Prepare a report on traffic congestion at heathrow

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Reference no: EM131244334

BAA is a private company that operates some of the largest airports in the United Kingdom, including Heathrow and Gatwick. Suppose that BAA recently commissioned your consulting team to prepare a report on traffic congestion at Heathrow. Your report indicates that Heathrow is more likely to experience significant congestion between July and September than any other time of the year. Based on your estimates, demand is Q1d = 600 – 0.25P, where Q1d is quantity demanded for runway time slots between July and September. Demand during the remaining nine months of the year is Q2d = 220 – 0.1P, where Q2d is quantity demanded for runway time slots. The additional cost BAA incurs each time one of the 80 different airlines utilizes the runway is £1,100 provided 80 or fewer airplanes use the runway on a given day. When more than 80 airplanes use Heathrow’s runways, the additional cost incurred by BAA is £6 billion (the cost of building an additional runway and terminal). BAA currently charges airlines a uniform fee of £1,712.50 each time the runway is utilized. As a consultant to BAA, what pricing plan would clearly enhance Heathrow’s profitability? What price should BAA charge for runway slots between July and September? £ What price should BAA charge for runway slots for the remaining nine months? £

Reference no: EM131244334

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