MANAGEMENT 402

AIRLINES PLAY UP IMPROVEMENTS IN ON-TIME PERFORMANCE

Travelers in Atlanta line up to check in for a Delta Air Lines flight.

Several airlines grabbed bragging rights for their on-time performances for all of 2009 after the government Friday released its Air Travel Consumer Report for December. But some conveniently ignored rivals with better punctuality records in a classic game of statistical slicing and dicing. Hawaiian Holdings Inc.'s Hawaiian Airlines, as usual, had the best performance of all 19 airlines that report domestic-flight timeliness to the Department of Transportation. Tiny Hawaiian for the full year got 92.1% of its flights to their destinations within 15 minutes of schedule, its sixth consecutive year in the top spot. Southwest Airlines Co., another perennially punctual carrier, came in second, with 83% of its flights on time. But some larger carriers blew off the showings of Hawaiian, Southwest, Alaska Air Group Inc.'s Alaska Airlines and two regional airlines that topped the list of 19. Instead, they compared themselves, as they often do, with a handful of competitors with similar hub-and-spoke route networks. UAL Corp.'s United Airlines and US Airways Group Inc. both look at a universe of just five carriers: themselves, Delta Air Lines Inc. (which now includes Northwest Airlines), AMR Corp.'s American Airlines and Continental Airlines Inc. Within that group, United was the 2009 winner, with 81% of its domestic flightsexcluding regional flights flown by commuter partnersarriving within 15 minutes of their target. Joe Kolshak, United's senior vice president of operations, said although his company "certainly pays attention to what Southwest is doing," the discounter has one fleet type and isn't a true hub-and-spoke carrier. As for Hawaiian, he said, "look at where they're operating," referring to the carrier's many flights within the islands. "That's not a valid, statistically meaningful comparison."

Source: Susan Carey in The Wall Street Journal, February 13 2010 http://online.wsj.com/article/SB10001424052748703525704575061331712019218.html

th

MANAGEMENT 402

US Airways came in a close second in that subset, after being the No. 1 on-time airline among the five in 2008. Robert Isom, US Airways' chief operating officer, said the comparison is a valid one because the five offer "a different product and business model," with attributes that include connecting hubs, firstclass cabins and international and regional flights. "When we stack up, we compare ourselves to the big majors," he said. In that grouping, Delta and Continental were tied, with 78.8% of domestic flights on time, and American had a 77.2% showing. "If we were them," Hawaiian CEO Mark Dunkerley said of the five carriers, "we'd ignore us too. Fiddling with the DOT rankings and making excuses are not what customers want." Southwest carries the most domestic passengers of any U.S. carrier, a spokesman said, "so I'd say we're a pretty big airline even if we don't act like one." Alaska Airlines, a smaller hub-and-spoke carrier, takes a different approach, one that Ben Minicucci, the chief operating officer, called more "fair." Alaska compares itself to the top 10 U.S. airlines by traffic, a grouping that excludes Hawaiian. By that measure, Alaska came in second, just behind Southwest, in 2009. In spite of the hair-splitting, airlines in general are doing a better job of getting passengers to their destinations within a few minutes of schedule. Taken together, all 19 carriers in 2009 achieved a 79.5% on-time score, compared with 76% the year earlier. It was their best showing since 2003, the Transportation Department said. Helping the improvement was a nearly 11% reduction in domestic capacity between January 2008 and last month. Fewer flights mean less congestion at airports and in the overtaxed air-traffic control system. The improved showing of United, which ranked 17th in 2008, was partly the result of a years-long employee campaign. The exercise isn't rocket science. But it requires a concerted effort to communicate with employees scattered all over the country, to train workers to new, more-efficient standards and get them to consistently perform the intricate ballet of getting flights out on time a thousand times a day. United's Mr. Kolshak estimated there are 1,400 different elements that come into play in the departure of each United plane. One big way to get it right is to leave on time, he said. United offered bonuses to employees for meeting punctuality goals, and paid out $825 to each of its eligible 41,000 workers last year. Mr. Isom said US Airways also is trying to do a better job of leaving on time, as part of a worker campaign that has sharply improved its punctuality in the past two years. It paid employees $350 in bonuses last year. Ditto for Alaska Airlines, which paid its workers $1,000 each in bonuses last year for achieving punctuality and customer-satisfaction goals, according to Mr. Minicucci.

MANAGEMENT 402

Passengers generally don't choose airlines because they fly on time. But they are peeved if their flights are late. And if many flights are delayed for reasons less obvious than bad weather, customers may switch their business to a rival. "You certainly want to be in the competitive set," said Mr. Isom. "You don't want to be an outlier."

QUESTIONS The Excel file Flight Delays data.xlsx has data on arrival and departure delays for every United Airlines flight that departed from Chicago OHare (ORD) to Los Angeles International Airport (LAX) in the first week of January 2010. 2 1.) How would you summarize the data on minutes delayed (at arrival)? For the remaining questions, we say that a flight departed late if it left the gate at ORD with a delay of 15 minutes or longer. A flight arrived late if it arrived at the gate at LAX with a delay of 15 minutes or longer. A flight that is not late is on time. 2.) If you only look at the flights that departed ORD on time, what was the fraction of flights that arrived at LAX on time? Compare this with the fraction of flights that arrived on time out of all the flights that departed late. Do the data support Mr. Kolshaks assertion that flights that depart on time tend to arrive on time? 3.) If you only look at the flights that arrived at LAX on time, what was the fraction of flights that departed ORD on time? Compare this with the fraction of flights that departed on time out of all the flights that arrived late. 4.) What was the fraction of flights that a. departed on time and arrived on time? b. departed on time but arrived late? c. departed late but arrived on time? d. departed late and arrived late? (Make sure that the sum of a., b., c. and d. is 1.)

Data source: Bureau of Transportation Statistics, Research and innovative technology administration (RITA), http://www.transtats.bts.gov/DL_SelectFields.asp?Table_ID=236&DB_Short_Name=On-Time