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A Mechanism for Bilateral Airport Slot Trading in the Secondary Market

Research output: Working paperPreprint

Published
Publication date27/06/2024
PublisherSSRN Working Paper
Number of pages38
<mark>Original language</mark>English

Abstract

In this research, we introduce a bilateral mechanism for slot trading in the secondary market. The secondary market complements the primary slot allocation set by the Worldwide Airport Slot Guidelines (WASG), offering airlines the flexibility to adjust their slots and improve their network schedules. Typically, acquiring slots in the secondary market occurs through bilateral transactions and our proposed mechanism is designed specifically for this type of trading. The proposed mechanism facilitates an orderly structured secondary trading while ensuring incentive compatibility and individual rationality considerations. We propose a mixed-integer programming model to formulate the proposed bilateral slot trading mechanism. Additionally, we offer a robust version of this model to address the uncertainties an intermediary might face in slot valuation. We test our mechanism across a comprehensive set of instances, providing insights into its behaviour and discuss the regulatory and contractual needs for successfully implementing this mechanism in practice.