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Operating variables
We use 11 financial and operating characteristics of an airline as independent
variables (see Table I). The market share indicates dominant power of an airline
in attracting customers. The growth in the operating revenue provides a
measure of increase in the number of passengers on a year-to-year basis. The
revenue per passenger mile indicates the amount a passenger is willing to pay
IJQRM Variable Symbol
12,2
Proportion of flights delayed per airline DELAY
Market share MSHARE
Revenue per passenger mile in cents RPM
56 Operating revenue growth OPRGR
Debt to capital ratio DTA
Current ratio CR
Load factor LF
Profitability code OPC
Log of operating revenue LOGOPR
Employees per departure EMPDEP
Table I. Operating revenue per employee OPREMP
List of variables
Probability Standardized
Variable Coefficient level estimate
58
Proportion of flights delayed
0.35
0.30
0.25
0.20
0.15
Figure 1. 0.10
Proportion of flights 0 0.05 0.10 0.15 0.20 0.25 0.30 0.40 0.45
0.35
delayed vs. operating
revenue per employee Operating revenue per employee
0.30
0.25
0.20
0.15
Figure 2. 0.10
Proportion of flights
6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10
delayed vs. log
(operating revenue) Log (operating revenue)
graphs showing the relationship between the probability of delays and A multivariate
operating revenue per employee and logarithm of operating revenue analysis of
respectively. flight delays
Conclusions
Customer service represents an important parameter in choosing an airline.
The on-time performance of an airline is of significant concern to an airline 59
traveller. In this article, we examine the relationship between airline flight
delays and financial conditions of airlines. Our analysis indicates that the
likelihood of a flight being delayed increases with the leverage, airline size and
operating revenue per employee and decreases with the revenue growth and
current ratio. However, only operating revenue per employee and airline size
represented by the logarithm of the operating revenue have statistically
significant effects (with level of significance being less than 0.1) on the
likelihood of flights of an airline being delayed. The methodology presented in
this article should be of significant interest to quality control professionals to
ferret out factors that cause problems.
References
1. Ippolito, R.A., Estimating airline demand with quality of service variables, Journal of
Transport Economics and Policy, Vol. 15, January 1981, pp. 7-14.
2. Hildebrandt, L. and Buzzell, R.D., Product quality, market share and profitability: a causal
modelling approach, Working Paper, 91-045, Harvard Business School, Cambridge, MA,
1991.
3. Rose, N.L., Profitability and product quality: economic determinants of airline safety
performance, Journal of Political Economy, Vol. 98, 1990, pp. 944-64.
4. Goldberger, A.S., Econometric Theory, John Wiley & Sons, New York, 1964.
5. Cox, D.R. and Snell, E.J., Analysis of Binary Data, 2nd ed., Chapman & Hall, London, 1989.
6. Agresti, A., Analysis of Ordinal Categorical Data, John Wiley & Sons, New York, NY, 1984.