Airline customer loyalty through analysis of stated preference

Shanna Trichês Lucchesi,Christine Tessele Nodari,Luis Afonso Dos Santos Senna,Ana Margarita Larrañaga

doi:10.1590/2238-1031.jtl.v9n2a5

Shanna Trichês Lucchesi, Christine Tessele Nodari + Show 2 more

Open Access

https://doi.org/10.1590/2238-1031.jtl.v9n2a5

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Abstract

This study evaluates airline customer loyalty and estimates the switching costs for a domestic airline route in Brazil through a stated preference survey. Several structures of discrete choice models were tested to represent the choice of behavior: multinomial logit, mixed logit random coefficients, multinomial logit incorporating systematic variations of preferences, mixed logit error component and mixed logit error component incorporating systematic variations of preferences. The results showed that loyal passengers are more likely to choose the dominant Brazilian airline Tam. The switching costs of passengers loyal to Tam, for this sample, are equivalent to 15% of the fare, which represents much more than the percentage for other companies. These passengers are less sensitive to variations in the fares and incur higher costs not to switch airlines.

Highlights

This study evaluates airline customer loyalty and estimates the switching costs for a domestic airline route in Brazil
In order to achieve this goal, the stated preference (SP) of passengers departing from Porto Alegre and arriving in greater São Paulo (Guarulhos, Congonhas and Viracopos airports) were collected
The estimated models show that passengers traveling with the same company are more likely to choose Gol and Tam airlines than Azul

Summary

Introduction

Beggs and Klemperer, 1992; Klemperer, 1987) This studies show that the presence of a switching cost can affect the market power of the firms and result in welfare losses. The costs are seldom of direct monetary expense; instead they are often costs such as learning and transaction costs, and for most customers these costs are not realized since they do not switch (Carlsson et al, 2006) While much of this cost can be attributed to differences in perceived quality, frequent flyer programs contribute to a non-negligible share. Discrete choice models from SP data were estimated., which allowed the inclusion of heterogeneity in the preferences of individuals (random and systematic variations) and the correlation between the sampled individuals; (ii) on the inclusion of variables which characterize passenger loyalty to the airline and the existence of a third party payer.

Setting and data collection

Estimation of discrete choice models

Analysis of results

Airline loyalty effect

Findings

Conclusion