Journals Proceedings

Abstract

The total revenue of the airport authority is divided into aeronautical and non-aeronautical ones. Landing fees are the main sources of aeronautical revenue. Therefore, it is essential to formulate a suitable charging mechanism for landing fees. Traditionally, pricing methods for airport landing fees are based on the maximum takeoff weight or maximum landing weight, which has little theoretical rationale. Airports landing fees charged in Taiwan are also based on the aircraft weight. There are various pricing methods in academic research, such as average-cost pricing, marginal-cost pricing and Ramsey pricing. Ramsey pricing is suitable for uncongested airports or any airports in its off-peak periods,while marginal-cost pricing is appropriate for congested periods. Due to the increase in traffic volume and its hub operation, Taiwan Taoyuan International Airport (TPE) suffers from congestion in peak periods. Thus, TPE is thinking to differentiate its landing fees in different periods. This research aims at developing a charging mechanism that applies the Ramsey pricing model. The pricing mechanism is then validated at TPE and Taipei Songshan Airport (TSA). Although price elasticity is essential to Ramsey pricing, it is difficult to directly calculate this elasticity of airline demand in landing. The ordered probit model is used to find the price elasticity from different passenger groups, and then the estimation results are put in the Ramsey pricing model in order to substitute the price elasticity of airline’s landings. In empirical research, the results indicate that in most of the case, as the aircraft is larger and the distance is longer, the landing fees are higher. Additionally, calculation results reveal that in every case the current charge at TPE and TSA is less than the land fees based on the Ramsey pricing mechanism.