Hub-Carrier Scheduling and Hub-Airport Congestion Pricing

Abstract

This study examines hub-carrier scheduling and hub-airport congestion pricing using a simple hub-spoke network model incorporating both schedule delays and congestion delays. We find that in the short-middle run, where aircraft size is given exogenously, hub-airport congestion tolls are not needed at the social optimum if the (negative) congestion delay effect is more or less offset by the (positive) schedule delay effect. In the long run, where aircraft size is decided endogenously, at the social optimum, it is not necessary to impose congestion tolls via a per-flight charge or via per-passenger charges. This is in stark contrast to the results of existing literature. Interestingly, we further find that when the per-flight charge is weight related, a profit-maximizing (privatized) hub airport imposes schedule and congestion delay costs via per-flight charges, but there are no delay cost terms in the private optimal per-passenger charges. However, when the per-flight charge is movement related, it imposes schedule and congestion delay costs via both per-flight charges and per-passenger charges. These “private” optimal congestion-pricing rules provide useful insights into privatized, or profit-maximizing/emphasizing, hub airports.

Keywords: hub-carrier scheduling; hub-airport congestion pricing; schedule delay; congestion delay; profit-maximizing hub airports; weight-movement-related per-flight charge

JEL Classification: L93; L30; H20