Originally Posted by
MSPeconomist
What university (and location), what course, what major/minor subjects and degree program (if any)?
When a flight from AAA to BBB is cancelled, the passengers from this flight generally spend more time in airport AAA (being rebooked and waiting for the new flight) and eventually arrive at BBB, generally a bit later. So airport AAA should gain rather than lose business while BBB doesn't lose much business. You seem to be assuming that when the flight is cancelled, the passengers just don't fly and don't spend time at the airport either.
By this reasoning, wouldn't airport businesses want to be insured against the LACK of flight delays and cancellations at that airport?
That's an interesting question.
1. As you said, you have those who spend more time at the airport while they wait to be rebooked onto another flight, which makes them more likely to frequent the shops and restaurants, driving up revenues.
2. On shorter routes, people will be rebooked onto trains or drive, reducing revenues at the airport.
3. People might rebook to other nearby airports, reducing revenues at the initial airport.
Regardless whether the net effect between the three is negative or positive, I would find it hard to believe that airports could not carry the risk as part of their daily operations and would require insurance.
Insurance premiums = expected payout + business / administrative expenses of the insurance provider + profit of the insurance provider.