X An Incentive Compatible, Efficient Market for Air Traffic Flow Management

Air Traffic Flow Management (ATFM) is a challenging operations research problem whose importance keeps escalating with the unabated growth of the airline industry. In the presence of inclement weather, the problem becomes particularly serious and leads to huge monetary losses and delays1, Yet, despite massive efforts on the part of the U.S. Federal Aviation Administration (FAA), airline companies, and even the academia, the problem remains largely unsolved. In a nutshell, the reason for this is that any viable solution needs to satisfy several conflicting requirements, e.g., in addition to ensuring efficiency the solution also needs to be viewed as “fair” by all parties involved. Indeed, [Bertsimas et al. 2011] state that “ ... While this work points at the possibility of dramatically reducing delay costs to the airline industry vis-a-vis current practice, the vast majority of these proposals remain unimplemented. The ostensible reason for this is fairness ... .” It also needs to be computationally efficient – even moderate sized airports today handle hundreds of flights per day, with the 30 busiest ones handling anywhere from 1000 to 3000 flights per day. The full problem involves scheduling flight-landings simultaneously for multiple airports over a large period of time, taking into consideration inter-airport constraints. Yet, according to [Barnhart et al. 2009], current research has mostly remained at the level of a single airport because of computational tractability reasons. Building on a sequence of recent ideas that were steeped in sound economic theory, and drawing on ideas from game theory and the theory of algorithms, we present a solution that has a number of desirable properties. Our solution for allocating flights