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Delays at Logan Airport Case Study


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Delays at Logan Airport Case Study

  1. 1. Delays at Logan Airport Master of Global Management Michael Calo Ilyas Cagar Operations Management and Research Anne-Claire De Briey Professor Ocampo y Vilas Margaux Lonbois Laura Valkiers William Vermeulen
  2. 2. The Current Situation at Logan Airport Our case analysis takes an in-depth look at the causes and plausible solutions for the delays experienced at Logan Airport in Boston, Massachusetts. The data used to analyze the delays fall before and until the year, 2000. The problems within Logan Airport’s efficiency are predominantly due to the high degree of delays during peak periods throughout each day. In 2000 more than one in four flights were delayed, a total of 27% of the flights. As forecasted, Logan Airport expects the passenger volume to rise in the upcoming years, making the search for a solution to the delays a pressing concern for the organization’s long-term efficiency and success One primary cause for delays are the adverse weather conditions that frequently visits the New England region. Boston’s harsh climate and severe winters make the airport very sensitive to weather fluctuations. In cases of adverse weather conditions, the amount of planes delayed dramatically increases from 5% to 12%. Normal operations entail the use of three runways, but with adverse weather conditions the amounts of runways in use can be limited to two or one dependent on the severity of the weather conditions. During average inclement weather, arrival and departure operations are usually limited to the use of two runways. The use of only two runways results in a drop in the amount of operations from a normal 118 – 126 to a much lower 78 – 88 operations per hour. In comparison to the average inclement weather event, severe weather conditions are often due to intense northwest winds that are frequently accompanied by high levels of snowfall during the winter months. During these conditions, operations are limited to one runway, creating massive delays for passengers. Operations drop to lower than 50% of normal operations at about 40 to 60 per hour. Another source of the delays, originate from Logan Airport’s complex interactive queuing system. The fleets that operate on the runways at Logan Airport consist of 3 main categories of aircrafts. The largest planes at this airport are the Conventional Jets, which have an on-board capacity of 150 passengers. The second aircraft that uses the runways at Logan Airport are the Regional Jets, with a maximum capacity of 50 seats. The last and smallest aircraft model to utilize Logan Airport is the Turboprop, which are planes that can hold up to 19 passengers. The use of three different sizes of aircrafts on the same runways at Logan Airport is a source of massive delays on flight turnaround time. This is primarily caused by the differing amounts of time and space needed for takeoff, dependent on the size of the aircraft. As previously stated, Logan Airport forecasts that there will be influential increases in passengers that will utilize the airport in upcoming years. To cope with and profit from this increase, a solution must be found that solves or at least minimizes the delays. One of these proposed
  3. 3. solutions is the construction of an additional runway that would alleviate the dependency on limited runways during inclement weather conditions. Due to several environmental and political reasons, numerous groups, with notable representation in the city, oppose the construction of the new runway and ultimately doubt if the new runway would be an effective solution to the delays. Another solution that has been proposed is the use of demand management through the installment of peak- period pricing. This strategy assists in determining which aircrafts can operate on each runway at given points in time and limits the delays that are influenced by the complex mix of different sized aircrafts utilizing the same runways. Following this brief introduction into the current situation at Logan Airport, we will analyze the effect of Peak Period Pricing on delay costs, the effect of PPP on different mixtures of aircraft types and on their revenues and finally, the arrival and service rates and the results from arrival rates exceeding service rates. From the data collected, conclusions will be made and we will provide recommendation pertaining to the use of Demand Management and/or the construction of an additional runway to curtail the delays caused by a growing amount of passengers forecasted to utilize Logan Airport in the upcoming years. As this case is a depiction of an authentic event, we will also use the data collected to reflect on the actual decisions and developments made by Logan Airport. We will include a small comparison with the real life decisions made and from this we will recommend our opinions on whether correct decisions were made and how our decisions may have differed given the 20/20 hindsight we have regarding Logan Airport’s approach to a growing volume of passengers. Peak Period Pricing’s Impact on Delay Times and Costs In the 2000s, Logan Airport in Boston has faced various problems regarding plane delays. Several methods have been proposed in order to reduce congestion and aircraft delays. One of the solutions could be to use a peak-period pricing method, which would charge the aircrafts a higher rate during period of high capacity utilization in order to reduce runway traffic at that time, and therefore, delays. During peak periods, the arrival rates range from 45 to a little over 60 planes per hour. We have analyzed the delay times and associated costs during peak period for three types of planes. (Turboprop, Regional jet and Conventional jet) For each aircraft type, we have analyzed delay costs at three levels of service at 50, 55 and 59 planes per hour to gauge the impact. We realized that the total delay time in the case of 50 planes per hour would be 6,55min. Then 12,52 min of delays would be registered for 55 planes per hour and more than 1 hour (60,50min) for an arrival rate of 59 planes per hour. Moreover, all these delays would lead to significant costs. The table below indicates the costs (in $) of both operational and passenger delay costs.
  4. 4. Turboprop Regional jet Conventional jet 50 planes/hour 75,25199999 167,9454545 467,2909091 55 planes/hour 143,9603478 321,2869565 893,9478261 59 planes/hour 695,6067227 1552,436975 4319,495798 Figure 1: Delay costs per aircraft per service rate The Federal Aviation Administration (FAA) estimated that a flight delayed would be only taken into consideration if it has a delay of more than fifteen minutes past schedule. Logan Airport could benefit from this definition in terms of costs. The operational costs would remain the same. Whether the delay is taken into consideration or not, the operational costs (fuel, pilot, workers…) would remain the same. However, it could be interesting for Logan airport to take into consideration the FAA’s definition of delay regarding the passenger costs. Indeed, these costs would not be paid for an arrival rate of 50 and 55 planes per hour because the delay estimated per plane is less than 15 minutes and are therefore not deemed as flight delay. Given our findings, we can see that reducing the arrival rates leads to cost reduction. In our analysis in the table above, data shows that a peak with 59 planes has way higher costs than for example 50 planes per hour. The delay costs associated with 50 Turboprop’s are almost 11 times less than the Turboprop of 59 planes per hour (this is also applicable for the other plane types). Peak Period Pricing and the Airplane Mix Our analysis of the operational inefficiencies at Logan Airport will now be examined by incorporating the impact of peak-period landing fees on the three different types of airplanes. It is stated that airlines are only willing to shift flights to off-peak periods if costs of incurring peak charges outweigh the costs of shifting flights to off-peak periods. This hesitancy is mostly due to the airlines’ fears of angering their customers, possibly resulting in a significant loss in revenue and returning customers. Peak-period landing fees have an immense impact on revenues and profits of specifically smaller aircrafts in comparison to the more conventional aircrafts due to the fees’ negative impact on the profitability of each flight. In response to these landing fees, some airlines will face a difficult decision to change their flights to off-peak periods, raise prices or even cancel operations. Given this
  5. 5. general information, we will now investigate how differently priced landing fees impact the profitability of each type of aircraft utilizing Logan Airport. We start our analysis by calculating the revenue per plane for each model given the seating capacity and revenue per person. Given our assumption of 70% load factor (seats occupied), we find total revenue per plane to be 70% of the plane’s total revenue. With the total revenue of each aircraft, we can then subtract each landing fee amount of $100, $150 or $200. In Table 2.1 you can see our calculations for each kind of plane and the decrease in revenue per plane for each landing fee amount. With this data, it is already apparent that the per-flight revenue of the Turboprop aircrafts will endure the most significant decrease in comparison to the other aircraft models. Plane Seating Revenue/person Total Revenue TR with 70% load minus $100 minus $150 minus $200 Turboprop 19 230 4.370 3.059 2.959 2.909 2.859 Regional jet 50 154 7.700 5.390 5.290 5.240 5.190 Conventional jet 150 402 60.300 42.210 42.110 42.060 42.010 Figure 2: Revenue per plane given a loading factor of 70% and the effect of PPP Before we can assess the economic impact of these landing fees will be, we must calculate the margin of operating profit. We do this calculation by taking the total operating profit ($) from each plane and dividing this with the total revenues ($) of each plane. This gives us the operating profit margin of the planes. As you can see in Table 2.2 the Turboprop aircraft has an operating margin of 2,74%, the Regional Jet has an 11% operating profit margin and the Conventional Jet has a margin of 12,22%. Given the drastic difference in operating margin between the Turboprop and Regional Jet, we can already suggest that the Turboprop will be most significantly affected the by demand management through peak-period landing fees. Figure 3: Calculation of the Operating Profit Margin Plane Operating Profit [$] Total Revenues [$] Operating Margin [%] Turboprop 4.000 146.000 2,74% Regional Jet 52.821 480.021 11,00% Conventional Jet 2.365.000 19.352.000 12,22%
  6. 6. With the operating profit margin known, we can now compare this value with the effect of the landing fees on the total revenue per plane. As you can see in Table 2.3, our calculations of the landing fees impact on total revenue represents the debilitating effect these fees will have on the profitability of the Turbojet. At all three levels of landing fees, the operating margin (2.74%) is less than the landing fees impact on revenues. Given this observation, Turboprop flights will never be able to turn a profit during peak periods. In the case of Regional Jets, the fees will have a reasonably significant effect on the flight profitability (depending on which fee is used), but profits are still there to be made. Additionally, we can see that every landing fee for the Conventional Jets barely affect their operating profit margin, representing their ability to withstand peak period pricing and continue normal flight operations within Logan Airport. Plane Decrease in Revenue (%) $100 fee $150 Fee $ 200 Fee Operating Margin (%) Turboprop 3,27% 4,90% 6,54% 2,74% Regional Jet 1,86% 2,78% 3,71% 11,00% Conventional Jet 0,24% 0,36% 0,47% 12,22% Figure 4: Comparison between the effects of landing fees on the revenue per plane with the Operating Profit Margin Given our previous analysis, we can conclude that peak-period pricing will have a significant effect on the mix of airplane classes utilizing Logan Airport during peak periods. For instance, an airplane model mix of 40% Turboprop, 18% Regional Jets and 42% Conventional Jets, will be highly impacted by the implementation of peak period pricing. This is due to the 40% of Turboprop models that will cancel operations due to their inability to maintain profitability during these peak periods. This 40% of Turboprop flights will be distributed between the Regional Jets and Conventional Jets during peak periods in hopes of minimizing delay costs caused by a mix of aircrafts attempting to utilize the same runways during the same periods. During peak period pricing, we can see that the operating profit margin for the Conventional Jets is minimally affected. Therefore, we predict that there will be a larger increase in Conventional Jet aircrafts at Logan Airport, which will be capable of withstanding the negative effects of peak period pricing until a higher fee is established. Given a decrease in Turboprops operating during peak hours, the magnitude of delays will also significantly decrease. If runways are limited to Regional and Conventional Jets, the runways can be used more effectively and efficiently for arrivals and departures. Given the fact that smaller aircraft hold fewer passengers, fly more slowly and are required to maintain greater distances to
  7. 7. avoid wind vortexes from larger aircraft, attempting to mix these models into peak periods will only serve to increase delay times and ultimately costs. With these observations, we can assume that a mix of airplanes containing 20% Turboprops, 30% Regional jets and 50% Conventional jets, will have far less significant implications on the magnitude of delays at Logan Airport. Due to the fact that Turboprop aircrafts only account for 20% of flights during peak periods in this example, the use of peak period pricing and landing fees will significantly impact a smaller percentage of flights than in the previous scenario. Seeing as the majority of flights during peak periods are larger aircrafts in this scenario, we can assume that the magnitude of delays will be less significant influenced with peak period pricing. By only having half the amount of Turboprops flying during peak periods, delay times and costs automatically diminish, making the use of peak period pricing less significant within this mix of aircrafts than the former mix. As a result of demand management and the use of peak period pricing, smaller Turboprop aircrafts will be forced to cancel operations during peak periods due to an inability to create profits. Given this change, Turboprop aircrafts will begin to operate during off-peak periods, spreading out flight options and minimizing congestion during peak periods. Due to the amount of delays caused by the inefficiencies and slow nature of the departure/arrival process for Turbojets, eliminating their use during peak periods will dramatically increase savings in delay costs. For the larger, Regional and Conventional aircrafts, the absence of Turboprop aircrafts during peak periods will minimize the delay costs and improve aircraft turnaround time on the runway and at the gate. By limiting the idle time and wasted minutes waiting for Turbojets to clear the way, the fees that are associated with operating during these peak periods will ultimately be offset. The Impact of Weather Conditions on the Arrival and Service Rates The capacity of the airport in good weather conditions averages 60 planes an hour. During moderate weather conditions, 45 planes an hour. During severe weather conditions, the airport only averages 30 planes an hour. The service rate of Logan Airport is directly correlated to the weather conditions. Therefore, if arrival rate exceeds the weather-variable capacity, waiting lines will occur. The Logan Airport case shows that 90% of all flights were non-transition flights. This means that flights arrive more uniformly over each hour rather than cluster in hourly lumps. Due to this, the airport only has a small timeframe to recover, before the planes come back from the other airport to Logan. This does not give the airport any time to reduce its pending waiting line, since arrival rates are not expected to drop during the normal flight schedule. As long as the inclement weather persists, the waiting line increases. Moreover, the longer the waiting line gets, the larger the effect
  8. 8. on the variability of arrival times. Keeping aircrafts in holding patterns longer than planned requires them to burn more fuel than initially anticipated, which increases costs incurred by the airline. By calculating the delays during different weather conditions, some severe problems became clear. We calculated the delay time and cost for three different situations. The first situation is the good weather condition. In this condition the three runways are open which means that the airport functions at it’s highest capacity. During good weather conditions, delay times are minimal at most. The only delay we observe is at 18.00h and this is a delay of only one minute. Although this minute delay can be solved quickly, we noted that it does result in a cost of 39,20 dollars, which shows that even the slightest delays result in high costs. The second situation is the moderate weather condition. This means that only two runways are used and that the capacity decreases. At moderate weather conditions a lot of problems occur. The delays already start at 8h with a delay of 12 minutes and it quickly builds up until a delay of 47 minutes at 17h. It is important to highlight the problem of queuing. When planes arrive too late, they create a waiting line, as explained above. Due to the fact that flights continue to arrive, the line keeps expanding. Given the degree of delays, it takes several hours after the peak periods to get resolve the problems and eliminate the waiting line. The cost of such a waiting line is massive. For example, at 17h a waiting line of 47 minutes has an average cost of $914. The last situation is the severe weather condition. During this condition, only one runway is in operation and capacity is at its lowest. Delays begin to take effect at 6h with a waiting line of 4 minutes. The waiting period grows quickly to almost a 7-hour waiting line at 17h and almost 9 hours at 20h. The problem of queuing occurs here as well. The costs are dramatically high from 7.762 dollar at 17h and even 10.271 dollars at 20h. In addition, it must be noted that flights, which are delayed for more than 2 hours, will never depart, creating a huge impact on the overall operational and passenger costs associated with the flight. A possible solution to decrease the delay times is by building a new runway, which can be used during severe weather conditions. With the construction of this runway, minimal major delay times would be registered. Adding at least one additional runway would partially alleviate the delay concerns and minimize delay costs. Figures 5 and 6 below show what happens when we add an additional runway. We will not do this when weather conditions are good as this gave minor delays. We assume three different capacities of this additional runway. This is +10, +20 or +30 additional arrivals per hour. The graph shows that during the moderate weather conditions, an additional 10 arrivals almost eliminates delay problems. In the second graph we can see that an additional 30 arrivals an hour during severe weather conditions is needed to cope with the delay problems.
  9. 9. Recommendations on Peak Period Pricing and/or the Addition of a New Runway Given our findings in the analysis above we have reached a conclusion on what we believe would be the best approach at Logan Airport in relation to minimizing the magnitude of delays and the operational and passenger costs associated. First, we would recommend to the FFA in Boston that we believe in the use of an additional runway and endorse Massport’s construction of a runway at Logan Airport despite pushback from several groups. Given the current magnitude of delays caused by the limitations of our runways, we believe an additional runway would alleviate several delay issues. For example, an additional runway, 0 10 20 30 40 50 60 0h 2h 4h 6h 8h 10h 12h 14h 16h 18h 20h 22h Waiting line Figure 5: Moderate weather condiQons waiQng line/hour - capacity MWC waiting line MWC waiting line (+1 runway +10) MWC waiting line (+1 runway +20) MWC waiting line (+1 runway +30) 0 50 100 150 200 250 300 0h 2h 4h 6h 8h 10h 12h 14h 16h 18h 20h 22h Waiting line Figure 6: Severe weather condiQons waiQng line/hour - capacity SWC waiting line SWC waiting line (+1 runway +10) SWC waiting line (+1 runway +20) SWC waiting line (+1 runway +30)
  10. 10. positioned in a way that is resistant to severe weather conditions will improve Logan Airport’s ability to maintain a satisfactory turnaround time for all of its aircrafts during peak periods or times of severe and inclement weather. Due to the fact that winds approaching from the Northwest force Logan to reduce operations down to one runway, creating the ability to better cope with these weather events will greatly reduce delay costs. Additionally, we believe Massport’s construction of another runway can assist in reducing delay times related to the use of a fleet of aircrafts that vary in size and turnaround time. If we were to assign a specific runway to just Turboprop aircrafts, we would efficiently limit the amount of time the larger aircrafts must wait for these Turboprops to clear the runway. By designating smaller aircraft to their own specific runway, we can resolve the magnitude of delays caused by a complex mix of aircrafts utilizing the same runways during the same time periods. Due to the growth in the amount of passengers predicted to use Logan Airport in the upcoming years, we also see Peak Period Pricing as a useful and necessary tool to cope with the high magnitude of delays being experienced at Logan. We believe that by instating a peak period pricing strategy, we will encourage passengers to fly during a more widespread range of flight times. If peak periods are associated with high landing fees, we will discourage smaller aircrafts from operating during these periods and will either cancel operations or move them to off-peak periods, both of which will improve delay times. We believe that the long term effects of peak period pricing will be positive, as the growth in passengers at Logan is predicted to continuously expand. With a strategy that encourages Turboprop operations during off-peak periods, Logan Airport will be able to better utilize the runways during peak periods by predominantly using the conventional and regional jets that require less turnaround time and space for takeoff, while also transporting a much higher number of passengers per flight. So what really happened? Given our findings and recommendations to add both peak period pricing and an additional runway to cope with the magnitude of delays at Logan Airport, we will now divulge the actual decisions made by the officials in relation to these topics. Once being proposed in 1973 and enduring 40 years of delays due to disagreements over the runway’s feasibility, finally on November 23, 2006 runway 14/32 became operational. This runway is now used for both departures and arrivals. To address delays caused by inclement weather conditions, Logan Airport has designated the use of this runway to conditions that have a minimum wind threshold of19km/h from the northwest. In 2009 they also finished with the building of a new taxiway parallel to runways 4R/22L and 4L/22R. They started constructing this taxiway in 2007 with approval of the FAA. Logan Airport in Boston now
  11. 11. operates six runways that are aligned in three different directions in order to sufficiently cope with winds and inclement weather approaching from all directions. Given this new runway configuration, Logan Airport can accommodate 120 operations per hour when the FAA can use a three-runway system. In the event of poor weather conditions, the operations per hour can be reduced to 60 operations. Given these decisions made by the FAA at Logan Airport regarding the expansion of their runway configuration, we must also note that the officials didn’t see peak period pricing as the primary solution to be used in resolving their delay dilemma. Throughout the 2000’s, the use of peak period pricing to cope with delays during peak periods was frequently considered. Due to Logan Airport’s positioning in Boston as a far northern coastal city, they placed a high level of importance on the relationships with Turbojet passengers that originated from regions that were users of smaller aircrafts. Logan Airport officials were wary of the deteriorating effect peak period pricing may have on the long term relationships between themselves and their Turbojet customers. Figure 7: New Runway Configuration as of 2006
  12. 12. Work(s) Cited 1. Andersson, Kari, Francis Carr, Eric Feron, and William D. Hall. "Analysis, Modeling, and Control of Ground Operations at Hub Airports." Air Transportation Systems Engineering (2001): 305-41. 16 June 2000. Web. 1 Dec. 2015. 2. Idris, Husni R., Bertrand Delcaire, William D. Hall, John-Paul Clarke, John R. Hansman, Eric Feron, and Amedeo R. Odoni. "Observations of Departure Processes at Logan Airport to Support the Development of Departure Planning Tools." (1998): n. 4 Dec. 1998. Web. 1 Dec. 2015. 3. Narayanan, V.G. "Delays at Logan Airport." Review. Harvard Business Review 13 Dec. 2001: Print.