VIII. Appendix

The current landing fees at Metro are more sensitive to the weight of aircraft than the number of passengers on board. As a result, an aircraft with very few people on board has charges nearly as high as for a full aircraft. However, the difference in fees between a small aircraft and a large jet is very wide. If a fee system were developed which is more sensitive to number of passengers, the airport and airlines could benefit if demand could be increased as a result.

If cost per passenger is reduced, the airlines save money on each passenger. The savings may not be large enough to pass along to the passenger (or if they are, may not increase demand for airline seats if demand is relatively inelastic). However, the aggregate savings from all passengers may allow the airline to increase demand through new marketing initiatives, improved customer services or special market incentives involving Metro Airport.

As an example, in 1987, activity fees were $.46 per 1,000 pounds of landed weight. This resulted in an effective cost per passenger of $.915. [51] If, instead of an activity fee, the airport charged simply $.915 per passenger, the airport's revenue from airline landings would have been the same.

The following formula shows the effect of weight on cost/passenger:

(((A + (X * Y))/1000) * P)/X = Cost/passenger, where
X = Number of passengers per flight (X=1 through 500)
Y = Weight/passenger (including luggage) = 220 pounds
P = Activity fee/1000 pounds = $.46
A = Aircraft weight (empty) 727: A=100,000 pounds, 757: A=127,050 pounds

Airline cost per passenger on a Boeing 727, for example, reaches $.915 when it has 57 people on board. An airline will not be profitable if it has only 57 people on a typical flight. In fact, airline flights average around 65% of seats being filled (about 115 people on each 727). To earn the same amount of revenue as 57 passengers at $.915 each, the airport would need to charge only $.50 for 115 passengers.

Such a system would also encourage airlines to use larger aircraft. Currently, with 57 people on board a Boeing 757, the cost per passenger equals $1.13 (because a 757 weighs more). Thus, if a per passenger charge of $.915 were applied to all passengers on a 757, the airline would save at least $12.25 per flight ($1.13 less .915 times 57). Therefore, assuming a fixed number of people per flight, an airline's cost per flight would be lower using larger aircraft than it is at present.

Therefore, if demand could be increased, airlines would receive further reductions in cost by using larger aircraft to meet this demand.

If privately-owned, Metro and the airlines could develop a fee system which reflects the profitability of the airlines' aircraft mix. Many possible formulas could be considered, all designed to maximize airport revenue and minimize airline cost per passenger.