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.     

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.     

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.     

Market strategy development and innovation to strengthen consumer-based equity: The case of Brazilian airlines

A brand valued by passengers would be able to convey quality and credibility, adds value to air transport the service, and increases passengers' willingness to pay a premium for tickets. However, studies on consumer-based brand equity in the air transport sector have been scarce, especially in developing countries such as Brazil. This study examines the relationship between marketing strategies adopted by Brazilian airlines in the domestic market and the strengthening of consumer-based brand equity (particularly brand associations with brand awareness, perceived quality, and brand loyalty). A literature review and a survey of 33 managers from Brazil's top airlines were conducted to develop the study's conceptual model. To empirically test the model, another survey was conducted on 480 passengers at six airports in the central western, southern, and southeastern regions of Brazil and the data analyzed via structural equation modeling. The results show that joint investments are necessary for innovation in service, price promotion, and event sponsorship in order to strengthen the key consumer-based brand dimensions. This study provides a basis for the development of future studies on passenger-based brand equity and helps airlines target their marketing strategies with maximum effectiveness.     

An investigation into traveler preferences and acceptance levels of airline ancillary revenues

This study determines traveler preferences and acceptability levels for a range of airline ancillary products and services by employing an on-line passenger survey to examine booking preferences as well as attitudes toward a selection of air and non-air travel components sold by the airlines. The survey results are combined with expert opinions collated from a recent international conference, along with secondary data, to generate an acceptance ranking which can be used by a range of airlines to formulate their ancillary revenue strategies. It is found that airport car parking and checked baggage charges proved to be the most accepted commission based and unbundled products for airlines to sell respectively. Despite the recent focus and successes in ancillary revenues, however, it can also observed that none of the ancillary products and services examined in this study achieved a high take up rating suggesting that airlines can do much more to convince travelers of the benefit and value in airlines selling non-core products and services to them.     

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.     

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.     

Multimarket contact, alliance membership, and prices in international airline markets

This paper tests the mutual forbearance view in the context of airline alliances in the international air travel market. Using passenger booking and airfare data on transpacific routes, we find consistent evidence for the positive association between multimarket contact and airfares. Our results also suggest that multimarket contact between non-aligned airlines is associated with higher airfares, whereas multimarket contact between airlines in the same alliance has no additional upward impact on airfares. Moreover, it is shown that higher airfares tend to exist when airlines have greater multimarket contact on open-skies routes. In restrictive (non-liberal) international markets, however, multimarket contact may not affect airfare.     

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.     

Celebrity livery featured aircraft,the Moneki Neko (fortune cat) of airlines

Aircraft livery is a painting scheme on the aircraft that allows an airline not only to differentiate its aircraft from those of others, but also to promote the perceived values of the airline. Besides being visually attractive, celebrity-themed aircraft liveries also become increasingly popular today because they can influence consumers' perceptions of airlines. This study uses the data collected from Taiwan international airport, ranked the world's top 15 heaviest passenger traffic, to investigate the influences of celebrity worship on the original Theory of Planned Behavior's constructs, and purchase intention. The results reveal significant positive relationships between celebrity and attitude, perceived behavioral control, and purchase intention. Finally, contributions and implications are discussed.     

Adoption and loyalty toward low cost carriers: The case of Taipei–Singapore passengers

This study explores the determinants for the duration of airline passengers to adopt a low cost carrier (LCC) and their loyalty toward the LCC. The analysis results of travel information on 338 passengers traveling between Taipei and Singapore show that business passengers take longer duration to accept the LCC. Cheaper fares and convenient booking channels can shorten the passenger’s duration to adopt the LCC, whereas airline image and safety consideration can increase the duration. Frequent flyer programs and convenient booking channels can increase the passengers’ loyalty toward the LCC.     

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.     

Passenger airline choice behavior for domestic short-haul travel in South Korea

When the Seoul-Busan line of South Korea's high-speed rail system, dubbed the Korea Train Express (KTX), entered service in November 2010, it was expected that this line would compete with air transport services for short-haul domestic journeys. Therefore this is a study about passengers' choice behavior when traveling short-haul domestic routes in South Korea. It utilizes MNL and NL logit models with selected variables, and the data required for the analyses were gathered through Stated Preference (SP) Techniques. The main SP survey was conducted for three weeks at departure lounges in Incheon International Airport in May 2012. The results reveal that fare, access time and journey time are significantly important with respect to passenger choice. The results further indicate that business travelers are more willing to pay than non-business travelers to reduce access and journey time. It is also noteworthy that reducing access time is more important than reducing journey time for short-haul domestic travelers. The conclusion is that it is significantly important for airline planners or local authorities that want to increase their local market share to invest in relatively fast access modes.     

Exploring passenger preferences in airline service attributes: A note

This paper examines passengers' valuations on airline service attributes using stated preference analysis in the direct flight air market between Taiwan and China. An experiment design reflecting the characteristics of low cost airlines is used to collect stated preference data from Taiwanese air passengers. Empirical results reveal not only the implicit values of service attributes but also the preference differences in attributes between business and non-business travelers.     

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.     

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.     

The impact of service quality and price on passengers' loyalty towards low-cost airlines: The Southeast Asia perspective

The objective of this study is to examine the impact of service quality by adopting AIRQUAL model and price on passengers' loyalty through the linkage of passengers' satisfaction toward low-cost airlines from the perspective of Southeast Asia. With 200 questionnaires analyzed, the results suggest that service quality and price have a positive significant impact on passenger satisfaction, and as a result lead to passengers’ loyalty. Besides, the findings of this research also confirm the mediating role of customer satisfaction between service quality and loyalty, price and loyalty separately, which implies that customer satisfaction is a vital factor for an LCCs to survive in such a highly competitive aviation market.     

The decline of the traditional travel agent model

This article analyzes the struggle between traditional travel agencies and airlines to gain control of the Spanish airline services market. Also analyzed is the strong emergence of a third player, online travel portals that act as online travel agencies. We use a multinomial logit model to study the influence of 27 socio-economic factors and trip attributes on passenger purchase channel choice. The results show that the profile of a passenger who has a greater likelihood of making his/her bookings online is that of a young person, a student or educated to a high level, a habitual traveler, booking a simple journey and using an LCC. The factors linked to an increased likelihood of making purchases by phone include: being male, middle-aged, on a business or short trip, and the passengers usually use a travel agency. Finally, passengers who are over 65 years of age, with a lower academic level, who use a travel agency and are going to make a more complicated journey, are more likely to purchase their tickets in-store.     

What are passenger perspectives regarding airlines' environmental protection? An empirical investigation in Taiwan

Many airlines recognize the importance of environmental protection. The airlines implement a number of environment-friendly activities related to in-flight services and wish to trigger passengers' support and therefore inquire as to their preferences. Because these activities are not identical between airlines, it is not known which items are actually supported and which items are opposed. In this paper, major airline environmental protection activities were collated, and the Smart partial least square software was used to analyse data from 442 passengers who have experienced air travel in the past 3 years. The results showed that in general, passengers would prefer to choose airlines that supported environmental protection activities. However, several activity items would be rejected if passengers felt their rights or interests being compromised. It was also indicated that people from countries at different stages of economic development had varying preferences regarding their support of airlines' environmental protection activities, and the young generation had more concern about environmental protection than others. The findings of this research could be beneficial for airlines setting up their differentiated marketing strategies for enhancing both environmental protection efforts and business performance.     

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.