Airline on-time performance and its effects on consumer choice behavior

Perhaps, owing to the unavailability of delay data on passengers’ flight routing, a challenge in air travel demand estimation is the examination of consumer response to flight delay within an origin-destination framework. An interesting but unanswered question is: how does air travel delay at various airports along a given itinerary affect consumer choice behavior? Using a methodology that enables us to match airline on-time performance data to passenger itinerary and estimating a discrete choice demand model, this paper finds that increases in flight delay negatively impact the likelihood of choosing a product and that welfare costs of delay to consumers may be substantial. These results are robust across different measures of on-time performance and irrespective of market hauls.