American Economic Review

Another Look at Airport Congestion Pricing

INTRODUCTION

Airline travel in the United States has rebounded sufficiently from the September 11 terrorist attacks that travelers and policymakers have begun to worry once again about gridlocked skies. Economists themselves have been unwavering in their concern about congestion, varying only in the way they would use the price mechanism to allocate existing runway capacity efficiently and thus begin to solve the problem. For decades, beginning with Michael E. Levine (1969) and Alan Carlin and R. E. Park (1970), airline researchers have called for airports to replace their existing landing fees, based on an aircraft’s weight, with efficient landing and takeoff tolls based on an aircraft’s contribution to congestion. In recent years, however, some economists have begun raising questions about the extent to which such pricing would reduce delays. Jan K. Brueckner (2002) has pointed out that because an air carrier bears the cost of delay that it imposes on its other flights, it should be charged only for the delay it imposes on other carriers’ flights. For example, a carrier with a 50 percent share of operations at an airport should be charged for one-half of the delay costs it creates— the delay incurred by other carriers— while the carrier’s smaller competitors, which have many fewer operations, should be charged for all the delay they create. Christopher Mayer and Todd Sinai (2003) apply this idea to hub airports where dominant carriers cluster their operations to provide convenient connections for passengers (while nondominant carriers operate most of their flights at less-congested times). They conclude that optimal tolls at hub airports should be small because most of the delay at those airports is internalized.

Although these authors make theoretically valid points, they do not quantify the welfare Another Look at Airport Congestion Pricing By Steven A. Morrison and Clifford Winston gains from modifying congestion tolls to account for internalization and the pattern of airline operations at hubs. The size of the gains is important because commercial airlines and especially general aviation have succeeded thus far in blocking any change in airport pricing policy that would cause them to pay higher landing fees. Accordingly, many air transport operators would be more strongly opposed to efficient congestion pricing, as suggested by Brueckner, and Mayer and Sinai, because they would perceive it as blatantly inequitable: operators with a small share of flights at a congested airport would pay higher tolls than those with a large share, even if both operated during the same time period.

In this paper, we develop a model of the net benefits to air travelers from flights to and from US airports and calibrate it with data that account for a large share of the nation’s passenger air travel in 2005. Current delays, which reduce net benefits to travelers, are higher than optimal and would be ameliorated by airport congestion tolls. We estimate and compare the welfare gains from the optimal congestion tolls suggested by Brueckner, and Mayer and Sinai, and from congestion tolls more traditionally recommended by economists, to assess whether the incremental benefits from optimal tolls would justify the requisite effort to overcome the greater political opposition they would likely face. We find a small difference between the net benefits generated by the two congestion pricing policies because the bulk of airport delays are not internalized and because the efficiency loss from pricing internalized congestion is small. Congestion charges traditionally supported by economists would significantly reduce delays at congested US airports and have a greater likelihood than optimal tolls have of actually being implemented.