Impact of operational performance on air carrier cost structure: Evidence from US airlines

► We investigate the impact of operational performance on airline cost structure. ► We develop distinct operational performance metrics to incorporate into airline cost models. ► The results show that flight activity outside schedule windows, delay and schedule buffers impact airline costs substanti...

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Bibliographic Details
Published in:Transportation research. Part E, Logistics and transportation review Logistics and transportation review, 2012-09, Vol.48 (5), p.1032-1048
Main Authors: Zou, Bo, Hansen, Mark
Format: Article
Language:English
Subjects:
Airline cost structure
Airlines
Cost control
Cost estimates
Cost structure
Impact analysis
Operational performance
Studies
Translog model
Transportation economics
US airlines
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Summary:► We investigate the impact of operational performance on airline cost structure. ► We develop distinct operational performance metrics to incorporate into airline cost models. ► The results show that flight activity outside schedule windows, delay and schedule buffers impact airline costs substantially. The impact of operational performance on airline cost structure is empirically investigated using an aggregate, statistical cost estimation approach. Two distinct sets of operational performance metrics are developed and incorporated into the airline cost models as arguments. Results from estimating a variety of airline cost models reveal that both delay and schedule buffer are important cost drivers. We also find that flight activity outside schedule windows increases cost, whereas flight inactivity within schedule windows does not. Using the estimated cost models, we predict the cost savings to airlines of “perfect” operational performance, obtaining an estimate in the range of $7.1–13.5billion for 2007.
ISSN:1366-5545
1878-5794
DOI:10.1016/j.tre.2012.03.006