The impact of flight delays on passenger demand and societal welfare

US airline passengers increasingly have access to flight delay information from online
sources. As a result, air passenger travel decisions can be expected to be influenced by
delay information. In addition, delays affect airline operations, resulting in increased block
times on routes and, in general, higher carrier costs and airfares. This paper examines the
impact of flight delays on both passenger demand and airfares. Delays are calculated
against scheduled block times as well as against more idealized feasible flight times. Based
on econometric estimations, welfare impacts of flight delays are calculated. We find that
flight delays on a route reduce passenger demand and raise airfares, producing significant
decreases in both consumer and producer welfare. Since producer welfare effects are estimated
to be three times as large as consumer welfare effects, we conclude that from an
economic efficiency rationale, airlines should be required to pay for the bulk of flight delay
remediation efforts.