Agency Costs and Airline Delays

Cite this Article
Joshua D. Wright, Agency Costs and Airline Delays, Truth on the Market (October 10, 2011),

Luke Froeb has a great post on the chart above, agency costs, and airline delays.   In particular, Froeb is interested in “on-time” departures, i.e. the plane pushes back from the gate on time, but sits near the gate until it is their turn in the queue.  Read the whole thing, but here is the key paragraph:

The first row (per diem) indicates how much the flight crew earns once it checks into the airport, the second (holding pay) after it loads the plane, and the third (hourly wage) after it pushes back from the gate and turns on the beacon.    By rushing to load the plane, and push back from the gate, the captain earns $164/hour more than he or she does by waiting to load the plane.

It would be relatively easy to solve this problem by taking the decision on when to push back from the gate away from the flight crew and give it to the airline instead.

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