Robust Scheduling Practices in the U.S. Airline Industry: Costs, Returns, and Inefficiencies.
Forthcoming in Management Science
36 Pages Posted: 16 Jan 2013 Last revised: 19 Nov 2015
Date Written: October 2014
Airlines use robust scheduling to mitigate the impact of unforeseeable disruptions on profits. We examine how effectively three common practices – flexibility to swap aircraft, flexibility to reassign gates, and scheduled aircraft downtime – accomplish this goal. We first estimate a multiple-input multiple-outcome production frontier, which defines the attainable set of outcomes from given inputs. We then recover unobserved input costs, and calculate how expenditure on inputs affects outcomes and revenues. We find that the per-dollar return from expenditure on gates, or more effective management of existing gate capacity, is three times larger than the per-dollar returns from other inputs. Next, we use the estimated tradeoffs faced by carriers along the frontier to measure the value to carriers of reducing delays. Finally, we calculate the improvement in carriers’ outcomes and profits if their operational inefficiencies are eliminated. On average, we estimate that operational inefficiencies cost carriers about $1.7 billion in revenue annually.
Keywords: Airline Performance, Robust Scheduling, Stochastic Production Frontiers, Directional Distance Functions
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