Aircraft Replacement and Tariff Policy

Abstract

This goal of this paper is to define the optimal tariffs policy and resulting schedule of replacement of aircraft for meeting the travel demand at each moment in time when the actual transport capacity decreases due to the physical deterioration of aircraft. The author shows that between 2 successive replacements of old aircraft, the optimal pricing consists always of quoting first the optimal instantaneous monopoly tariff for the time when the existing transportation capacity meets the demand level corresponding to that price, and then dampening demand to the actual transportation capacity; the length of the time interval between 2 successive replacements of an aircraft is constant.