To Pad or Not to Pad? A Note on the Schedule Padding Behavior of Airlines

ABSTRACT

This note provides a rationale for the current trend in airline schedule padding by studying the strategic behaviour of carriers that may decide whether or not to pad their flight beyond the optimal time necessary for flight completion. Using a structural demand and supply model for air travel, our results indicate that the positive price effects of schedule padding we observe are primarily driven by cost increases (inefficiency effect) rather than increases in markup (marketing effect).

KEYWORDS:

• Airlines
• schedule padding
• nested logit
• flight scheduling

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ https://newsroom.hawaiianairlines.com/releases/hawaiian-airlines-marks-15-straight-years-as-most-punctual-u-s-airline

² The nested logit model has the following well-known predicted product share function: $s_j=\frac{exp\left(\frac{{\delta }_j}{1-\sigma }\right)}{D_g}\times \frac{D_g^{1-\sigma }}{\left[1+{\sum }_{g=1}^G{D}_g^{1-\sigma }\right]}$, where $D_g=\sum _{j{G}_g}exp\left(\frac{{\delta }_j}{1-\sigma }\right)$ and $G_g$ is the set of products belonging to group $g$.

³ We use the Herfindahl-Hirschman Index (HHI) to classify markets into competitive (HHI ≤ 0.25) and concentrated (HHI > 0.25) markets and followed the Department of Justice’s guidelines to determine the threshold HHI of 0.25. https://www.justice.gov/atr/herfindahl-hirschman-index.

⁴ We thank an anonymous referee for this suggestion.