It's Not Simply Luck : The Impact of Network Strategy, Schedule Padding, and Operational Improvements on Domestic On-Time Performance in the US Airline Industry

Airlines showcase their on-time performance (OTP), a globally accepted operational performance metric, to demonstrate punctuality, service reliability, and attract air travelers. Airlines adopt passive strategies, such as \schedule padding" and active processes, such as making operational improvements, to improve their OTP. Also, factors outside an airlines' control, such as unexpected bad weather, cause the actual observed performance to deviate from the planned execution. Hence, in addition to schedule padding and operational improvement, we define a third factor called "retrospective luck", i.e., the difference between the actual realization and the expected outcome. This paper establishes and quantifies the impact of these three factors on OTP in the airline industry. Additionally, we also study the effect of these strategies on OTP rankings, routinely used to compare airlines operating in common geographies. Our procedure builds on the structural estimation model developed in prior literature and replicates the typical schedule planning process observed in the airline industry. We use an eleven-year panel data of flights operated by the US domestic carriers from 2005 to 2015 to measure OTP changes, schedule padding, and operational improvements. Our analysis shows two main results: (i) Operational improvement has the highest association with airline OTP compared to schedule padding and retrospective luck. However, (ii) retrospective luck has higher association with OTP rankings compared to schedule padding and operational improvements