The Effect of the Internet on On-Time Performance in the Airline Industry

This paper uses flight-level data and measures of Internet penetration in U.S. metropolitan statistical areas between 1997 and 2007 to study the relationship between Internet access and flight on-time performance, which represents a measure of flight quality. We find that on-time performance is substantially worse for flights in which passengers originated in areas with greater Internet access. The magnitude of the effect of the Internet is larger for competitive segments. Our results are driven by longer departure delays and longer flight time, despite airlines’ increased flight schedule times. Our results lend support to theoretical search models that suggest that firms engaging in price competition may choose to lower the quality of the goods they offer. We also discuss additional explanations for our findings. JEL classification: D83; L25; L93