The Role of Route-Level Decisions in the Efficiency and Resilience of Airline Operations: Evidence from the Wright Amendment Repeal

Problem definition : We study the impact of an airline’s route-level decisions on the efficiency and resilience of its operations. Methodology/results : Our study uses a proprietary passenger-level data set provided by Southwest Airlines and takes advantage of a regulatory change, the Wright Amendment repeal. The Wright Amendment restricted nonstop service between Dallas Love Field Airport (DAL) and most major destinations. Its repeal led to significant changes in Southwest’s service offerings at DAL. We use a difference-in-differences framework to quantify the impact of the repeal on the scheduled travel times and long travel delays at the passenger level, which serve as proxies for efficiency and resilience, respectively. We show that the repeal’s impact varies widely across destinations. Although Southwest introduced nonstop service to some destinations but not others after the repeal, this decision alone does not sufficiently explain the observed heterogeneity. As such, we develop two route-level metrics—route inefficiency and route resilience—to explain the heterogeneous impact of the repeal on different destinations. Moreover, our counterfactual analysis shows that reallocating connecting passengers with small itinerary buffers to alternative itineraries can result in major resilience improvements without significantly deteriorating efficiency. Managerial implications : Our findings are robust to alternative empirical specifications and have important implications for practitioners and regulators. Specifically, our study not only sheds light on the operational consequences of airlines’ route-level decisions but also demonstrates how managers can effectively manage the efficiency-resilience tradeoff for connecting passengers. Our study also implies that regulators can add more transparency to airline operations by providing public access to passenger-level data.