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The relationship between on-time performance and airline market share: a new approach

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  • Suzuki, Yoshinori
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    Abstract

    We propose a new method of modeling the relationship between on-time performance and market share in the airline industry. The idea behind the method is that the passengers' decision to remain (use same airline) or switch (use other airlines) at time t depends on whether they have experienced flight delays at time t-1 or not. More specifically, we posit that the passengers who experienced flight delays are more likely to switch airlines for the subsequent flight than those passengers who did not experience delays. To capture such effect, we develop an aggregate-level Markovian type model that estimates the transition probability matrices separately for the passengers who experienced flight delays at time t-1 and for those who did not experience delays. The model was calibrated with the US DOT data. The study results imply that, once experiencing flight delays, passengers are more likely to switch airlines. The results also imply that on-time performance affects a carrier's market share primarily through the passengers' experience, and not though the "advertisement" of performance.

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    Bibliographic Info

    Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

    Volume (Year): 36 (2000)
    Issue (Month): 2 (June)
    Pages: 139-154

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    Handle: RePEc:eee:transe:v:36:y:2000:i:2:p:139-154

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    Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description

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    Related research

    Keywords: Airline demand On-time performance Markov model Non-linear regression;

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    Cited by:
    1. Forbes, Silke J., 2008. "The effect of air traffic delays on airline prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1218-1232, September.
    2. Michael Mazzeo, 2003. "Competition and Service Quality in the U.S. Airline Industry," Review of Industrial Organization, Springer, vol. 22(4), pages 275-296, June.
    3. Britto, Rodrigo & Dresner, Martin & Voltes, Augusto, 2012. "The impact of flight delays on passenger demand and societal welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 460-469.
    4. Suzuki, Yoshinori & Tyworth, John E. & Novack, Robert A., 2001. "Airline market share and customer service quality: a reference-dependent model," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(9), pages 773-788, November.
    5. Ferrer, Juan-Carlos & Rocha e Oliveira, Paulo & Parasuraman, A., 2012. "The behavioral consequences of repeated flight delays," Journal of Air Transport Management, Elsevier, vol. 20(C), pages 35-38.
    6. Rupp, Nicholas G., 2009. "Do carriers internalize congestion costs? Empirical evidence on the internalization question," Journal of Urban Economics, Elsevier, vol. 65(1), pages 24-37, January.
    7. Mark Lijesen & Peter Nijkamp & Eric Pels, 2005. "The Home Carrier Advantage in Civil Aviation," Tinbergen Institute Discussion Papers 05-011/3, Tinbergen Institute.

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