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How much do consumers really value air travel on-time performance, and to what extent are airlines motivated to improve their on-time performance?

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  • Gayle, Philip G.
  • Yimga, Jules O.

Abstract

This paper estimates the value consumers place on air travel on-time performance (OTP), and the extent to which airlines are motivated to improve their OTP. We find robust evidence that consumers value OTP and are willing to pay to avoid delays. Airlines can invest to improve OTP, but would independently choose to do so only if on-time performance improvement leads to increases in profitability. Using a methodology that does not require having actual cost data to draw inference on cost changes associated with improvement in OTP, we analyze airlines' optimal OTP-improvement investment choice. The modeling framework allows us to provide estimates of OTP-related marginal investment costs per minute of improvement necessary to achieve specific percent reductions in arrival delay minutes from the current levels of arrival delay minutes observed in the data.

Suggested Citation

  • Gayle, Philip G. & Yimga, Jules O., 2018. "How much do consumers really value air travel on-time performance, and to what extent are airlines motivated to improve their on-time performance?," Economics of Transportation, Elsevier, vol. 14(C), pages 31-41.
    • Handle: RePEc:eee:ecotra:v:14:y:2018:i:c:p:31-41
    DOI: 10.1016/j.ecotra.2018.01.003
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    References listed on IDEAS

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    Cited by:

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    3. Alessandro V. M. Oliveira & Bruno F. Oliveira & Moises D. Vassallo, 2024. "Airport service quality perception and flight delays: examining the influence of psychosituational latent traits of respondents in passenger satisfaction surveys," Papers 2401.02139, arXiv.org.
    4. Philip G. Gayle & Ying Lin, 2021. "Cost Pass‐Through In Commercial Aviation: Theory And Evidence," Economic Inquiry, Western Economic Association International, vol. 59(2), pages 803-828, April.
    5. Chen, Yongmin & Gayle, Philip G., 2019. "Mergers and product quality: Evidence from the airline industry," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 96-135.
    6. Yimga, Jules, 2022. "Code-sharing agreements and path quality in the US airline industry," Transport Policy, Elsevier, vol. 116(C), pages 369-385.
    7. Yimga, Jules, 2020. "Price and marginal cost effects of on-time performance: Evidence from the US airline industry," Journal of Air Transport Management, Elsevier, vol. 84(C).
    8. Myongjin Kim & Qihong Liu & Nicholas G. Rupp, 2023. "When Do Firms Offer Higher Product Quality? Evidence from the Allocation of Inflight Amenities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(2), pages 149-177, March.
    9. Altringer, Levi & Zahran, Sammy & Shwiff, Stephanie A. & Begier, Michael J. & Anderson, Aaron, 2022. "Spillover delay effects of damaging wildlife strike events at U.S. airports," Economics of Transportation, Elsevier, vol. 30(C).
    10. Yimga, Jules & Gorjidooz, Javad, 2019. "Airline schedule padding and consumer choice behavior," Journal of Air Transport Management, Elsevier, vol. 78(C), pages 71-79.
    11. de Oliveira, McWillian & Eufrásio, Ana Beatriz Rebouças & Guterres, Marcelo Xavier & Murça, Mayara Condé Rocha & Gomes, Rogéria de Arantes, 2021. "Analysis of airport weather impact on on-time performance of arrival flights for the Brazilian domestic air transportation system," Journal of Air Transport Management, Elsevier, vol. 91(C).
    12. Ren, Junqiushi, 2023. "Financial conditions and incumbent quality responses to entry: Evidence from airlines' on-time performance," Journal of Air Transport Management, Elsevier, vol. 107(C).
    13. Bontemps, Christian & Remmy, Kevin & Wei, Jiangyu, 2021. "Ex-post evaluation of the American Airlines-US Airways merger: a structural approach," TSE Working Papers 21-1258, Toulouse School of Economics (TSE).
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    16. Zakharenko, Roman & Luttmann, Alexander, 2023. "Downsizing the jet: A forecast of economic effects of increased automation in aviation," Transportation Research Part B: Methodological, Elsevier, vol. 170(C), pages 25-47.

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    More about this item

    Keywords

    Airline on-time performance; Commercial aviation;

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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