Homogeneous service with heterogeneous products: Relationships among airline ticket fares and purchase fences

A fare table derived from homogeneous service is essential for revenue management applications in the airline industry. Restrictions or so-called fences are usually regarded as a useful tool to differentiate homogeneous seat service. Nevertheless, the relationships among fares and fences are not yet clear. This study aims to investigate passengers’ preferences on the choice of ticket alternatives describing by fares and fences and using Taiwan domestic air travel as an example. Regarding the attributes that an airline ticket may be attached such as departure time, booking time, ticket validity, changing fee, refund and fare, stated preference questionnaires are developed with multiple hypothetical scenarios for respondents to select in the experiment. 398 valid samples are collected for the logit model analysis. With the use of mixed logit model to accommodate both passengers’ heterogeneity and also the issue of relevant alternatives in the experiment, the results show statistical significance of all applied attributes with correct signs. In addition, passengers possess different attitudes on the fence of booking time, ticket validity, changing fee, and fare. Willingness-to-pay of each fence is further calculated to ultimately generate a fare table based on the combination of fences for practice use.