![]() ![]() Although the risks related to airport user pricing and fees, for instance, can be crucial in the economic viability of a project, the volatility of airport activity levels is often among the leading factors with significant potential for creating option values. Other additional considerations, such as airport user pricing and fees, the structure of airline use and lease agreements, cost per enplanement (CPE) rates, and competition from other airports, can also be highly relevant in the eventual implementation of capital improvement projects ( 10– 12). The study singles out enplanement volatility as a key valuation variable for its far-reaching implications to several aspects of airport capital improvement decisions. airport operators may face (hereafter referenced “jumps”) in their enplanement volumes. Thus, contributing to the growing literature ( 6– 9) that recognizes the value of flexibility in engineering and airport development projects, this paper offers an explicit specification of the demand risks U.S. For these airports, results imply higher exposures to excess capacity risks because of the increased persistence of losses, despite the higher year-on-year volatility of small airports. ![]() The analysis shows that medium airports may be uniquely positioned to benefit the most from flexible design approaches. ![]() Moreover, the paper provides a comparison of enplanement growth rates by airport size for the largest 140 U.S. The results show that flexibility options add economic value by reducing downside exposures and by providing the ability to increase capacity if enplanements stay on a rising trajectory. A Monte Carlo simulation example also demonstrates the application of the proposed valuation model. The second, flexibility in engineering design, permits operators to influence their demand composition and to reconfigure airport facilities if their business environment changes unfavorably. The first type of option-flexibility in investment timing decisions-creates value by conditioning capacity expansion decisions on trends in airport activity levels. ![]() As such, the paper proposes a model that can be used to value two types of flexibility options common in airport expansion projects. Even though the valuation of flexibility options may depend on several factors, the volatility of future airport activity levels, which largely defines the business risk for airport operators, makes up the focus of the present paper. All subjects Allied Health Cardiology & Cardiovascular Medicine Dentistry Emergency Medicine & Critical Care Endocrinology & Metabolism Environmental Science General Medicine Geriatrics Infectious Diseases Medico-legal Neurology Nursing Nutrition Obstetrics & Gynecology Oncology Orthopaedics & Sports Medicine Otolaryngology Palliative Medicine & Chronic Care Pediatrics Pharmacology & Toxicology Psychiatry & Psychology Public Health Pulmonary & Respiratory Medicine Radiology Research Methods & Evaluation Rheumatology Surgery Tropical Medicine Veterinary Medicine Cell Biology Clinical Biochemistry Environmental Science Life Sciences Neuroscience Pharmacology & Toxicology Biomedical Engineering Engineering & Computing Environmental Engineering Materials Science Anthropology & Archaeology Communication & Media Studies Criminology & Criminal Justice Cultural Studies Economics & Development Education Environmental Studies Ethnic Studies Family Studies Gender Studies Geography Gerontology & Aging Group Studies History Information Science Interpersonal Violence Language & Linguistics Law Management & Organization Studies Marketing & Hospitality Music Peace Studies & Conflict Resolution Philosophy Politics & International Relations Psychoanalysis Psychology & Counseling Public Administration Regional Studies Religion Research Methods & Evaluation Science & Society Studies Social Work & Social Policy Sociology Special Education Urban Studies & Planning BROWSE JOURNALSĪirport capital improvement programs involve considerable flexibility in investment timing and engineering design. ![]()
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