Flexible Design of Airport System Using Real Options Analysis - MIT

12/14/2007
1.231 Planning and Design of Airport System Dai Ohama
Costs for the operation and maintenance are categorized into the ones above. From the
past disclosed information by the government, operating and maintenance cost in all airports
in Japan in 2005 was ¥147.4 billion. [10] I assume that these costs depend on the scale of
air traffic. The whole air traffic in Japan in 2005 was 1,431,000 and 300,000 in Tokyo Int’l
Airport, which is about 20% of the whole traffic, so the operating and maintenance costs for
Tokyo Int’l Airport in each year is assumed ¥29.48 billion, which is also assumed equally for
the current three runways. So the operating cost and maintenance costs for the one runway
is one-third of ¥29.48, which is equal to ¥9.84 billion. In addition, in the current
construction plan indicates that the specific maintenance cost for the runway D is ¥100
billion for the next 30 years. Thus the maintenance cost of ¥3.33 billion should also be
included in the operating and maintenance cost for the new runway. Therefore, the
operating and maintenance costs for the runway D are set as ¥13.17 billion.
4.1.3 Capacity of Airport
According to the Ministry of Land, Infrastructure and Transport in Japan, the improved
maximum capacity of the airport by the runway extension in Tokyo Int’l Airport is 40
aircrafts per hour, and it estimated this capacity can accommodate 87 million passengers per
year. [2] So the capacity in terms of the number of passenger in this airport is 87 million.
4.1.4 Discount Rate
Discount rate is the opportunity cost of capital, and it can be calculated by the capital
asset pricing model (CAPM). CAPM requires the risk-free rate of interest, the sensitivity
of specific project or company to stock price, and the expected rate of return of the market.
However, the government used the discount rate of 4% when it assessed not only this project
but also any airport related project. [11] Thus, the discount rate of 4% is also used in this
case study.
4.2 Uncertainty in System
There are usually a lot of uncertainties in large-scale engineering systems which include
technical change, economic change, regulatory change, industrial change, political change,
and so on. [4] This case also includes a lot of uncertainties such as demand of the number
Term Project: Flexible Design of Airport System Page 14 of 22