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Case Study for Logan International

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Tags: case studyfundamentalLogan Internationalsignificant impact

Essay type: argumentative essay

Words: 1040

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1. a. Per plane delay times ?=50: 6. 54 minutes/ plane ?=55: 12. 52 minutes/ plane ?=59: 60. 5 minutes/ plane Delay costs Arrival rate| 50| 55| 59| Turbo| 6. 54(348+0. 7*15*25. 7)60=$67. 07| 12. 5(348+0. 7*15*25. 7)60=$128. 32| 60. 5(348+0. 7*15*25. 7)60=$620. 02| Jet| 6. 54(1585+0. 7*150*25. 7)60=$467. 29| 12,5(1585+0. 7*150*25. 7)60=$893. 95| 60. 5(1585+0. 7*150*25. 7)60=$4319. 5| Regional Jet| 6. 54(632+0. 7*50*25. 7)60=$167. 07| 12. 5(632+0. 7*50*25. 7)60=$319. 62| 60. 5(632+0. 7*50*25. 7)60=$1544. 37| b. Delay costs according to FAA There are only delay costs associated with an arrival rate of 59, delay time: 60. 5-15= 45. 5 Arrival rate| 50| 55| 59| Turbo| 0| 0| 45. 5(348+0. 7*15*25. 7)60=$466. 30| Jet| 0| 0| 45. 5(1585+0. 7*150*25. 7)60=$3248. 62| Regional Jet| 0| 0| 45. 5(632+0. 7*50*25. 7)60=$1161. 49| c. We think 20-30 minutes would be a reasonable definition of delay because there shouldn’t be delay costs associated with delays under 30 minutes because it’s not a lot of time. d. PPP is a good solution if it can reduce the arrival rate by even a small amount, say 5 planes. By reducing it from 59 to 55, per plane delay times will decrease dramatically, as will delay costs. 2. a. Revenue per plane Turbo| Jet| Regional Jet| 15*0. 7*240=2520| 150*0. 7*400=42000| 50*0. 7*160=5600| % of fee/ revenue Landing Fee| 200| 250| 300| Turbo| 2002520=7. 9%| 2502520=9. 9%| 3002520=11. 9%| Jet| 20042000=0. 48%| 25042000=0. 6%| 30042000=0. 71%| Regional Jet| 2005600=3. 6%| 2505600=4. 5%| 3005600=5. 4%| We think having a fee of at least 3% of revenue would be significant. For all landing fees, turboprobs and regional jets would feel a significant impact, conventional jets would not. Turboprobs would be the most affected. b. Per plane delay times ?=40: 3. 6 minutes/ plane ?=45: 4. 57 minutes/ plane ?=55: 12. 52 minutes/ plane i. Delay cost Arrival rate| 40| 45| 55| Turbo| 3. 6(348+0. 7*15*25. 7)60=$37. 07| 4. 57(348+0. 7*15*25. 7)60=$46. 85| 12. 5(348+0. 7*15*25. 7)60=$128. 32| Jet| 3. 6(1585+0. 7*150*25. 7)60=$257. 01| 4. 57(348+0. 7*15*25. 7)60=$326. 36| 12,5(1585+0. 7*150*25. 7)60=$893. 95| Regional Jet| 3. 6(632+0. 7*50*25. 7)60=$91. 89| 4. 57(348+0. 7*15*25. 7)60=$116. 69| 12. 5(632+0. 7*50*25. 7)60=$319. 62| Total cost Arrival rate| 40| 45| 55| Landing fee| 300| 250| 200| Turbo| 37. 07+300=337. 07| 46. 85+250=296. 85| 128. 32+200=328. 32| Jet| 257. 01+300=557. 01| 326. 36+250=576. 36| 893. 95+200=1093. 95| Regional Jet| 91. 89+300=391. 89| 116. 69+250=366. 69| 319. 62+200=519. 62| All planes prefer the lowest total cost so turboprobs prefer a $250 landing fee, Jets prefer a $300 landing fee and regional jets prefer a $250 landing fee. ii. PPPs effect on delays definitely depend on the particular mix of planes because certain types of planes are more impacted than others. 40% turbo, 18% regional, 42% conventional No fee (? 50)| $200 fee| $250 fee| $300 fee| 0. 4*67+0. 18*167+0. 42*467=253| 0. 4*328+0. 18*519+0. 42*1094=684| 0. 4*297+0. 18*367+0. 42*576=427| 0. 4*337+0. 18*392+0. 42*557=439| A $200 landing fee would have the most impact if your arrival rate was more than 55 because it would generate the most money and would reduce the planes to 55. If the arrival rate is less than 55 you would chose a landing fee of $300 because it generates more money and reduces the arrival rate to 40. iii. 5% turbo, 30% regional, 65% conventional No fee (? =50)| $200 fee| $250 fee| $300 fee| 0. 05*67+0. 3*167+0. 5*467=357| 0. 05*328+0. 3*519+0. 65*1094=883| 0. 05*297+0. 3*367+0. 65*576=499| 0. 05*337+0. 3*392+0. 65*557=497| c. With this combination a $200 landing fee would also have the most impact because it would generate the most money if the arrival rate was over 55. If the arrival rate is under 55, a $250 fee would be most effective. 3. a. The fundamental condition is, the value of lambda (arrival rate) must be smaller than mui (capacity rate) is violated in the 18th hour at the Logan airport. The airplane traffic at this time exceeds the 120 average airplane operations per hour. Normally, if a system has a higher value than value, the system will be overloaded and the waiting time can go to infinite levels. Though this case there is an exception, as is evident in Exhibit 8. After the 18th hour the airport’s arrivals are under operational capacity so the planes can be delayed to these later hours, making the system still able to function. This roll over effect helps relieve some of the over capacity at the 18th hour. b. For hour 17 there is a 12. 52 minute delay time. The costs are $128. 92 for the turbojet, $319. 57 for the regional jet and $853. 82 for the conventional jet. You cannot calculate the delay time/ delay cost for the 18th hour because the average arrival rate is greater than the total expected runway capacity. Under moderate weather conditions capacity drops down to 78-88 operations per hour. Under severe weather conditions the capacity drops to 40-60 operations per hour. In these weather conditions for both the 17th hour and 18th hour the arrival rate exceeds the runway capacity, and we cannot calculate the waiting time. For severe weather, even if you get the planes out at a later hour it would still take much longer than if there was moderate weather. Most planes will land in hour 19 because it’s not as busy. 4. Our overall recommendation to FAA for the city of Boston would not be to pick one option over the other. The two different options: allowing Massport to build a new runway versus insisting that Massport institute peak-period pricing can exist together. Each option has its own pros and cons. In terms of peak-period pricing, there are both advantages and disadvantages. The community is in favour of peak-period pricing which is an advantage so as to have their support. On the other hand, peak-period pricing also has disadvantages. Firstly, it does not help with the weather-related problems (which is a main issue – delays jump from approximately 5% to 12%. ) In order to help with the weather-related problems, a new runway would have to be built. Secondly, peak-period pricing has a negative effect on small planes. Regional carriers (such as Cape Air and New England Air) and Boston satellite communities were against the idea. They believed that there would be lots of job losses due to the higher prices at peak times. Furthermore, it would cause suffering for the residents. Massport even exempted 16 New England communities from some of the fees; however, this cancelled out the good effects that peak-period pricing could potentially bring to Logan airport. In terms of building a new runway, there are also both advantages and disadvantages. A large advantage is that it deals with weather-related problems. While at the same time, if a new runway is built and the demand does increase (as projected – in 2010 or 2015 to be 37. 5 million) then peak-period pricing may have to be put into effect anyways. Furthermore, the community does not want Massport to build a new runway and therefore they would have to deal with the complaints and conflict with them. Massport says that the new runway is to help with bad weather conditions; however, community activists think otherwise and believe that it is a “back-door means of increasing good weather capacity” (pg. 4). Cost/hour/plane Turbo: 25. 7*0. 7*15+345=614. 9 Regional: 25. 7*0. 7*50+632=1531. 5 Conventional: 25. 7*0. 7*150+1585=4283. 5 In a quantitative manner, if the typical airplane mix is 40% turboprop, 18% regional jet, and 42% conventional jet then the delay cost/ plane/ hour is: 0. *614. 9+0. 18*1531. 5+0. 42*4283. 5= $2320. 70 If the new runway cost $100 million to build then the break even reduction cost is: 100000000/2320. 70= 43090. 45 plane hours. They think the new runway will reduce delay by 90,000 plane hours per year so if the break even time is approximately 43,000 plane hours than it will be less than 1 year. The annual advantage to this will be: 2320. 70*90,000= $208,863,000 Which is obviously a very high number. So if an additional runway is built, the demand will increase and PPP might be introduced anyways, so we choose both.
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