Flexible Design of Airport System Using Real Options Analysis - MIT

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12/14/2007 1.231 Planning and Design of Airport System Dai Ohama current design that government actually planned and that would construct the whole runway island, including a parallel taxiway and a south edge. This design does not include flexibility. Case B refers to the design that constructs the whole runway island in the same way as Case A. But this design recognizes future uncertainty which is demand of passengers, while Case A considers deterministic projection of the demand of passengers. Case C refers to the design that constructs only runway area without parallel taxiway and south edge of the runway at the initial construction, and expands the parallel taxiway and south edge after 10 years operation if the demand exceeds the capacity of the airport for two consecutive years. Table 4-1 shows the summary of case of analysis. Table 4-1 Cases of Analysis Case Initial Future Investment Uncertainty Flexibility Case A R/W, PT/W & SE N/A N/A Case B R/W, PT/W & SE Recognizing N/A Case C R/W Recognizing Future Expansion PT/W & SE Source: Applied R de Neufville,et al [7] 4.1.1 Capital Investment Capital investment here means the initial construction fee and the expansion fee of the parallel taxiway and the south edge. In the “New Runway Extension Project”, the construction fee is ¥570 billion, [2] so the initial investment in Case A and Case B is ¥570 billion. In Case C, I assume that the initial investment can be set by prorating the area where it needs. In the area of the taxiway (827,625m 2 ), the structure of the runway island is landfill (¥64,700/m 2 ), [2] so the construction fee is ¥53.55 billion. In the area of the south edge (45,120m 2 ), the structure of the runway island is piled pier (¥786,500/m 2 ), [2] so the construction fee is ¥35.48 billion. Therefore, considering the bank revetment area (assumed 5% extra) and the joint area for the both areas so that the expansion could be possible, the initial construction fee of Case C is ¥505 billion. ([570-(53.55+35.48)]*1.05) Term Project: Flexible Design of Airport System Page 12 of 22
12/14/2007 1.231 Planning and Design of Airport System Dai Ohama The expansion cost of Case C is only the area of taxiway and the south edge, which is the same as the difference between the initial cost of Case A, B and that of Case C. Considering the extra fee of the joint area (assumed 10% extra), the expansion fee is ¥97.9 billion. ((53.55+35.48)*1.05) The initial investment is assumed to be paid equally every year through the construction for 4 years, while the expansion investment is supposed to be paid equally every year for 2 years. Runway (R/W) Parallel Taxiway South Edge (Landfill) (Piled Pier) 827,625m 2 45,120m 2 Figure 4-1 Expansion Area of Runway D 4.1.2 Revenues and Costs There are several types of revenues and costs in the airport system such as from aeronautical charges, non-aeronautical charges, and off-airport or non-operate charges. [8] In the current operation of Tokyo Int’l Airport, these charges applies, but in terms of a runway, aeronautical charges, which is the charges for services or facilities directly related to the processing of aircraft and their passengers, is the main charge. [8] The aeronautical charges have several categories such as landing charge, terminal-area air navigation charge, passenger service charge in terminals, security charge, charges for airport noise, and so on. [8] In terms of a runway, landing charge is the main source of the revenue. Thus, I assume that the revenue is only from the landing charge. The current landing charge in Tokyo Int’l Airport as of 2006 is ¥490,000 for B747-400D, ¥350,000 for B777-200, and ¥230,000 for B777-724, and so on. [9] I set the average landing fee of this airport as ¥332,000 / aircraft by assuming the probabilities for each type of aircraft of 23% for B747-400D, 35% for B777-200D, and 41% for B767-300. I also assume that this landing charge is fixed for the next 20 years. For the simplicity, I also set the revenue for each year is landing charge multiplied by the minimum of the number of passenger or the capacity. Term Project: Flexible Design of Airport System Page 13 of 22
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