RESEARCH Business Economy

AIR FARES
Hiking ticket prices to ease congestion feasible at some airports

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

9/1/2001

CHAMPAIGN, Ill. — Proposals to unclog the nation's airports by imposing "congestion pricing" on flights during peak hours may work – so long as they are implemented with care and flexibility, according to a University of Illinois economist.

Jan K. Brueckner, an expert on airline economics, has analyzed the possible effects of congestion pricing at U.S. airports. Under this plan, the landing fees paid by airlines, which currently depend only on aircraft weight, would vary with the level of peak-hour congestion at an airport.

Higher landing fees would lead to higher operating costs and ticket prices during peak hours, which would encourage airlines and passengers to shift flights to off-peak hours, thereby reducing flight delays and cancellations.

Or so the thinking goes. Despite the endorsement of congestion pricing by the influential Transportation Research Board, the system will work properly only if it accounts for the level of competition among airlines at a particular airport, Brueckner concluded.

According to the UI economist, congestion pricing is unnecessary at airports that are dominated by a single airline, because that carrier already "internalizes" the costs of congestion in choosing its traffic patterns. In other words, the dominant airline takes into account the lost passenger time and higher operating costs caused by congestion.

"Congestion tolls are unneeded at an airport dominated by a monopoly carrier and, indeed, imposition of the tolls could be counterproductive, leading to under-use of the peak period," Brueckner wrote in a just-released paper, "Internationalization of Airport Congestion."

At airports where a number of airlines share traffic, however, the carriers don’t fully internalize the costs of congestion. A peak-hour fee is then needed to shift passengers and flights to off-peak hours. Congestion pricing holds promise at such overcrowded multi-carrier airports as Boston Logan and New York La Guardia.

On the other hand, Atlanta, one of the nation's busiest airports, is so dominated by Delta that congestion pricing is unneeded, Brueckner wrote, because the levels of congestion are fully internalized. The same holds true at Detroit and Dallas-Fort Worth, which are dominated by Northwest and American, respectively.

At Chicago O'Hare, where United and American each operate about 40 percent of the flights, a fee that equals about half the external cost of a peak flight would be appropriate to reduce delays, Brueckner concluded.
Improvements in air traffic control, especially in forecasting bad weather and keeping the system more fluid during localized storms, have resulted in fewer flight delays so far this year.