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2 Skein International Airport It is not widely recognised that the recent flush of Fly / Drive package holidays promoted by many major Airlines owes much to the imaginative pioneering work by Skein International Airport, whose “Park ‘n’ Fly” scheme was promoted in 1997. Skein International, a municipally owned airport, has developed steadily over the last 20 years, and now has a very significant passenger throughput. It always aimed to offer a reasonable amount of car-park provision, and has extended facilities several times - in accordance with the master-plan for the airport’s development. But at one stage the unexpectedly rapid growth of traffic outstripped car-park capacity, and particularly in 1993 and 1996, there were many complaints both from passengers, and from airlines who feared future growth might be inhibited. (Off airport parking is available for such emergencies, operated by commercial firms, but it is not covered and is not liked by passengers). Car Park 3 came into operation in 1997, and in that year, Skein Airport announced its “Park ‘n’ Fly” scheme - offering plentiful, relatively cheap, covered car parking. As is well-known in the airline business, this is held to be a significant factor in Skein’s success. Further car parks came into operation in 1998 and 2004. The latter of these (Car Park 5) was in fact a year late in opening following a building strike, and parking capacity was outstripped in 2003. Apart from this, however, the scheme has been pretty successful with relatively few complaints about the number off facilities offered. But the continuing growth in demand suggests that there may be some overloading even in 2006. A further addition is therefore being considered (which could become available in January 2008 if necessary). The Airport Development plan calls for Car Park 6 to be in a specific location, but two alternative outline designs are available - giving extra capacity of 400 places and 600 places respectively. It is widely expected that a takeover by the National Airports Authority (or some other unnatural disaster!) will take place early in the 2010’s. Management, therefore, is concerned only with provision up to and including the operating year of 2010 itself. A factor which now has more prominence than in the boom years is the need for new capital investments to earn a reasonable return. The City Council requires 12% return on future capital investment, and is endeavouring to impose this requirement on all its enterprises - including, of course, Skein International. At the same time, the airport management is anxious to continue to provide a good service for users. Should a new airport car park be authorised? If so, which of the two alternative capacities would seem most appropriate, and in what year should it be brought into operation? In assembling data for analysis of this problem, the following has emerged: (1) All financial information is given in constant prices. (2) Subsequent developments in total passenger movements is expected to follow the pattern over the last decade or so - with continuing growth, but at a lower rate than in the boom years. (3) Capital costs for providing new car parks are £1,500 per place. (4) Maximum revenue obtainable per parking place per year = £200 (or 13.3%, on capital). This only arises when the car park is operating at essentially full capacity, at peak periods. (5) No changes are permissible in the charging structure for parking (see Table 3). (6) The building schedule for car parks is shown in Table 1. This indicates the numbers of places provided and the years in which each has come into operation. You may assume that car parks become available on January 1 of any year. (7) Table 2 shows the revenue received from parking fees over the last 15 years. It also indicates the revenue from each of the car parks individually - indicating the relatively low utilisation commonly experienced in the early years of operation for any new car park. TABLE 1 Car Park Building Programme Car Park 1 2 3 4 5 Commissioned on January 1 1988 1994 1997 1998 2004 Parking Capacity 2000 1000 1500 1000 1000 TABLE 2 Revenue per year (per car park and in total) (x £1000) Year Car Park Number 1 2 3 4 5 Total 1990 200 200 1991 300 300 1992 394 394 1993 400 400 1994 390 186 576 1995 400 200 600 1996 400 200 600 1997 390 190 236 816 1998 390 190 230 78 888 1999 390 190 260 116 956 2000 390 190 270 170 1020 2001 400 200 290 190 1080 2002 400 200 300 200 1100 2003 400 200 300 200 1100 2004 390 190 290 190 176 1236 2005 400 200 300 190 190 1280 TABLE 3 Parking Charges Days (or part days) 1 2, 3 4, 5 6-8 9-11 12-15 Charge £2 3 4 5 6 8 Distribution of stays & charges 20% 20% 20% 20% 10% 10%