Department of Economics

Pricing the Major Hub Airports

Department of Economics
University of Delaware
Working Paper #2008-13

Pricing the Major Hub Airports

Joseph I. Daniel and Katherine Thomas Harback

ABSTRACT

Implementing congestion pricing at twenty-seven major US airports would reduce delays by thirteen passenger-years and one thousand aircraft-hours every day, saving three to five million dollars. Chicago and Atlanta would save about one thousand dollars per aircraft. Airport revenues would increase about eleven million dollars daily. A bottleneck model with stochastic queues estimates substantial welfare gains whether or not airlines internalize self-imposed delays. Erroneously imposing fees from the non-internalizing specification on internalizing airlines, however, would be a costly mistake. The model calculates equilibrium traffic rates, queuing delays, layover times, connection times, and congestion fee schedules by minute of the day.

Keywords: airport congestion pricing, stochastic queuing, bottleneck model.

JEL Codes: R4, H2, L5, L9

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