Economic Effects of
Congestion and Delay
Joe Sinnott
March 2002
© 2002 The MITRE Corporation. All rights reserved.
Trend in Actual Block Times
116
114
Average Monthly Actual Block Time
12 Month Moving Average
Block Time (mins)
112
110
108
106
Trends in Average Actual Block Times
104
(corrected for changes in stage length and relative frequency)
102
100
Jan
84
2
Jan
85
Jan
86
Jan
87
Jan
88
Jan
89
Jan
90
Jan
91
Jan
92
Jan
93
Jan
94
Jan
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Jan
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Jan
97
Jan
98
Jan
99
Jan
00
Jan
01
© 2002 The MITRE Corporation. All rights reserved.
Some Thoughts on Scheduled Block Times
• Some suggest that airlines can and do adjust scheduled
block times simply and easily to suit their needs
– Yes, airlines do
– But these adjustments are significant decisions affecting
•
•
•
•
•
Operating costs
Capital costs
Revenue
Market share
Markets served
– They are not made lightly
3
© 2002 The MITRE Corporation. All rights reserved.
Trend in Actual Block Time
Implications of Small Changes in Actual Block Times
120
100
6.9 mins
Block Time (mins)
Block times seem relatively unaffected, but ...
80
60
40
20
If air carriers operated in December 2000 at the same
block times as in March 1984, their direct operating
costs savings alone would be about
• $400 million per month
• $4.5 billion per year (while 1999 profit was $8.0 B)
Average Monthly Actual Block Time
12 Month Moving Average
0
Jan84 Jan85 Jan86 Jan87 Jan88 Jan 89 Jan90 Jan 91 Jan 92Jan 93 Jan 94Jan 95Jan 96Jan 97Jan 98Jan 99Jan 00Jan
84
85
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00
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Calendar Year
4
© 2002 The MITRE Corporation. All rights reserved.
Key ATM System Relationships:
ATM System, Airlines … and Passengers
ATM System
Capacity and Efficiency
ATM
ATMSystem
System
Airlines
Airlines
ATM System Use
(how much, where, when)
5
Cost and Quality of
Service Offered
Passengers
Passengers
Demand for Service and
Value Purchased
© 2002 The MITRE Corporation. All rights reserved.
Passenger Perspectives:
What Adds Value and Creates Demand
Fewer
Fewer Trip
Trip Segments
Segments
Same Carrier with Interconnection
Fly
Fly at
at Preferred
Preferred Times
Times
Direct
Direct Flights
Flights
Reliable
Reliable Schedules
Schedules
Shorter
Shorter Flights
Flights
Frequent Flyer Benefits
Frequent
Frequent Flights
Flights
Shorter
Shorter Connections
Connections
Reduced
Reduced Ticket
Ticket Prices
Prices
Safety
Performance Factor
6
Change in Demand
Percent RPMs (B)
Change
On-Time Performance
1% Increase
0.4%
1.7
Flight Duration
1% Decrease
0.8%
3.2
Average Number of
Trip Segments
1% Decrease
1.6%
6.9
Flight Frequency
1% Increase
0.2%
0.75
Ticket Price
1% Decrease
0.5%
2.0
© 2002 The MITRE Corporation. All rights reserved.
Airline Decision Processes
Related to ATM System Performance
Decision Making Time Frames and Processes
Time Frame
Key Decision Process Products
Strategic Planning Time Frame
• Capital Planning Decisions
2-5 years
Markets, Network, Fleets, Facilities
Schedule Development Time Frame
• Schedule Planning, Resource Planning (manpower, training),
1-2 years Markets, Networks, Schedule, Staffing
Operations Analysis
Requirements, Planned Aircraft Type
• Schedule Planning, Capacity Management, Operations Analysis
2-3 months
Aircraft and Crew Assignments
• Schedule Adjustment, Resource Adjustment, Operations Analysis
30 days
Operations Planning Time Frame
• Schedule Integrity, Company Delay & Cancellations Programs
18 hours
Departure Times, Flight Plans,
• Flight Planning Optimization, Load Planning, Gate Usage
4 hours
Cancellations, Aircraft and Crew
• Flight Planning Commitment, Load Planning, Gate Usage
90 minutes
Assignment Modifications
Flight Operations Time Frame
• Systems Control (dispatch)
30 minutes
Departure Times, Flight Plans,
• Flight Operations (aircraft management)
Departure
Reroutes, Cancellations, Diversions,
• Flight Operations, Systems Control
En Route
Flight Operations
• Flight and Airport Operations (passenger, ramp)
Arrival
Operations Analysis Time Frame
• Operations Analysis (cost, block performance)
Post Flight
Information and Conclusions
• Financial Analysis (profitability, cost)
Ongoing
(feedback to other decision processes)
Source: Adapted from Airline Metric Concepts for Evaluating Air Traffic Service Performance,
CNS/ATM Focus Team, February 1, 1999.
7
© 2002 The MITRE Corporation. All rights reserved.
Illustrative Analysis:
Impact on Fleet Utilization/Productivity
Flight time reduction of 1 percent has a significant impact
Impact on Air Carrier* Fleet Requirements
Fleet Requirement Reduction
19 aircraft (0.5%)
Value of Reduction (one time)
NPV of Lease Cost
Replacement Cost
$450 M
$940 M
Impact on Air Carrier* Revenues
RPMs
Yield
Revenue Increase
Constant Yield
Constant Load Factor
0.4%
0.0%
$235 M (0.35%)
0.5%
-0.1%
$275 M (0.45%)
* Top 10 air carriers in enplanements
8
© 2002 The MITRE Corporation. All rights reserved.
Implications of Hub Operations:
Local vs. Connecting Traffic at Hubs
100%
Percentage of Enplanements
90%
80%
70%
60%
50%
40%
30%
20%
10%
 Connections are key to hubs
 Connect times influenced by
– Layout of terminals/gates
– Airline staffing and infrastructure
– Predictable on-time performance
 Predictable performance affects both
– Connections already booked
• Re-accommodation costs
• Spilled revenue
– Connections that can be offered
• Fleet/network productivity
• Revenue
0%
Connecting Traffic
Local Traffic
9
© 2002 The MITRE Corporation. All rights reserved.
Intermediate-Term Effects
of ATM System Performance Changes
•
•
•
•
•
•
•
•
•
Direct
Direct
Operational Impact
Operational Impact
Actual block time
• Actual block time
On-time performance
•Connections
On-time performance
completed
• Connections completed
Arrival/departure capacity
• Arrival/departure capacity
Aircraft utilization
• Aircraft utilization
•
•
•
•
•
•
Schedule Impacts
Schedule Impacts
Scheduled block times
• Scheduled block times
Scheduled arr/dep times
•Bank
Scheduled
arr/dep times
structure
•Length
Bank structure
of flying day
• Length of flying day
Service frequency
•City-pairs
Service frequency
served
• City-pairs served
Operating Cost per Flight
Operating Cost per Flight
Fuel cost
•Direct
Fuel cost
maintenance cost
•Crew
Direct
maintenance
cost
labor
cost
•Pax
Crew
labor
cost
reaccomodation cost
• Pax reaccomodation cost
Yield Impact ($/RPM)
Yield Impact ($/RPM)
Total Cost Impact
Total Cost Impact
10
Demand Impact
Demand Impact
• Revenue passenger miles
• Revenue passenger miles
Total Revenue Impact
Total Revenue Impact
© 2002 The MITRE Corporation. All rights reserved.
What was the major operational issue?
Scenario courtesy of Jack Kies (FAA)
It was
this!
Not this!
Where Are We Going?
•
•
•
•
•
•
•
•
•
12
Traditional major hubbing carriers
Low cost point-to-point carriers
Regional carriers
Turboprop commuter carriers
Corporate or “high-end” GA
Fractional ownership
Air taxi service
Charter operations
Personal use or “low end” GA
© 2002 The MITRE Corporation. All rights reserved.
13
© 2002 The MITRE Corporation. All rights reserved.
What’s the Effect
on Airline Revenue and Profitability?
Revenue C
( onst 1999$ in Billions)
$100
$90
$80
$70
$60
$50
Operating and Net Profit by
Scheduled U.S. Airlines
$40
$30
$20
$10,000
$10
$0
$8,000
Revenue for Scheduled
Services by U.S. Airlines
Profit (Const 2000$ in Millions)
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00
$6,000
$4,000
$2,000
$0
71 72
73 74 75 76
77 78
79 80
81 82
83 84
85 86
87 88
89 90 91 92
93 94
95 96
97 98 99 00
-$2,000
Year
-$4,000
Operating Profit
Net Profit
-$6,000
15
© 2002 The MITRE Corporation. All rights reserved.
140
102
120
100
100
98
80
96
60
94
40
Block Time Index
Fuel Price Index
92
90
Jan
84
16
20
(1991=100)
104
Monthly Fuel Price Index for Major Carriers
(12 month moving average, 1991=100)
Actual Block Time Index for Domestic Routes
Does Fuel Price Affect Actual Block Time?
0
Jan
85
Jan
86
Jan
87
Jan
88
Jan
89
Jan
90
Jan
91
Jan
92
Jan
93
Jan
94
Jan
95
Jan
96
Jan
97
Jan
98
Jan
99
© 2002 The MITRE Corporation. All rights reserved.
Trend in Fleetwide Ideal Cruise Speeds
Do They Affect Actual Block Times?
0.81
Average Ideal Cruise Speed for Major Air Carriers
0.80
There has also probably been greater variation
in ideal cruise speeds across the fleet than in
the early 1980s as the fleet transitioned from a
faster to a slower one
Mach
0.79
0.78
Av Week
Janes
Eurocontrol
Average
0.77
0.76
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98
Year
17
© 2002 The MITRE Corporation. All rights reserved.
Overview of Airline Costs
Capital Assets (11%)
Direct Maintenance (9%)
Flight Equipment Maintenance
Flight Equipment
Depreciation, Aircraft
Rentals
Prepare to Fly (17%)
Traffic Servicing (e.g., gate
agents, baggage handlers)
Aircraft Servicing (e.g.,
cleaning, fueling, pre-flight)
18
Marketing & Scheduling (17%)
Reservations & Sales, Advertising
& Promotions
Other (8%)
Flying Operations (36%)
Flight Crew Salary and Benefits,
Fuel, Passenger Service
G&A, Ground Property &
Equipment Maint, Transport
Related Expenses
© 2002 The MITRE Corporation. All rights reserved.
DAL Schedule at ATL (1998)
80
Number of Aircraft at Gate (Estimated)
70
60
50
40
30
20
10
0
4:00
19
6:00
8:00
10:00
12:00
14:00
16:00
Time of Day
18:00
20:00
22:00
0:00
© 2002 The MITRE Corporation. All rights reserved.
Implications of Connections
Itineraries
Connecting
Cumulative
Itineraries
Connecting
Connecting Itineraries vs. Connection Times
6,000
5,900
5,800
~330
markets
5,700
5,600
5,500
10 Mins
5,400
5,300
5,200
15
20
25
30
35
40
45
50
Minimum
Passenger
Connect
Time
Passenger
Connect
Time
20
© 2002 The MITRE Corporation. All rights reserved.
Illustration:
How Airlines Set Scheduled Block Times
So,
how can
ATMTimes
system
Actual
Block
improvements
affect
(specific
city pair, aircraft type,
time of day)
scheduled block times?
Number of Flights
1. Set the on-time performance goal
~ 80% of flights within 15 minutes
of scheduled arrival time
reducing
Mean of Actual by
Block
Time
the mean
3. Set scheduled block time to 15
minutes shorter than 80th
percentile time ( 60th percentile)
Variance in Actual Block Time
or by reducing the variance
2. Find 80th percentile
time in the actual
block time distribution
Actual Elapsed Block Time
Scheduled Block Time =
f ( On-Time Performance Goal, MeanActual Block Time , VarianceActual Block Time , … )
21
© 2002 The MITRE Corporation. All rights reserved.
Implications of Irregular Operations
18
99% 95% 90%
80%
Daily Rank-Ordered Cost of
Delays, Cancellations and Diversions
16
 Delays, cancellations, diversions happen every day
 The cost to air carriers is substantial
 Irregular operations occur infrequently, but result in
significant costs
Millions of Dollars
14
$57M ($14M/day)
12
$235M ($12M/day)
10
$409M ($11M/day)
8
6
4
Cumulative Cost (Cost per Day)
2
0
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
Ranked Day (by Sum of Costs)
22
© 2002 The MITRE Corporation. All rights reserved.