A Nested Logit Approach to Airline Operations Decision Process

This study analyzes the role of logistical variables, competition characteristics and weather conditions in a decision model for flight operations by airlines. We demonstrate that a nested logit model is appropriate on both theoretical and empirical grounds. The sample consists of all flights on Fridays in January 2003. We find that there are positive and significant correlation between daily flight frequencies and cancellation rates. The findings revealed that competition does not necessarily lead to better performance and the flights to and from the carrier’s hub are less likely to be cancelled. Sever weather is a significant contributor to worse on-time performance.