The effect of frequent flyer programs: A case study of the Korean airline industry

Frequent flyer programs are important for airlines in Korea in their marketing of services. This paper develops a conceptual model to investigate the effect of such programs by examining the relationships them and, airline service quality, pricing, passenger satisfaction, airline image, and airline selection. Path analysis is used to analyze data collected from Korean international air passengers. The results show that frequent flyer programs have direct and indirect effects on pricing, passenger satisfaction, airline image, and airline selection. In addition, their effects on passengers' selections are significantly different between Korean and foreign airlines.     

Managing valuable Taiwanese airline passengers using knowledge discovery in database techniques

Taiwanese domestic airline passenger loads have declined over the past decade, and the inauguration of the Taiwan high-speed rail service in 2007 has further intensified the competition facing the airlines. Gaining and retaining valuable passengers thus has become essential in maintaining domestic airline profits in the increasingly competitive transportation market. This study develops a knowledge discovery in database process, including the recency, frequency, and monetary model and the C5.0 decision tree. The former is used to assess passenger value, while C5.0 is used to mine demographic, travel behavior, and critical service quality information for valuable passengers. The results identify valuable passenger characteristics that can help Taiwanese airlines maximize their number and retention.     

An investigation of service quality,customer satisfaction and loyalty in China's airline market

Customer loyalty is a source of competitive advantage and an important intangible asset to any organisations, but empirical evidence from China's airline market regarding the determinants of passenger satisfaction and loyalty is lacking. This paper investigates the service quality of four major airlines in China's domestic market and explores the links between their service quality and customer satisfaction, as well as the conditions under which airlines can retain existing passengers. In line with previous studies, service quality variables are significant factors influencing customer satisfaction levels. However, satisfactory service was not found to result in higher customer loyalty among business travellers. In comparison to Hainan Airlines, passengers who travelled with Air China, China Southern and China Eastern were more likely to switch to an alternate carrier, indicating lower levels of brand loyalty. In addition, the frequent flyer programs (FFPs) have been largely a failure for the four major airlines in terms of increasing customer loyalty, as revealed in this study. It is necessary to draw distinctions between business and leisure travellers when studying the determinants of customer satisfaction and customer loyalty. Ticket pricing had a positive and significant effect on passengers' overall satisfaction and in turn strengthened customer loyalty among leisure travellers, but achieved no impact on the satisfaction and loyalty of business passengers. Some demographic variables such as gender, income and education are statistically significant for one group of passengers but not for another in the probit models estimated. It is suggested that different marketing strategies may be used to target different market segments to improve customer loyalty.     

A voice in the skies: Listening to airline passenger preferences

This study aims to identify the impact levels and priorities in the service expectations that passengers have when identifying a preferred airline. The results are based on probabilities and impacts, and can help airlines to accurately understand the preference criteria of their passengers. The priorities of the passengers may differ according to the airline chosen; therefore, the probabilities shown in this study can inform senior airline managers about the passenger perspective. This study uses the Stochastic Multicriteria Acceptability Analysis-2 (SMAA-2) method. SMAA-2 identifies the priorities and impact levels of passengers’ expectations on airline selection, and the ranking of alternative firms according to the probability. According to the obtained results, Airline 3 (AF₃) is the most preferred airline with the highest confidence rate. This airline operates based on a low-cost model that allows passengers to choose additional services for additional charges. The passenger expectations that have the highest impact on the preference when selecting an airline are 1) ticket prices, 2) punctuality, and 3) booking convenience. Free in-flight food and beverages, the variety and quality of the food and beverages, and voyager miles programs for loyal customers are found to have no impact on the ranking of airlines. The expectations identified by the passengers in this study are related to the outcome quality dimension, with services dominated by flexible features. The findings of this study define the passenger as a rational decision maker who is price sensitive.     

Airline choice by passengers from Taiwan and China: A case study of outgoing passengers from Kaohsiung International Airport

Understanding what factors passengers consider when selecting an airline is critical, as airlines can utilize this information in market segmentation and marketing strategies. However, few studies have explored how passenger demographics and the nationality/type of carrier (full service or low-cost; regional or international) affect the choice factors of passengers when selecting airlines. The main objective of this study was to explore the airline choice factors considered by passengers, compare the choices of passengers with different demographics, and analyze which factors are emphasized by passengers from Taiwan and China when selecting airlines. We conducted a questionnaire survey of outgoing passengers at Kaohsiung International Airport in relation to 22 factors underlying their choice of airline. Using factor analysis, we identified the five factors: ground services, convenience, in-flight services, price, and travel availability. We then utilized cluster analysis to identify four groups, each concerned with price, comfort, convenience, and ground services, respectively. Nationality, age, income, flying frequency, and purpose of travel lead to differences in deciding which factors were considered by cross-strait passengers. Passengers of different nationalities concerned with different factors when selecting airlines. Our findings can add to the completeness of existing research as well as provide airlines with reference in developing marketing strategies for different customer groups.     

Are low-cost carrier passengers less likely to complain about service quality?

Complaints made by airline passengers to the U.S. Department of Transportation (DOT) are often used in academic research and in the media as a proxy for the quality of commercial air service in the United States. In this paper, we test whether passengers of network carriers are more likely to make a complaint to the DOT about service quality failures than passengers of low-cost carriers. Through a fixed-effects regression, we find that passengers of low-cost carriers like Southwest Airlines are less likely to complain about service quality than passengers of network carriers like United Airlines, given the same levels of service quality and controlling for yearly fixed effects. This behavior could be explained by price-based expectations of service quality, lack of information about how to complain to the DOT, or qualitative differences in front-line customer service between airlines.     

Text mining approach to explore dimensions of airline customer satisfaction using online customer reviews

The airline industry operates in a highly competitive market, in which achieving and maintaining a high level of passenger satisfaction is seen as a key competitive advantage. This study presents a novel framework for measuring customer satisfaction in the airline industry. Using text mining methods we explore Online Customer Reviews (OCRs) to provide guidelines for airlines companies to improve in competitiveness. We analyze a database of more than 55,000 OCRs, covering over 400 airlines and passengers from 170 countries. Using a Latent Dirichlet Allocation model we identified 27 dimensions of satisfaction described by 882 adjectives. Dimensions and adjectives were used to predict airline recommendation by customers, resulting in an accuracy of 79.95%. The most relevant dimensions for airlines' recommendation prediction were calculated. OCRs were stratified according to several variables. Of those, type of passenger impacted the least on the number of dimensions of customer satisfaction, while type of cabin flown impacted the most. Observing results in different publication years we showed airline customer trends through time. Our method showed sensitiveness to identify variations in dimensions distribution according to different passenger characteristics and preferences. Practical implications are that airline service providers aiming at maximizing customer satisfaction should focus their efforts on (i) customer service to first class passengers, (ii) comfort to premium economy passengers, and (iii) checking luggage and waiting time to economy class travelers. Regression analysis revealed cabin staff, onboard service and value for money as top three dimensions of satisfaction to predict the recommendation of airlines. Designing services that excel in those dimensions is likely to improve the company's performance with customers.     

Assessing the effects of perceived value (utilitarian and hedonic) in LCCs and FSCs: Evidence from South Korea

In the airline industry, passengers choose and buy service based on their perception of which airline delivers better value. Thus, it is important to compare two types of airlines, Low Cost Carriers (LCCs) and Full Service Carriers (FSCs), to measure how much their product or service is worth and the effect of perceived value on passengers' purchase decisions. This study examined the relationship between perceived value, satisfaction, and purchase intention in both FSCs and LCCs. Confirmatory Factor Analysis (CFA) and Structural Equation Modeling (SEM) were performed for data analysis. Our findings reveal that passenger satisfaction in LCCs is affected by hedonic value and utilitarian value, but passengers' future purchase intention is not dependent on satisfaction even when passengers are satisfied. In FSCs, moreover, utilitarian value is not a significant factor for satisfaction and purchase intention. This research provides implications for airline marketers and directions for future research.     

Transformation of India's Domestic Airlines: A case study of Indian Airlines, Jet Airways, Air Sahara and Air Deccan

India, home to one-sixth of the world's population, is becoming one of the world's economic engines. Its bureaucratic and outdated regulatory policies have been reformed resulting in a three-fold increase in the number of scheduled airlines and a five-fold increase in the number of aircraft operated. This paper reviews how the new regulatory roadmap has transformed the supply of domestic air services. A large passenger survey conducted in Mumbai investigated the sensitivity of passengers to a change in fare and which flight products would encourage them to select either a full service airline or a low cost carrier. The study finds that there is a homogenous set of flight products required by leisure passengers, travelling on both full service and low cost airlines, however there is a considerable dissimilarity overall between the requirements of passengers using a full service airline and a low cost carrier.     

Passenger perceptions of service quality: Korean and Australian case studies

This paper investigates air passengers’ perceptions of 11 factors that may influence their buying behaviour namely, in-flight service, reservation-related service, airport service, reliability, employee service, flight availability, perceived price, passenger satisfaction, perceived value, airline image, and overall service quality. Analysis of variance and an independent sample t-test are applied to data collected from Korean and Australian international air passengers. The results reveal that passenger perceptions are significantly different across airlines, seat classes, and usage frequencies.     

Recovering costs through price and service differentiation: Accounting for exogenous information on attribute processing strategies in airline choice

The entry of low cost airlines has thrown out a challenge to all airlines to find ways of attracting passengers, through a mix of fare discounting, greater frequency, improved flight times and no-frill's levels of on-board service. These competitive strategies have an impact on cost recovery. As airlines seek business in an increasingly heterogeneous passenger market, a greater understanding of what matters to potential passengers in choosing an airline grows in importance. Traditional studies of passenger airline choice assume that all attributes matter, but some to a lesser extent. What happens to the empirical evidence on willingness to pay when specific attributes are totally ignored by particular passengers? In this paper, we examine the impact of individual-specific attribute processing strategies (APS) on the inclusion/exclusion of attributes on the parameter estimates and behavioural outputs of models of airline service and fare level choice. Modelling practice assumes that whilst respondents may exhibit preference heterogeneity, they employ a homogenous APS with regards to how they process the presence/absence of attributes of stated choice (SC) experiments. We demonstrate how information collected exogenous of the SC experiment on whether respondents either ignored or considered each attribute of the SC task may be used in the estimation process, and how such information may be used to provide outputs that are attribute processing strategies segment specific.     

Examining airline service quality from a process perspective

Airline service is composed of a set of processes. Passengers may have distinct expectations at different stages of the service chain. In this study, air travel was divided into ground and in-flight service stages. We first examined the gap between passengers’ service expectations and actual service received and the gaps associated with passenger service expectations and the perceptions of these expectations by frontline managers and employees of a Taiwanese airline. Next, importance–performance analysis was used to construct service attribute evaluation maps to identify areas for improvement. Results revealed that these gaps did exist and passengers were more concerned about the responsiveness and assurance dimensions from airline frontline staff. The tangibles dimension was considered more important when evaluating in-flight service quality than when evaluating ground service quality.     

Evaluation of passenger satisfaction with service quality: A consecutive method applied to the airline industry

Passengers' dissatisfaction with service quality is one of the crucial factors affecting the market share loss of airlines. This study aims to find out how airlines become capable of satisfying their passengers by considering the diversity of pre-purchase expectations. Therefore, the study proposes a novel model for clustering air passengers to identify passengers with similar expectations. Thus, the passengers' expectations of the service quality attributes in each cluster were measured and converted into quantitative degrees of customer satisfaction by applying the Kano model. Finally, Importance-Satisfaction Analysis (ISA) was employed to finding that which service quality indicators fall into the “Keep up the proper work”,” Concentrate here”,” Possible overkill”, and “Low priority” category for eliciting applicable marketing strategies.     

Exploring characteristics of passengers using traditional and low-cost airlines: A case study of Belgrade Airport

Low cost carriers entered the Serbian air travel market after Serbia joined the European Common Aviation Area (ECAA) in 2006, prompting the development of healthy competition among airlines and resulting in significant traffic increase at Belgrade Airport. The aim of this paper is to examine the characteristics of passengers traveling on low-cost carriers (LCC) in comparison with those traveling on traditional airlines by using cluster analysis, and to provide practical implications to airport management in tailoring their strategies to meet growing demand. A comprehensive passenger survey was recently conducted at Belgrade Airport on the routes where competition between traditional and LCC carrier exists. The results reveal that emigrants, primarily encouraged by favorable fares, constitute a substantial portion of LCC passengers. Affordable service offered by LCC has also been a positive stimulus for emigrants, who purchase tickets for their friends and relatives to visit them in their host countries. On the other hand, passengers using traditional airlines could be generally classified into two segments, those who fly on business and those who fly for leisure purposes, and each had specific needs when choosing their airline.     

The impact of an aircraft's service environment on perceptions of in-flight food quality

Airlines are currently striving to improve the quality and quantity of in-flight food, because research has shown that catering is a key attribute for a customer's satisfaction with airline service quality. But the role of an airline's service environment in forming customer perceptions about food quality has not yet been properly investigated. Using electronic word-of-mouth data from N = 3996 airline passengers, this study deploys a linear regression model at multiple levels to relate perceived in-flight food quality with both the overall service environment and its formative components. The results clearly unveil the importance of an aircraft's service environment on perceived in-flight catering quality; perceptions of food quality are primarily influenced by the quality of cabin staff service, followed by entertainment and seat quality. Instead of continuing with the current practice of signing up top chefs to improve menus, airlines may instead consider putting their management focus on service improvements.     

Airline in-flight entertainment: the passengers’ perspective

Following relaxation of economic regulation in many aviation markets, the competition amongst airlines has intensified in recent years. This has resulted in improvements in airline products, especially in the in-flight services. One of the areas on which airlines have focused their attention is the provision of personal in-flight entertainment (IFE). In 1998, airlines spent $1.8 billion on IFE. However, the industry is faced with a number of questions in relation to such levels of investment: Are the investments justified? Does IFE influence passengers’ choice of airline? Does IFE have a revenue-generating potential? What does the future hold as far as the IFE services are concerned? This paper addresses these questions based on a passengers survey and literature review. The results indicate that while IFE is not amongst the primary factors affecting passengers’ choice, it contributes greatly to passengers’ satisfaction with airline services. While provision of IFE can currently act as a differentiating factor, in the future it will become part of passengers’ expectations. It has also become apparent that, while IFE has the potential to generate some revenue, it would not be enough to cover the total costs associated with the installation and running of IFE systems. The impact of IFE would be felt, indirectly, through increase in passenger loyalty which should have a positive impact on airline revenues.     

Investigating passengers’ intentions to use technology-based self check-in services

As more and more airlines have introduced technology-based self check-in services, it has become increasingly important to understand the factors affecting airline passengers’ attitudes toward this new form of check-in services and also their intentions, especially from Asian passengers’ perspectives. An empirical study was conducted among Taiwanese airline passengers using the technology acceptance model (TAM) as the basic research model while considering additional factors for further analysis such as external stimuli, perceived service quality, perceived behavioral control, need for service, and perceived risk. The findings revealed that attitude and external stimuli best explain passengers’ behavioral intentions to use the kiosks, whereas perceived usefulness and perceived ease of use have little effect on their intentions. These findings suggest that airlines in Taiwan should persuade passengers to acquire a more positive attitude toward the new check-in kiosks and should consider implementation of incentive strategies in encouraging passengers to adopt the self check-in service.     

Predicting airline passengers’ loyalty using artificial neural network theory

The study explores a model for predicting airline loyalty using the antecedents indicated in previous studies. Data was collected using a questionnaire distributed to 614 domestic air passengers using the snowball sampling method. The measurement tool had 16 scale items constructed on the recommendations of previous studies. Passenger satisfaction, airline service quality, passenger perceived value, and airline image are identified as determinants for airline loyalty. The predictive analytical approach of Artificial Neural Network theory and covariance-based Structural Equation Modelling for determining causality is employed in the study. The artificial neural network model predicts airline loyalty with 89% accuracy. Sensitivity analysis suggests passenger satisfaction as the most significant predictor of airline loyalty. The causal study supports that passenger satisfaction mediates the relationship between airline service quality and airline loyalty.     

Evaluating frequent flyer programs from the air passengers' perspective

Frequent flyer programs are used as a common strategy in the airline industry. They can be defined as a service quality attribute that consists of some redemption of free flight miles and can determines the selection of airlines. It has been argued that they can act as an entry barrier, but limited attention has been paid to assessing the impact of this strategy on passengers’ perceptions of service. They are generally part of broad airline service quality parameters and thus can creates dilemmas for airline managers, passengers and regulators regarding their added value, costs and competitive effects on industrial organization.     

Strategic airline alliances and endogenous Stackelberg equilibria

This paper analyzes the economic effects of the code-sharing alliances between an international and a domestic airline. If these two allied airlines and a separate unallied international airline endogenously choose the role of fare-leader or fare-follower, two types of Stackelberg equilibria exist. This finding suggests that the Stackelberg solution seems reasonable, and provides a guideline for the airlines’ role-choosing. Furthermore, although this complementary alliance improves the social welfare, it decreases the consumer surplus of the direct international passengers and may decrease that of the direct domestic passengers. The negative effects should also be considered when governments evaluate a complementary alliance.