Logan Airport w5p6e

OPERATIONS MANAGEMENT MGCR 472 CASE STUDY ASSIGNMENT Due on 25/26th March 2015 in class

INSTRUCTIONS: 1.

Make sure to write down the name, student # and section # for each student in the group on the cover page of the case study report.

2.

This assignment counts for 7% of your final grade.

3.

Late submissions and submissions by e-mail will not be accepted.

4.

You have to work in this assignment in groups. The number of students that can be in a group is 4. Group can be from different sections taught by other OM professors. Each group should submit only one case study report. Reports can be submitted to any instructor.

5.

Good luck!

CASE STUDY REPORT In the Delays at Logan Airport case, there are different proposals for reducing congestion. One of the methods proposed to tackle the impact of delays was peak-period pricing, PPP. The other one was to build a new runway. In this case study, your objective is to evaluate these alternatives using waiting line models and to provide a recommendation to FAA to solve the delay problem at Logan Airport. Make sure you demonstrate that you have thought through your recommendations and the effects on other related activities. Also demonstrate that you understand the concepts and tools from the class that apply. Prepare an action-oriented advisory report, which presents concisely your analysis and recommendations for solution of the primary management problems. In order to assist you in your analysis, we prepared the discussion questions. DO NOT SIMPLY ANSWER THE DISCUSSION QUESTIONS. The main body of the case study report should not exceed 5-pages typewritten, one-andhalf-spaced, using default margins and 12-point type. In addition to the main body, you can attach an appendix that includes the details of the calculation, figures, tables, etc. The appendix itself should not exceed 2 pages. Your report should start with an executive summary (maximum 0.5 pages), which summarizes your recommendations and findings. The main body of the report should present a detailed discussion based on the provided questions and your analysis of the quantitative questions. Clearly state your assumptions. Be selective. Do not restate case facts. Summary tables in the text are encouraged for quantitative information. The details of the calculation can be put in the appendix, but any result that is important for answering questions or providing managerial insights should be referenced in the text. You may use figures to visually represent information contained in the text. Make sure tables and figures are referenced in the text. The following general guidelines are for your use in structuring your report. It is fine if you choose to structure it in another way. However, the page limit rules must be followed. General Guidelines An ideal case study report should be composed of four sections: (a) executive summary, (b) problem analysis, (c) detailed recommendations, and (d) limitations. Executive Summary State the major issues. If you do not intend to address all of the major problems in your recommendations, then indicate which one(s) you do intend to address. Use caution in your selection. Do not choose a minor problem with an obvious solution. Next, summarize your

recommendations. Indicate the results you expect. This section of the report should take from one to two paragraphs. Problem Analysis Provide any analysis necessary to your statement of the problems. Indicate the significance or importance of the problems through discussion of their magnitude, urgency, difficulty, and/or possible consequences of a delay in addressing them. Discuss causal relationships whenever possible. You may include a discussion of secondary problems, as well. Indicate why you think these are secondary. Recommendations Give the details of your recommendations. Take a stand for action. Do not merely suggest "more study" or "call in a consultant." Direct your recommendations to eliminating the underlying causes, not merely minimizing or eliminating the symptoms. Indicate precisely how these will help to alleviate the problem. Provide ing analysis. Include the most significant and relevant facts, assumptions and principles. Include computational where appropriate. You may want to discuss major alternatives that you rejected with a brief explanation of your reasons for rejecting them. Discuss the results you expect in greater detail, give , and indicate when you anticipate the realization of the benefits. Be realistic. Identify major costs necessary for implementation. (This should be the primary section.) Limitations Discuss limitations of your analysis or recommendations. These might include assumptions you made but do not feel comfortable with, or impediments to success that may prove more difficult than you expect. Discuss potential disadvantages of your recommendations.

DISCUSSION QUESTIONS FOR “THE DELAYS AT LOGAN AIRPORT” In order to your recommendation, you are supposed to develop a detailed analysis (both quantitative and qualitative) in the case study. In order to assist you in your analysis, we have prepared the following discussion questions1. The below questions are of two types. Those with a calculator figure ( ) indicate the involvement of a quantitative analysis (although they might also involve some qualitative discussion). The other questions are to initiate a broader discussion of the case study based on the managerial insights that can be developed from quantitative questions, case discussion among the group and use of strategic operations management and related concepts. You can also make use of your knowledge from related courses (marketing, strategy, finance, IS, ing, etc.). QUESTION 1 In the case, good weather operational capacity (i.e., both arrivals and departures) was around 120 planes per hour. Assuming that the number of arrivals approximately equals the number of departures, we obtain an average arrival capacity of 60 planes per hour. Although there are three runways in operation during good weather, only two of them are used for arrivals, which imply that each arrival runway has an hourly capacity of 30 planes per hour. During the peak period, arrival rates generally range from 44.5 planes per hour to a little over 60 planes per hour. The FAA has reported an estimate for delay costs to the airlines. According to this report, for a 15 seat turboprop airplane it costs the airlines around $352 per plane per hour due to operating expenses and extra ground crew time, while for a representative 150-seat plane these delay cost totals to $1,590 per plane per hour. You can assume that the corresponding cost for regional jets is $672 per plane per hour (regional jets have 50 seats on average). However this report does not consider the costs to airline engers created by delays (such as missed meetings, events, or inconvenience). Airlines may suffer more due to these delays in of foregone revenue, as dissatisfied customers switch to alternative means of transportation or forego travel altogether. The Air Transport Association (a major airline industry group), has however, used a $30.9 per hour estimate as the value of a enger’s time in its estimates of

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Note: In order to answer the quantitative questions you will need to and utilize the Excel spreadsheet DelayCalculator.xls, which is available through course website.

annual delay costs. According to FAA definition a flight is delayed only if it arrives (or departs) more than fifteen minutes past schedule. a) ( ) Assume good weather conditions, and a 65% enger load factor. What are the per plane delay times (assuming the arrival rate to be 50, 55 and 59 planes per hour)? What is the total cost (operational and enger costs) associated with arrival rates of 50 planes per hour, for all three types of planes mentioned? What are your results if the arrival rate is i) 55 planes per hour? ii) 59 planes per hour? b) ( ) Now resolve the above question using the FAA’s definition of delay? Do you think this definition of delay is more reasonable? c) If you think the above definition of delay is not reasonable, suggest an alternative. d) Based on your calculations in part a) and part b), do you believe PPP is a potential solution (by reducing the arrival rates during periods where demand is much higher) to reduce the costs of over scheduling? QUESTION 2 Once you read the Delay at Logan Airport case it is clear that peak periods exist for a reason. That is, they are not random fluctuations but rather a result of enger’s desires for landings and takeoffs at certain times of the day. Therefore airlines will shift flights to different periods only if the costs of incurring peak charges outweigh the costs (in of lost revenue and customer dissatisfaction) of shifting flights to off-peak periods. Continue to assume that planes fly with 35% of enger seats empty (that is, 65% load factor) and also assume that per enger revenue for different aircraft sizes are as follows; $230 for a turboprop airplane with 15 seats; $154 for a regional jet with 50 seats; $402 for a jet with 150 seats. a) ( ) Which airplane types would feel a significant economic impact by peak-period landing fee of $150? What about $200 fee? What about $250 fee? b) ( ) Assume that $150 landing fee is sufficient to reduce the peak period demand to 55 planes per hour, similarly with $200 fee the peak period demand is 45 planes per hour and with a $250 fee the demand is 40 planes per hour. i) What level of landing fee is preferred by conventional jets and by turboprop airplanes?

ii) Based on your answer to 2a) would you agree that PPPs effect on delays depend on the particular mix of airplane types using Logan during a peak hour? Do you believe PPP would have a significant effect if the typical airplane mix were 40% turboprop, 18% regional jet, and 42% conventional jet, as it approximately stands at Logan? iii) What would your answer be if we had a 10% turboprop, 30% regional jet, and 60% conventional jet mix, as one future scenario for 2015? c) To what extend might savings in delay costs that result from demand management offset peak period fees? QUESTION 3 The case clearly states that adverse weather conditions are the primary cause of delay. When winds from the northwest become moderately strong, Logan’s capacity drops from three runways (where one runway handles both arrivals and departures, one runway only departures and one runway only arrivals) to two (where two runways handle both arrivals and departures). Arrival capacity in the former case averages around 60 planes per hour and in the latter case, 45 planes an hour. When weather conditions are particularly severe, only one runway for both arrivals and departures is in operation, and total arrival capacity drops to 30 operations per hour. a)

During adverse weather conditions which of the fundamental assumptions of queuing theory discussed in class is violated? Discuss how, in reality, does the system function in spite of this violation?

Assume Logan’s weekday peaking pattern resembles the year 2000 data shown in Exhibit 8 of the Delays at Logan Airport case, with arrival rates composing half of the operations per hour shown. b)

( ) For good weather capacity- what are the expected delay times and delay costs for different types of planes landing at hour 17 and hour 18? What are delay times and costs during moderate and severe weather conditions? (Note: Some of these costs and times cannot be theoretically calculated due to the reason indicated in part a, and you might have to use your judgement)

QUESTION 4 What is your overall recommendation to FAA for the city of Boston?  Allow Massport to build a new runway?  Insist that Massport institute peak-period pricing?  Do both?  Do neither? Provide detailed justification (both qualitative and quantitative) for your recommendation.