Optimal Contract for Reducing Flight Delays in EU: In the Context of SESAR

In the context of the SESAR (Single European Sky Air traffic management Research) Joint Undertaking, the role that the air navigation service provider (ANSP) could play has been reconsidered. ANSP manages traffic and deals with potential conflict situations and external events, which have led to the reorganization of the air traffic. The modification of traffic inevitably leads to delays for airlines, which is costly. In this study, we suggest that ANSP could provide a costly delay reduction service to airlines. Indeed, if ANSP has several solutions for traffic conflict resolution or reorganization, there is room for a choice between these solutions using additional criteria. Our study thus proposes an original model in which we determine the optimal design of a delay reduction contract signed between welfare- or profit-maximizing ANSPs and a monopoly airline. We give some comparative statics, in particular, the evaluation of the impact of a modification in safety standards on the contract.