Impact of on-time performance on air carrier cost structure: The case of American Airlines Inc.

Abstract

The main goal of the study in this thesis is to investigate the impact of on-time performance on air carrier cost structure on the example of American Airlines Inc, identify the main delay cause factors and formulate recommendations for improvement of on-time performance. The main tasks of the study were to analyze the specifics of international airline industry, the cost structure of international air carriers, the relationship between on-time performance and costs and on the basis of literature review, formulate the hypothesis, construct the model and check the hypothesis with the help of empirical study. Several sets of on-time performance metrics are developed and incorporated into air carrier operational cost model. The consistent estimation results reveal that on-time performance is an important cost element of air carrier cost structure. The main delay cause factors which affect significantly the airline operational cost structure appeared to be air carrier management problems, bad weather conditions and late arrival of aircraft. After analyzing the empirical results, recommendations for on-time performance improvement are formulated for the American Airlines Inc.