Airport Simulation

The basic building block in airport simulation is the passenger (Pax) forecast. This is the basis for subsequent estimation of aircraft movements (ATM), investment in terminal buildings and airside installations, all traffic charges, tax free sales etc. In short it is the basic determinant of the airport’s economics.

The forecast model is usually based on a logarithmic relation between Pax, GDP and airfare price movement. ((Manual on Air Traffic Forecasting. ICAO, 2006)), ((Howard, George P. et al. Airport Economic Planning. Cambridge: MIT Press, 1974.))

There has been a large number of studies over time and across the world on Air Travel Demand Elasticities, a good survey is given in a Canadian study ((Gillen, David W.,William G. Morrison, Christopher Stewart . “Air Travel Demand Elasticities: Concepts, Issues and Measurement.” 24 Feb 2009 http://www.fin.gc.ca/consultresp/Airtravel/airtravStdy_-eng.asp)).

In a recent project for an European airport – aimed at establishing an EBITDA model capable of simulating risk in its economic operations – we embedded the Pax forecast models in the EBITDA model. Since the seasonal variations in traffic are very pronounced and since the cycles are reverse for domestic and international traffic a good forecast model should attempt to forecast the seasonal variations for the different groups of travellers.

In the following graph we have done just that, by adding seasonal factors to the forecast model based on the relation between Pax and change in GDP and air fare cost. We have however accepted the fact that neither is the model specification complete, nor is the seasonal factors fixed and constant. We therefore apply Monte Carlo simulation using estimation and forecast errors as the stochastic parts. In the figure the green lines indicate the 95% limit, the blue the mean value and the red the 5% limit. Thus with 90% probability will the number of monthly Pax fall within these limits.

From the graph we can clearly se the effects of estimation and forecast “errors” and the fact that it is international travel that increases most as GDP increases (summer effect).

As an increase in GDP at this point of time is not exactly imminent we supply the following graph, displaying effects of different scenarios in growth in GDP and air fare cost.

References