Gaming the System: Rolling the Dice on AAM Infrastructure Investments —Public-Private Partnerships or State-Funded

When we think of commercial aviation today, we see a public-private business model that has evolved over the past 100 or so years. The public sector provides and operates the airports and air traffic management systems and private enterprise pay fees to use that infrastructure to provide air travel and cargo services to the public. Those fees are incorporated into the price of a ticket passengers buy or the waybills shippers pay to transport their goods.

But advanced air mobility (AAM) isn’t conventional aviation as we know it. For the public to reap the benefits of this innovative mode of transportation it may take some unorthodox thinking and unique methods of financing. A pair of researchers from Kent State University, Esrat Farhana Dulia and Syed A. M. Shihab, have proposed a novel approach to the problem using game theory — mathematical models of how rational agents might interact and engage with each other — to posit how best to negotiate with private enterprise to foster a win-win outcome for everyone involved.

AAM Infrastructure is Ex-Pen-Sive

State governments are faced with determining whether they, their communities, should shoulder the entire cost of developing their AAM infrastructure on their own or, they should collaborate with private enterprises in public-private partnerships (PPPs). These costs will run into the tens of millions, if not hundreds of millions, to develop adequate infrastructure to make AAM viable, sustainable, and appealing to the masses.

Dulia and Shihab created two models — a public-private partnership (PPP) model and a non-PPP model — to help governments make educated decisions about which model is best-suited for a government’s constituency. The non-PPP model attempts to predict when it is best to invest in infrastructure to optimize the net present value (NPV) in any given city over the foreseeable future. By comparison, the PPP option uses a game theory model which considers an as-yet uncertain demand for AAM services and operational risks. Dulia and Shihab chose the U.S. state of Ohio as their prototypical venue to reveal how variations affect both parties.

Critical to modeling the optimal investment strategy — purely public or public-private — is understanding that the U.S. Federal Aviation Administration (FAA) classifies AAM infrastructure into two categories — soft and hard. The hard infrastructure is the physical infrastructure: vertiports, charging stations, electrical grids, surveillance systems, communication systems, maintenance facilities, and automation systems. The soft infrastructure is comprised of safety procedures, uncrewed aerial systems (UAV) traffic management, regulatory compliance, and the standard operating procedures that keep the aircraft moving in a predictable, efficient manner. Seamlessly integrating these two components with the existing metropolitan infrastructure will promote acceptance by the communities they will serve.

Dulia and Shihab developed two different strategies for state governments to consider: dual-player investment (DPI) and single-player investment (SPI). The DPI strategy considers the pros and cons of public-private partnerships while the SPI strategy considers a state-funded option only. The researchers analyzed the public’s general distrust in PPPs while also examining the costs and risks a taxpayer-only approach would portend.

In the case of Ohio, investments made in Cleveland and Cincinnati should proceed in 2026 with the remainder of the investments in Ohio’s other cities to follow in 2034.

Adopting a DPI approach doesn’t necessarily limit the partnership to a single private enterprise. A coalition of several private enterprises would help diminish the risks corporate investors would face.

The willingness of public agencies to integrate their existing transportation networks — such as public transit systems — could sweeten the deal for all involved, governments, private enterprise, and most important: the public.