Secondary trading of airport slots as a combinatorial exchange Paola Pellegrini a, ⇑ , Lorenzo Castelli b , Raffaele Pesenti c a IFSTTAR – Université Lille Nord de France, 20,rue Élisée Reclus, 59666 Villeneuve d’Ascq, Lille,France b DI 3 , Università degli Studi di Trieste, Via A.Valerio 10,34127 Trieste, Italy c DM, Università Ca’ Foscari Venezia, Cannaregio 873, 30121 Venezia, Italy a r t i c l e i n f o Keywords: Air Traffic Management Airport slot allocation Secondary trading Combinatorial exchange a b s t r a c t In our research we propose a market formalization of secondary trading of airport slots. This proposed market is managed through an individual rational and budget balanced combinatorialslot exchange.The suggested market mechanism allows consideration of en-route sector capacities during the slot allocation process. We quantify the potential advantage of the market by comparing it with current practice. The results show that solu- tions that appear optimalwhen neglecting en-route sector capacities can be infeasible when taking capacities into account.Finally, in the proposed market the existence of grandfather rights does not seem to affect airline costs in a significant way. Ó 2012 Elsevier Ltd. All rights reserved. 1. Introduction The capacity of an airport is defined as the number of movements (take-offs and landings) that are allowed to take place in a given period of time. The airport capacity mainly depends on the configuration of runway(s), the size of the apron and the infrastructure of terminal facilities (UK Civil Aviation Authority, 2001). When the available airport capacity is unable to accommodate all the airlines’ requests, the number of movements is regulated by the introduction of airport slots. The slots are defined as scheduled time intervals for the arrival or the departure of a flight on a specific date. In this case, the airport capacity is declared in terms of available slots per hour and a mechanism to allocate all the available slots to flights has to designed. Following the guidelines of the International Air Transport Association (IATA) ( IATA, 2010) and the regulations of the European Commission ( Council of the European Community, 1993, 2004), the current mechanism of slot allocation in Europe consists of two steps: the primary allocation and the secondary trading. The primary allocation of slots takes place about 6 months before the starting of either the summer or winter season. Representatives of airlines and airports meet at a IATA conference and allocate airport slots for the forthcoming season according to the following procedure. The slots are initially allocated according to grandfather rights, that is, the use-it-or-lose-it right of an airline to keep a slot of the preceding equiv alent season if and only if such a slot was used at least 80% of the time. Then, half of the remaining slots are allocated to n entrants ( IATA,2010). Finally,the remaining slots are allocated in a non-discriminatory manner. The secondary trading oc- curs after the primary allocation. Airlines are allowed to exchange slots with competitors through bilateral trades, finalizing with the authorization by the airport slot coordinators. The primary airport slot allocation and the subsequent secondary trading are two steps of major importance especially fo those airlines operating at highly congested airports, such as the main hubs of legacy airlines offering a hub-and-spoke net- work to their passengers. In this case, if the airline is not able to perform one of its flights exactly at the desired time, reven losses are expected for this flight. In fact, revenues of legacy airlines are strongly influenced by business passengers whose 1366-5545/$ - see front matter Ó 2012 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.tre.2012.03.004 ⇑ Corresponding author. Tel.: +33 (0)3 20 43 83 43; fax: +33 (0)3 20 43 83 59. E-mail address: paola.pellegrini@ifsttar.fr (P. Pellegrini). Transportation Research Part E 48 (2012) 1009–1022 Contents lists available at SciVerse ScienceDirect Transportation Research Part E j o u r n a l homepage: w w w . e l s e v i e r . c o m / l o c a t e / t r e