 |  |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
2009 Annual Forum
View Abstract
The Impact of On-Time Performance on Air Fare Prices in the U.S. Airlines
Rodrigo Britto, University of Maryland, rbritto@rhsmith.umd.edu
Martin Dresner, University of Maryland, mdresner@rhsmith.umd.edu
This study provides a time series evaluation of on-time performance in the U.S. airline industry. In the last two decades customer service, and in particular, on-time performance in the airline industry, has drawn the attention of the media, researchers, and even Congress. Recent incidents have raised concerns of how to improve customer service and on-time performance. This problem has been compounded by the growth in traffic, inadequate air traffic control, the use of small planes flying frequent schedules, high load factors, etc. However, not all airlines are equally at fault. Some carriers have higher on-time performance than others.
Given the increase in delays, this paper empirically assesses if better on-time performance contributes to increases in passenger demand and, in turn, higher yields. On-time performance data were gathered from the Bureau of Transportation Statistics. The final sample includes data from 14 carriers and encompasses 1,704 observations from 58 domestic city-pairs routes under 500 miles for 16 quarters from 2003 to 2006. The results indicate that on-time performance has a positive lagged impact on passenger traffic and has a positive indirect impact on air fares through passengers.