Bidding behaviors for international airline seats in short/long distance flights

Abstract

The strategic planning on the bidding of international airline seats is one of the business models run by practitioners in the airline business. Meanwhile, airline companies in Taiwan has not carried out any seat-bidding activities. Thus, in order to learn passengers’ seat bidding behavior, this study discussed the factors that affect passengers to participate in the bidding and estimate their willingness to pay (WTP) by using the inverse hyperbolic sine (IHS) double-hurdle model. In addition, this study further discussed the effects of different personality traits on passengers’ participation in bidding and their WTPs. The results of this study showed that important factors affect passengers’ participation in bidding and their WTPs on long- and short-distance routes. The common variable included in short- and long-distance routes was the bid reference benchmark is lower than the WTP. In terms of personality traits, respondents with neuroticism and high education level were less willing to pay in the bidding on the short-distance route (from Taiwan to Cebu and Seoul). On the other hand, respondents had openness to experience and having an annual household income higher than the average were more willing to pay in the bidding on the long-distance route (from Taiwan to New York and Amsterdam). In addition, among the items that passengers consider important, the route location was found to be positively significant in seat bidding behavior on long-distance routes. In the end, according to the WTP analysis, the price differences that passengers were willing to pay for an upgraded seat from economic class to business class were about 27.6% and 29.8% of the price difference for short-distance routes (from Taiwan to Cebu and Seoul), respectively, while the price differences for long-distance routes from Taiwan to New York and Amsterdam were 25.8% and 29.9% of the price difference. The relative information acquired in this study could shed light on relative studies for future practitioners in the airline business.