6 Concept for Model Supply/Demand Models Impact Modules Panel Review Software Choices (90 Days) Task 7 Report/Recommendations Task 10B Final Report Model Panel Review Users Manual (30 Days) To Phase II