Pricing vs. slot policies when airport profits matter

Abstract

This paper analyzes pricing and slot-allocation mechanisms to manage airport capacity when profits are important to an airport, owing to budget constraints or profit maximization. We find that congestion pricing and slot trading/slot auctioning do not lead to the same results. Total traffic is higher under slot auctions than under congestion pricing. Furthermore, if airport profits matter just marginally, then slot auctions will outperform congestion pricing in terms of achieving a higher objective-function value. On the other hand, if airport profits matter sufficiently highly, which mechanism is better is then very much dependent on parameter values. In particular, congestion pricing may be strongly preferred over slot auctions for certain parameter values. The impact of congestion-remedy mechanisms on individual carriers is also examined.