Passenger Value of Time, Benefit-Cost Analysis, and Airport Capital Investment Decisions

Airports invest billions of dollars in their airport infrastructure and provision of services yet they have relatively little specific knowledge of their customer's valuation of them. Similarly the Federal Aviation Administration (FAA) and Transportation Safety Administration (TSA) have limited knowledge and only rough approximations of the value that passengers, shippers, meeters and greeters, and the companies that pay for air travel place on efficient and cost-effective air transportation services. Airlines and other direct sellers of their travel services take a more direct pulse of the public's value for these services and have been unbundling some of these related services with their a la carte pricing schemes, but do not share their proprietary market valuations. The FAA uses a decade-old basis for valuing passenger time and DOT has not revised this value for use in the required cost-benefit analysis for capacity projects funded via the Airport Improvement Program (AIP).<span>   The Office of Management and Budget places major emphasis on the development of these cost-benefit studies and FAA has incorporated this </span>requirement in the evaluation of their discretionary grants for capacity projects. Airports have relied on past planning practices or more subjective surveys of passenger satisfaction which do not yield information directly useful for rigorous investment evaluations. The estimation of capacity benefits relies principally on the service (value of time due to better and more reliable schedule and service patterns) and efficiency gains (reduced airline or operator costs), plus the informational value of understanding when the travel sequence will be accomplished, and in what steps. Airline operational and service practices have undergone major changes over the past two decades, but little research has focused on how these changes affect air passengers and their decisions. For example, passenger decisions and behavior may be influenced by current airline industry practices (e.g., hub and spoke versus direct service, reservation and booking practices, product differentiation strategies, and air alliance attributes; changes in the overall technology culture (e.g., internet and cell phone); or effects of security measures post 9/11. The purpose of this research is to provide a more current and comprehensive understanding of recent developments that would inform airports of their customers' valuations in order to make investment cases to airport managements, FAA and TSA, and the airlines or other airport users. An empirical or survey- based methodology for documenting these improved valuations will provide a basis for appropriate capital improvement plans and commitments that can pass scrutiny by FAA, GAO, and airlines and other users. Research is needed to account for how passengers value benefits associated with increased capacity and greater schedule certainty, frequency, timing, and other relevant characteristics that affect their decisions on traveling, including who, when, and what mode. This research may develop a database from a national survey of air passengers (similar to the ATA's Gallup surveys or major airport air passenger surveys) to estimate the passengers' values of time with the ability to differentiate between trip purpose, trip length, and other relevant passenger-trip and service characteristics (e.g., timing of flights, connection times, flight option redundancy, and flight frequency). <span> </span></font></div>

Language

  • English

Project

  • Status: Proposed
  • Funding: $350000.00
  • Contract Numbers:

    Project 3-19

  • Sponsor Organizations:

    Federal Aviation Administration

    800 Independence Avenue, SW
    Washington, DC  United States  20591

    Airport Cooperative Research Program

    Transportation Research Board
    500 Fifth Street, NW
    Washington, DC    20001
  • Project Managers:

    Goldstein, Lawrence

  • Start Date: 20100621
  • Expected Completion Date: 0
  • Actual Completion Date: 0
  • Source Data: RiP Project 24422

Subject/Index Terms

Filing Info

  • Accession Number: 01461807
  • Record Type: Research project
  • Source Agency: Transportation Research Board
  • Contract Numbers: Project 3-19
  • Files: TRB, RiP, USDOT
  • Created Date: Jan 3 2013 1:52PM