Concession revenues and delay reduction efforts: Case of U.S. Airports

Delays are often considered an inherent part of airport operations, leading to significant costs in terms of lost productivity. Addressing these delays typically requires sacrificing desirable outputs in the short term. However, this approach may not be ideal for all airports, especially those that rely heavily on concession revenues, where the opportunity cost of delays may be higher. Existing research indicates a connection between delays and concession revenues, suggesting that increased delays can lead to higher non-aeronautical income. Using data from 59 U.S. airports spanning 2009 to 2018 and employing a two-stage directional distance function approach, we explore how concession revenues influence delay reduction efforts. Our findings reveal that airports with substantial concession revenue tend to put less effort into delay reduction. However, we also identified an (overall) inverse U-shaped relationship between concession revenues and delay reduction efforts. In other words, less emphasis on reducing delays initially boosts revenues, but beyond a certain point, further neglect leads to a decline in concession revenues. Furthermore, we examine how factors such as airport competition, airline concentration, legacy airline hub status, and airport size impact delay reduction efforts. Airports within 50 miles of competitors are more proactive in minimizing delays to maintain a competitive edge, while legacy airline hubs are less motivated to invest in delay reduction due to their market power. Finally, we found no significant evidence to suggest that airline concentration or airport size has a notable impact on delay management efforts.