Research

Give Air Passengers an “Out” during Delays
Marketing Science, 2012

Instead of holding customers captive in an idled plane on a tarmac during unforeseen delays, airlines should give passengers the choice to leave or stay—and compensate them either way.

Doing so could stave off costly government regulation and increase customer loyalty, ultimately improving airline profits, according to Associate Professor Rachel Chen and Assistant Professor Catherine Yang in their study, “Customer Bill of Rights under No-Fault Service Failure: Confinement and Compensation.” The paper’s third author, Eitan Gerstner, is a former Graduate School of Management professor now working at the Israel Institute of Technology.

The paper, forthcoming in the journal Marketing Science, explores existing and proposed federal regulations governing extended passenger confinements due to blizzards and other unforeseen events. The U.S. Department of Transportation requires airlines to let passengers off after three hours on a tarmac or face a fine of up to $27,500 per passenger.

“Because airlines, cruises and other service providers do not see themselves responsible for delays due to weather or other issues that are beyond their control, too often they are reluctant to implement customer-friendly solutions,” said Yang. “But such a policy is likely to be perceived as socially responsible because it promotes customer satisfaction—and reduces complaints by those who suffer the most from captivity.”

Chen, who was recently promoted to associate professor, had her study, “Optimal Multiple-Breakpoint Quantity Discount Schedules for Customers with Heterogeneous Demands: All Unit or Incremental?,” co-authored with Lawrence W. Robinson of Cornell University’s Johnson Graduate School of Management, published in the Institute of Industrial Engineers’ flagship journal, IIE Transactions.

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