Please Answer Question 2. a to d. Thank you in advance.

Q2(b) is a review question for process analysis without variability. * For the waiting line analysis in Logan, always follow the following steps: - Who/what forms a queue? (Who/what waits?) - Who/what are the servers? - What are my 5 parameters (a, p, sigma_a, sigma_p, m)? - Apply VUT! * Use the VUT calculator to save some time in the last step above

102-011 Delays at Logan Airport 120 Exhibit 8 Comparison of August Weekday Peaking Patterns1995 vs. 2000 (Capacity operations per hour) Operations 130 1995 2000 120 110 100 90 80 70 60 50 40 30 20 10 Hana 0 0 1 2 3 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Hour Source: FAA/Massport. Exhibit 9 Scheduled August Weekday Passenger Operations by Period1995 vs. 2000 Operations 2000 Percentage 1995 2000 Period 1995 Change Midnight-4:00 a.m. 4:00 a.m.-8:00 a.m. 8:00 a.m.-12:00 p.m. 12:00p.m.-4:00p.m. 4:00 p.m.-8:00 p.m. 8:00 p.m.-Midnight Total 3 106 356 352 404 145 1,366 15 134 345 349 396 183 1,422 12 28 (11) (3) (8) 38 .2% 7.8 26.1 25.8 29.6 10.6 100.0% 1.1% 9.4 24.3 24.5 27.8 12.9 100.0% 56 Source: FAA/Massport 12 Delays at Logan Airport Question 1 The Massachusetts Port Authority (Massport) contended that "peak-period pricing would not represent an effective demand management tool, since Logan's operations did not generally come near to capacity". (See page 5 and Exhibit 8 in the case.) To assess this argument, please consider the following scenarios: (a) In Exhibit 8, the highest demand occurs in the hour of 18:00, which exceeds the capacity. Please tell Massport how this may affect delays. Does VUT equation apply to this scenario? (b) During the hour of 17:00, there are 111 operations scheduled. What is the average delay per flight during this hour? Please make the following assumptions. Boston's weather in August is typically good. Each runway has equal capacity. (Recall, capacity = 1 / average service time.) The landing/take-off requests for the runways arrive at the control office according to a Poisson process. Landing/taking-off process times have standard deviation 1 minute. The system is in steady state during this hour. (c) How will your answer in (b) change if Logan schedules 4 more flights during this hour? What if 8 more flights? (d) To what extent do you agree or disagree with Massport? Question 2 Logan investigates the operational delay costs for airlines. On average, one-hour delay costs airlines $330 for a turboprop plane, $600 for a regional jet, and $1,400 for conventional jet. Passengers also suffer from delays (such as missed meetings, events, or inconvenience). While it is not easy to quantify how passengers value their time, according to a major airline industry group survey, $22.5 per hour per passenger can be used as an acceptable estimation for passengers' delay cost. On a typical weekday of December 2000, the numbers of scheduled operations are: Hour 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 5 5 5 35 35 35 35 35 35 35 35 35 35 75 75 75 75 35 35 5 5 Operations 5 5 5 On December 23, the northwest winds were so severe that only one runway could be used, resulting in significant delays (a) On average, how many flights are waiting to use the runway during the hour of 5:00 on December 23? How many are waiting during the hour of 12:00 on December 23? Please make the following assumptions. The single runway has the same capacity as in good weather, but the landing/take-off times are more variable, and have an exponential distribution. The landing/take-off requests for the runway arrive according to a Poisson process with rate specified in the above table. (b) Using deterministic inventory buildup analysis (i.e., ignoring variability for this question), what would you estimate the total delay costs of both airlines and passengers on December 23? (Hint: recall the waiting cost analysis for National Cranberry truck drivers.) Assume the load factor is 70%. See the definition of load factor in the case. Seating capacities of different aircrafts are shown in Exhibit 13. Assume no flights are cancelled. Please feel free to make any other assumption as you need. Your estimate does not have to be highly precise, but you must provide good reasoning. (c) As advocated by Massport, a new runway would be located along the southwestern edge of the airport (see Exhibit 11). The new runway offers an additional capacity of 40 operations per hour. What would the delay costs have been on December 23 if the new runway had been available? (Please use the same arrival and service assumptions as in (a), and use waiting time analysis if possible.) (d) Using the results in (b) and (c), please decide if the saving in the delay costs in the long run offsets the construction costs of the new runway. (You may make assumptions as needed. For your information, Boston typically has about 10 days of severe weather each year.) Exhibit 11 The New Runway 14/32 at Logan Airport Question 3 Peak-Period Pricing alters the airlines' marginal costs (and marginal profits) during peak periods. In practice, when the marginal change in cost is negligible to an airline, its flight schedule will not be greatly influenced. But when the surcharge significantly alters the costs/profits of a flight during peak periods, the airline might consider shifting flights away from those time slots. Before proposing the surcharge fee, Logan Airport investigates different airlines' cost structures. An operating expense breakdown for three representative airlines is listed in Exhibit 12. In addition, per passenger revenue for different aircraft sizes is listed in Exhibit 13. 1 Source: FAA (a) Assume a 70% passenger load factor. For which airplane types (conventional jet, regional jet, and turboprop) would a peak-period operation fee of $200 have a significant impact? (Hint: Estimate revenue per flight using data in Exhibit 13, and then estimate cost or profit per flight using data in Exhibit 12.) (b) Based on your calculations for part (a), do you believe Peak-Period Pricing would bring significant relief to Logan's current and future congestion? Exhibit 12 Operating Profits of Three Representative Airlines (Fiscal Year 2008)2 (all figures in million dollars) Conventional Jet Regional Jet Turboprop $ 23,696 $ 1,479 $ 613.2 Operating Revenue Salaries and Benefits 23% 252 21% 164.8 29% 6,044 8,154 Aircraft Fuel 32% 328 27% 49.5 9% Aircraft Maintenance 978 4% 169 14% 48.8 9% 5% 60 5% 53.4 10% 4% 133 11% 13.4 2% 2% 134 11% 120.9 22% Landing fees 1,180 Depreciation & Amortization 1,022 Aircraft Rentals 487 Others 7,885 Operating Expenses $ 25,750 Operating Profit (Loss) $ (2,054) 31% 149 12% 108.9 19% 100% 100% $ 559.7 100% $ 1,225 $ 254 $ 53.5 Exhibit 13 Estimated Revenue per Passenger for Different Aircraft Classes Aircraft Class Market Carrier Seating Capacity Estimated Revenue per Passenger Hyannis, MA U.S. Airways Express 19 $220 Turboprop (e.g., Beechcraft 1900) Regional Jet (e.g., Embraer RJ145) Conventional Jet (e.g., Boeing 737-800) Washington, D.C. American Eagle 50 $130 Boston American Airlines 150 $360 2 Source: Adapted from 2009 SEC 10-K Filings of American Airlines, Republic Airways, and Pinnacle Airlines. Source: FAA/Massport; 102-011 Delays at Logan Airport 120 Exhibit 8 Comparison of August Weekday Peaking Patterns1995 vs. 2000 (Capacity operations per hour) Operations 130 1995 2000 120 110 100 90 80 70 60 50 40 30 20 10 Hana 0 0 1 2 3 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Hour Source: FAA/Massport. Exhibit 9 Scheduled August Weekday Passenger Operations by Period1995 vs. 2000 Operations 2000 Percentage 1995 2000 Period 1995 Change Midnight-4:00 a.m. 4:00 a.m.-8:00 a.m. 8:00 a.m.-12:00 p.m. 12:00p.m.-4:00p.m. 4:00 p.m.-8:00 p.m. 8:00 p.m.-Midnight Total 3 106 356 352 404 145 1,366 15 134 345 349 396 183 1,422 12 28 (11) (3) (8) 38 .2% 7.8 26.1 25.8 29.6 10.6 100.0% 1.1% 9.4 24.3 24.5 27.8 12.9 100.0% 56 Source: FAA/Massport 12 Delays at Logan Airport Question 1 The Massachusetts Port Authority (Massport) contended that "peak-period pricing would not represent an effective demand management tool, since Logan's operations did not generally come near to capacity". (See page 5 and Exhibit 8 in the case.) To assess this argument, please consider the following scenarios: (a) In Exhibit 8, the highest demand occurs in the hour of 18:00, which exceeds the capacity. Please tell Massport how this may affect delays. Does VUT equation apply to this scenario? (b) During the hour of 17:00, there are 111 operations scheduled. What is the average delay per flight during this hour? Please make the following assumptions. Boston's weather in August is typically good. Each runway has equal capacity. (Recall, capacity = 1 / average service time.) The landing/take-off requests for the runways arrive at the control office according to a Poisson process. Landing/taking-off process times have standard deviation 1 minute. The system is in steady state during this hour. (c) How will your answer in (b) change if Logan schedules 4 more flights during this hour? What if 8 more flights? (d) To what extent do you agree or disagree with Massport? Question 2 Logan investigates the operational delay costs for airlines. On average, one-hour delay costs airlines $330 for a turboprop plane, $600 for a regional jet, and $1,400 for conventional jet. Passengers also suffer from delays (such as missed meetings, events, or inconvenience). While it is not easy to quantify how passengers value their time, according to a major airline industry group survey, $22.5 per hour per passenger can be used as an acceptable estimation for passengers' delay cost. On a typical weekday of December 2000, the numbers of scheduled operations are: Hour 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 5 5 5 35 35 35 35 35 35 35 35 35 35 75 75 75 75 35 35 5 5 Operations 5 5 5 On December 23, the northwest winds were so severe that only one runway could be used, resulting in significant delays (a) On average, how many flights are waiting to use the runway during the hour of 5:00 on December 23? How many are waiting during the hour of 12:00 on December 23? Please make the following assumptions. The single runway has the same capacity as in good weather, but the landing/take-off times are more variable, and have an exponential distribution. The landing/take-off requests for the runway arrive according to a Poisson process with rate specified in the above table. (b) Using deterministic inventory buildup analysis (i.e., ignoring variability for this question), what would you estimate the total delay costs of both airlines and passengers on December 23? (Hint: recall the waiting cost analysis for National Cranberry truck drivers.) Assume the load factor is 70%. See the definition of load factor in the case. Seating capacities of different aircrafts are shown in Exhibit 13. Assume no flights are cancelled. Please feel free to make any other assumption as you need. Your estimate does not have to be highly precise, but you must provide good reasoning. (c) As advocated by Massport, a new runway would be located along the southwestern edge of the airport (see Exhibit 11). The new runway offers an additional capacity of 40 operations per hour. What would the delay costs have been on December 23 if the new runway had been available? (Please use the same arrival and service assumptions as in (a), and use waiting time analysis if possible.) (d) Using the results in (b) and (c), please decide if the saving in the delay costs in the long run offsets the construction costs of the new runway. (You may make assumptions as needed. For your information, Boston typically has about 10 days of severe weather each year.) Exhibit 11 The New Runway 14/32 at Logan Airport Question 3 Peak-Period Pricing alters the airlines' marginal costs (and marginal profits) during peak periods. In practice, when the marginal change in cost is negligible to an airline, its flight schedule will not be greatly influenced. But when the surcharge significantly alters the costs/profits of a flight during peak periods, the airline might consider shifting flights away from those time slots. Before proposing the surcharge fee, Logan Airport investigates different airlines' cost structures. An operating expense breakdown for three representative airlines is listed in Exhibit 12. In addition, per passenger revenue for different aircraft sizes is listed in Exhibit 13. 1 Source: FAA (a) Assume a 70% passenger load factor. For which airplane types (conventional jet, regional jet, and turboprop) would a peak-period operation fee of $200 have a significant impact? (Hint: Estimate revenue per flight using data in Exhibit 13, and then estimate cost or profit per flight using data in Exhibit 12.) (b) Based on your calculations for part (a), do you believe Peak-Period Pricing would bring significant relief to Logan's current and future congestion? Exhibit 12 Operating Profits of Three Representative Airlines (Fiscal Year 2008)2 (all figures in million dollars) Conventional Jet Regional Jet Turboprop $ 23,696 $ 1,479 $ 613.2 Operating Revenue Salaries and Benefits 23% 252 21% 164.8 29% 6,044 8,154 Aircraft Fuel 32% 328 27% 49.5 9% Aircraft Maintenance 978 4% 169 14% 48.8 9% 5% 60 5% 53.4 10% 4% 133 11% 13.4 2% 2% 134 11% 120.9 22% Landing fees 1,180 Depreciation & Amortization 1,022 Aircraft Rentals 487 Others 7,885 Operating Expenses $ 25,750 Operating Profit (Loss) $ (2,054) 31% 149 12% 108.9 19% 100% 100% $ 559.7 100% $ 1,225 $ 254 $ 53.5 Exhibit 13 Estimated Revenue per Passenger for Different Aircraft Classes Aircraft Class Market Carrier Seating Capacity Estimated Revenue per Passenger Hyannis, MA U.S. Airways Express 19 $220 Turboprop (e.g., Beechcraft 1900) Regional Jet (e.g., Embraer RJ145) Conventional Jet (e.g., Boeing 737-800) Washington, D.C. American Eagle 50 $130 Boston American Airlines 150 $360 2 Source: Adapted from 2009 SEC 10-K Filings of American Airlines, Republic Airways, and Pinnacle Airlines. Source: FAA/Massport;