The Impact of Price Fairness and Service Quality on Customer Satisfaction and Loyalty of Lion Air Airlines Due to Paid Baggage Policy on Domestic Flights at Soekarno Hatta Airport

Abstract

Low-cost airlines or commonly known as Low Cost Carrier (LCC) airlines are currently widely used by people in Indonesia to travel. This is evidenced by the high Market Share of the LCC Airlines, which is Lion Air Airlines, on domestic flights in Indonesia. Along with the increasing interest from many of its users, Lion Air Airlines has implemented a new policy on domestic flights, namely paid baggage. This is done with the objective to improve the service quality to its passengers. However, this causes the pros and cons to arise,which cause a decrease in the number of passengers due to the increasingly expensive costs. The purpose of this researchwas to find out the effect of price fairness and service quality on customer loyalty by mediating the customers satisfaction of Lion Air Airlines in Indonesia, especially domestic flights at Soekarno Hatta airport. The samples used in this research were 207 respondents who had used Lion Air Airline services and had experienced the new policies, chosen with Simple Probability Sampling technique. The instrument used in Data Analysis was SEM (Structural Equation Modeling) with variant based-Partial Least Square (PLS) —using SmartPLS 2.0 software. The results of this research indicated that the Price Fairness Variable does not affect Customer Loyalty of Lion Air Airlines through CustomerSatisfaction as the Mediator. Conversely, Service Quality Variable affects Loyalty of Lion Air Airlines through Customer Satisfaction as Mediator.