The Economic Impacts of Air Traffic Congestion

Abstract

It is well known that the strong growth in air travel demand experienced over the last several years is expected to continue into the future. However, recent studies have shown that these projections will be difficult to accommodate without substantial increases in delay. Thus, there is a perceived disconnect between the unconstrained demand forecasts and the ability of the system to handle the growth with existing technologies and procedures. This paper describes a methodology to reconcile the disconnect. Our basic approach is to impose the cost of projected delay on the air carriers, drive up fares, and correspondingly reduce the growth rate of traffic demand. Thus we present a demand forecast that explicitly accounts for the impact of binding capacity constraints. We compare the constrained forecast with an unconstrained forecast to evaluate the impact of congestion in terms that are familiar to high-level decision makers.