Welfare Effects of Capacity Constraints at Schiphol Airport - a New Model to Forecast Air Demand



Welfare Effects of Capacity Constraints at Schiphol Airport - a New Model to Forecast Air Demand

Authors

Marco Kouwenhoven, Eric Kroes, RAND Europe, NL; J Veldhuis, SEO Economic Research, NL

Description

This paper describes a comprehensive air demand forecasting system for Schiphol airport that calculates the impact of policies on welfare. We focus on the way the model handles existing physical and environmental limitations to demand growth.

Abstract

Dutch government policy allows the continuing growth of air traffic within strict safety and environmental limits. In order to assess the impacts of new policies on the development of Schiphol airport, the Ministry of Transport, Public Works and Water Management required a new model to forecast demand for air travel under a wide range of scenarios.

Historically air traffic forecasts have been made by extrapolating observed patterns of growth. However, in recent years new dynamics and constraints have entered the system. The dramatically increased competition between airports, airlines and alliances on the one hand, and serious airport capacity issues on the other, has made extrapolations of historic demand no longer adequate. Airport demand forecasts now need to focus heavily on the many competitive elements and on the physical and environmental constraints in addition to standard growth scenarios.

In our paper we describe a comprehensive and pragmatic air demand model system that was developed for the Ministry of Transport. The ?Airport Network and Catchment area Competition Model? (ACCM), provides forecasts of future air passenger volumes, air freight volumes and aircraft movements. Of particular interest is the way it takes account of choices of air passengers among competing departure and hub airports in North-West Europe (i.e. Netherlands, Belgium, Luxemburg, Western part of Germany, Northern part of France). The model uses a nested logit structure to represent choices of air passengers among alternative departure airports, transport modes to the airport, airlines (major alliances versus lowcost), air routes (direct versus transfer), and main modes of transport (for intra-Europe trips: car, train, airplane).

Passenger forecasts for future years are obtained by taking an observed base year origin-destination matrix, and applying market growth factors and market share shift factors. These last factors express the increase (or decline) in relative attractiveness of the airports and airlines due to anticipated changes in air networks and landside-accessibility.

In most scenarios a substantial growth of air traffic towards 2020 is predicted. The resulting numbers of aircraft movements often exceed the current runway capacity. Furthermore, the amount of noise generated by the aircrafts exceeds existing legal boundaries. This led to a number of challenges for the modellers:
- How to model the physical and environmental limits to the growth of Schiphol airport (and of other airports in the area)?
- How to simulate the impact of a wide range of policy measures?
- How to calculate the welfare effects?

In order to model the constraints the model first converts the passenger and freight demand into aircraft movements. Then a shadow price mechanism is applied to adapt both the demand and the movements until they fit the capacity constraints.

The aircraft movements submodel distinguishes three dimensions: size of the aircraft (nine classes), technological status of the aircraft (five classes) and moment of departure/arrival (four periods per day), resulting in 180 possible combinations. We have used observed distributions and foreseeable trends to predict the future distributions over these 180 combinations. An estimate of the total number of movements (per year and per period of the day) and the total environmental burden (i.e. the amount of noise generated by the departing and arriving aircrafts) can therefore be calculated.

If these totals exceed either the physical capacity or the legal environmental noise limit, an iterative procedure is started. Each iteration increases the airfares with a scarcity charge, so that demand is reduced and airlines that fly with larger aircrafts and/or from airports with less severe capacity constraints are favoured. In parallel, incentives for the airlines stimulate the use of larger and more modern (i.e. less noisy) aircrafts. This iterative procedure is repeated until the demand fits the capacity.

The resulting tool is capable of modelling a wide range of scenarios, both economic scenarios and airport and airline policies. This includes the introduction of air charges per passenger, per aircraft movement, or per unit of noise generated. In addition, welfare effects, i.e. the changes in consumer surplus relative to a base scenario, are calculated. This enables broad policy assessments in which the optimisation of welfare is taken into account. The tool is currently being used to assess a wide range of policies by the Minister. It is expected that the Dutch government will decide on possible new policies for development of Schiphol airport in April 2006.

Though this model was primarily developed for Schiphol airport, the concept of the model is generic and can be applied to other airports and other countries as well.

Publisher

Association for European Transport