Group5 Section B CB Final Project Report

Analysis of Consumer preference at various buying stages in Aviation Industry

Section B - Group 5

Akhil Agrawal 14P005

Sautraya Bhattcharjee 14P166

Chirag Mahajan 14P193

Praveen Sharma14P214

The study is based on the primary research gathered through the questionnaire method in an urban city of Gurgaon

Contents 1. ACKNOWLEDGEMENT ......................................................................................................................................... 3

2. INTRODUCTION ..................................................................................................................................................... 4

2.1 DRIVERS ................................................................................................................................................................. 5

2.2 CHALLENGES ........................................................................................................................................................ 7

2.3 KEY METRICS AND PARAMETERS ................................................................................................................... 8

3. LITERATURE REVIEW .......................................................................................................................................... 9

4. HPOTHESIS: ........................................................................................................................................................... 23

5. RESEARCH METHODOLOGY ............................................................................................................................ 24

6. SAMPLE STATISTICS………............................................................................................................................... . 25

7. HYPOTHESIS TESTING……................................................................................................................................. 29

8. RECOMMENDATION…………............................................................................................................................ 34

9. QUESTIONNAIRE…..,…………............................................................................................................................ 35

1. ACKNOWLEDGEMENT

We take immense pleasure in extending our sincere gratitude to all those people without whose

kind support the completion of this project would not have been possible. We are highly indebted

to our Professors Kanwal Kapil and Kirti Sharma, for their guidance and constant supervision, as

well as for providing necessary input regarding the project at all points of time. Our thanks and

appreciations go to our beloved classmates in developing the project and all other people who have

willingly helped us out with their full abilities.

Yours Sincerely

Akhil Agrawal

Sautraya Bhattcharjee

Chirag Mahajan

Praveen Sharma

2. INTRODUCTION

The commencement of the Aviation industry in India dates back to December 1912, when the first

domestic air route, between Delhi and Karachi was established. In 1915, the first Indian airline Tata

and Sons ltd started a domestic air mail service between Karachi and Chennai.

In 1953, the government nationalized the airlines industry, by enacting the Air Corporation Act.

Subsequently, assets of nine existing airline companies were transferred to two new corporations -

Air India International and Indian Airlines - creating a monopoly that perpetuated right up to 1993.

In 1994, with the repeal of the Air Corporations Act, private carriers like Jet Airways were permitted

to operate scheduled services, subject to fulfillment of certain criteria. However, some operators

could not sustain and exited the business in 1997.

The operating environment of the domestic airline industry underwent a substantial change between

1997-98 and 2011-12. Growth in number of players intensified competition, resulting in pricing

pressure for airline service providers.

India is currently one of the most under-penetrated aviation markets in the world. According to data

shared by AirAsia Group while releasing financials in December 2012, India has a fleet of around

422 aircraft for a population of 1.2 billion. In comparison, China has a fleet of 1,981 aircraft for 1.3

billion. A CAPA study in 2012 indicated the number of domestic airline seats per capita was very

low in India: just 0.07, when its 3.35 for Australia, 2.49 for the US, and 1.38 for Canada

With domestic air passengers in the country projected to triple to around 175 million per

annum by 2021 from 60 million in 2013-14, AirAsia India and Singapore Airlines have

announced new ventures to cash in on the growth.

Airlines, in general, also earn revenue from transporting cargo, selling frequent flier miles to other

companies and up-selling in-flight services. But the largest proportion of revenue is derived from

regular and business passengers. For this reason, it is important that you take consumer and business

confidence into account on top of the regular factors that one should consider like earnings growth

and debt load.

2.1 DRIVERS

Entry of Low-cost carriers: The airline industry has experienced a shift in demand with the

advent of no-frills low cost carriers which caters to the rising middle class and above. The demand

for the aviation industry depicted by the Passenger-kms travelled has been on the rise due to

competition amongst the players to keep the prices low. Civil aviation ministry has granted no-

objection certificates to six new airlines: three scheduled national carriers (Air One Aviation

Services, Zexus Air Services and Premier Airways) and three regional operations (Air Carnival,

ZAV Airways and Turbo Megha Airways). Though all these airlines are yet to secure flying

permits from the Directorate General of Civil Aviation. The new carriers, are largely meant

to improve connectivity and make way for greater competition which, in effect, will lead to more

consumer-friendly practices (read lower fares) in the domestic aviation market

Demand and supply of domestic carriers

(domestic + International)

Source : CRISIL

Higher household Incomes: The emergence of the fast-rising middle class, with comparatively

higher disposable income has led to the rise of demand in air travel. With domestic air passengers

in the country projected to triple to around 175 million per annum by 2021 from 58

million in 2012, many new low-cost carriers like AirAsia India and Singapore Airlines have

announced new ventures to leverage the growth in demand.

Increased FDI and Govt. support: Effective September 2012, foreign airline carriers have been

permitted to invest up to 49 per cent in scheduled and non-scheduled operations of Indian carriers.

The current size of the Indian aviation market and the growth potential it offers is attractive for

global carriers. The move to allow FDI is expected to provide the much-needed funding for

debt-laden carriers, which are highly leveraged at present. For the passengers, opening the

sector to foreign airlines will help bring global best practices into India with respect to better flying

experience and improved technology and safety systems

The aviation ministry is also planning to bail out loss making airlines by offering them loans at a

cheaper rate. The ministry has also started monitoring the financial health of the airlines and

has asked airlines to disclose all their debts including payable taxes so they don‟t go the

Kingfisher way.

Surging Tourism Inflow: The passenger traffic for both inbound and outbound, business and

leisure has increased over the last decade. Though recent times did see a period of stagnation, India

being a culture and heritage hub is expected to attract a lot of tourists. International passenger

traffic reported a steady CAGR of 8 per cent, over the last five years up to 2013-14. In

2013-14 the domestic air traffic grew by a moderate 4.6 per cent y-o-y to 60

million supported by discounting on ticket prices. Both domestic and foreign carriers have

expanded their networks to and from India, which has supported growth in international passenger

air traffic.

Increased cargo movement: India's trade linkages with developed countries and other global trade

hubs increased post the economic liberalization, which led to a robust growth in international

freight traffic. Bulk of the cargo comprises pharmaceutical products, perishable agricultural

products, electronics, electrical equipment, etc. In 2013-14, international freight traffic increased

by 5 per cent increase. While most Indian airports would increase cargo handling facilities over

the next five years growth in exports would shift the demand up. The Governments goals to double

exports and increase the share of manufacturing to 25% of GDP, is a boost to the cargo carrier

services. The facility of 24/7 custom clearance for export goods has been extended to 13 airports,

depicting the seriousness of the authorities to focus on exports.

Ticket Prices: In 2013-14, both domestic and international ticket prices declined by about 2 per

cent, thus propping up demand. Given their current financial health and losses, Indian airline

companies would eye every opportunity to hike air fares. While rising demand scenario might

favour such a move, the entry of new airlines in the Indian skies could restrict fare hikes.

Under-penetration: India is currently one of the most under-penetrated aviation markets

in the world. According to data shared by AirAsia Group while releasing financials in

December 2012, India has a fleet of around 422 aircraft for a population of 1.2 billion. In

comparison, China has a fleet of 1,981 aircraft for 1.3 billion. A CAPA study in 2012

indicated the number of domestic airline seats per capita was very low in India: just 0.07

compared with 3.35 for Australia, 2.49 for the US, 1.38 for Canada and 1.05 for Japan

2.2 CHALLENGES

Airline Industry works under several operational and financial constraints. High taxes on

aviation turbine fuel, or ATF, have made its price in India among the highest in the world. Fuel

comprises around 50 per cent of an airline's operating expenses. To add to it, the salaries of pilots

have risen through the roof and international airlines have often raised concerns about the high

airport charges in India. AirAsia, for one, had initially said it would not fly to Delhi and Mumbai

citing steep charges

Below are outlined reasons which impact the profitability of the industry:

Capital-intensive: The airlines industry is capital-intensive, with high fixed costs for aircraft

acquisition, leasing and maintenance. The c o s t o f m a i n t a i n i n g a i r c r a f t s a n d

c o m p l y i n g with aviation safet y norms are high. Additional costs incurred on training

pilots, technical support staff and crew members are fixed as well.

Fuel costs beyond airlines' control: Fuel costs, the largest cost component for airlines, are

beyond carriers' control and considerably impact their operating margins. Aviation turbine fuel

(ATF) prices are driven by the volatility in demand-supply of global crude oil. Rising fuel costs

would force carriers to increase ticket prices. Increase in ticket prices can lead to dip in demand and

subsequently, decline in passenger load factors (PLFs) of the carriers.

Higher sales tax (specific to India): ATF prices in India are expensive as compared to the rest of

the world, owing to high local sales taxes which ranges from 4-30 per cent. Consequently,

airlines' fuel costs escalate, leading to operational inefficiencies.

Source: Indian Oil Corporation

Congestion and Turna round time: Congestion in the airport affects the turnaround time of

aircrafts a n d r e d u c e s average aircraft utilization r a t e s . This l e a d s to w a s t a g e o f f u e l

a n d inefficient use of aircrafts by airline companies. Congestion can also cause inconvenience

to passengers, as delays in flight take-offs will unsettle their time schedules.

Turn-around time is the time required for loading, unloading, servicing or any other ground

handling operations on the airplane, which requires the airplane to stay on land. The time utilized

between landing on the airport and taking-off for the next flight is called the turnaround

time. The lesser the turnaround time, the more revenues generated as more is the time available to

be spent in air. The congestion on airports increases the turnaround time for the planes as on

land, they have to incur various charges levied by the airport, with no revenues.

Tendency of players to undertake marginal costing: Carriers often employ aggressive pricing

strategies in order to capture higher market share and sell tickets at below breakeven levels. This

strategy reduces average yields and increases competition, leading to losses for the entire industry

as others will be forced to follow suit and bring down their fares as well.

Deflating r e v e n u e s a n d i n f l a t i n g c o s t s : For airlines g l o b a l l y , a i r c r a f t a n d o t h e r

t e c h n i c a l equipment costs, employee costs, landing and parking charges at airports

have risen significantly, with ticket prices not increasing in a commensurate manner. This has led

to low revenues per passenger kilometer (RPKM) and rising expense per available seats per

kilometer (ASKM) for airline companies. Also, domestic airline companies are unable to pass on

increased costs because of severe competition in the industry.

Industry cyclical; faces longer recessions, shorter recoveries: New airline carriers enter the

industry during periods of high economic growth. These forays lead to a price war among players,

resulting in considerable losses for the whole industry. The price war continues until weaker

players move out of the industry or merge with financially strong companies

Strong influence of external factors: The airlines industry is acutely sensitive to external events

such as wars, economic instability, government policies and environmental regulations. The

industry's PLFs declined significantly following events such as the 9/11 terror attacks in the US and

the outbreak of the SARS syndrome in South-East Asia. The industry thrives on growth in

disposable incomes of consumers and the economic downturn seen since 2008 has impacted the

overall profit margins of the industry on the whole.

2.3 KEY METRICS AND PARAMETERS

Available Seat kilometers (ASKM) = (total number of seats available for transporting

passengers) X (The number of kilometers flown during period)

Revenue Passenger kilometers (RPKM) = (total number of revenue-paying passengers) X (The

number of kilometers flown during the period)

Revenue Per Available Seat kilometers = (Revenue) / (the number of seats available)

Yield: The average revenue earned per revenue passenger kilometer (RPKM)

http://www.investopedia.com/terms/a/availableseatmiles.asp

http://www.investopedia.com/terms/a/availableseatmiles.asp

Passenger- kilometers (pax-km) = It is the distance (km) traveled by passengers determined by no.

of passengers multiplied by the distance covered by the carrier. It can be used interchangeably with

RPKM

Passenger Load Factor (PLF): Passenger load factor is the ratio of RPKM to ASKM expressed

in per cent.

3. LITERATURE REVIEW

Authors and Year

Country of reference

Research Approach/

Methods

Relevant Sources

Variables in the study

(Independent/D ependent)

Key Findings Future Scope of

research

Implications

Lawrenc e F. Cunning ham, James H. Gerlach, Michael D. Harper

and

Clifford E. Young

USA Qualitative and Quantitativ e

eLibrary - MDI

Independent variable: Consumer Buying Stages and Delivery Model; Dependent variables:

Perceived Risk:

Financial, Performance,

Physical,

Psychological, Social, Time

The statistical findings indicate that perceived risk follows a pattern for internet and traditional airline reservation services. Generally, perceived risk falls dramatically at the information search stage for internet services, but then rises dramatically from the alternatives

evaluation stage to the purchase

stage. Risk then falls at the post- purchase stage. Perceived risk for

traditional airline reservation

services generally follows a similar pattern except that risk does not

decrease between need recognition

and information search, but does

increase between information search

and evaluation of alternatives.

Perceived risk for internet airline reservation services falls more

rapidly than for traditional airline

reservation services during need recognition and information search

and accelerates more quickly

between the alternatives evaluation and purchase stages. Most

importantly, perceived risk appears

to play a prominent role during the actual purchase of a service

regardless of delivery method

Future study should investigate causal relationship s that may exist among

delivery

methods, purchase

stages, and

risk types for a wide

variety of

online

airline

booking

services like aggregators like

Makemytri

p, company booking

websites

like Indigo, SpiceJet,etc on the basis

of more

rigorous methodolog

ies

The analyses indicate that performance risk drives the perceived risk premium, while physical,

financial and

social risk play ancillary

roles as risk

drivers at certain

stages. For Airlines, the

perceived

risk is directly linked with the stage of purchase and the delivery method. This will help us

evaluate the

prospects of Indian

Airlines with

the consumer segments in

India and

their buying stages

Fareena Sultan, Merlin C. Simpson,

Jr


eLibrary - MDI

Independent variable: Tangibles in an airline,

reliability,

Responsiveness, Assurance,

Empathy;

Dependent variables:

Consumer

Satisfaction

This finding is helpful for finding out key factors which influence consumer satisfaction of Europeans and Americans who form a sizeable

percentage of fliers in both Domestic

and especially in International Routes. The results reveal that

Americans and Europeans believe

that reliability is the most important aspect of airline-service quality and

``tangibles'' (which includes factors such as the appearance of the aircraft

and of its employees) is least important. Ironically, airlines find it

easier to meet customer expectations

in the area customers rate as least important (tangibles), while finding

it most difficult to meet expectations

of reliability ± the factor most valued by customers. These

assessments suggest that airlines

keen to improve customer-service quality

should devote more time and money

to improving reliability, and less to factors such as aircraft livery and

staff uniforms.

The analysis help sus find out what are the exact

drivers

through

which customer

service in

international aircrafts can

be improved

and this will help us link

consumer

satisfaction in these areas

discussed with aircraft profitability for the Indian Aircrafts

which cater to a lot of

International

passengers

Kalda, Kateryna

Romania Qualitative eLibrary - MDI

Independent Variable:

Consumer Perception based on Moral and Financial Factors; Dependent

Variables:

Consumer loyalty

After taking a final decision to use the air service the consumer need to

determine the most optimal air carrier for him. For this purpose he needs to collect information about all the possible air carriers. Such information can be received from the advertising booklets, television and

from experience of relatives, friends

who used services of one or another airline. The collected

information needs to be analyzed

and a consumer takes a final decision to use a certain air carrier services.

According to the experience,

future consumers perceive in best way information from the side of

satisfied clients who already used

such a service before. After a future consumer made a final

decision to use the certain airlines, he automatically becomes a firm

client and continues to collect

information about these airlines. In the case of negative perception of

information, a client begins the

search of other air company. In the case of positive perception of

information about the airline, a

potential client makes a final decision to use a certain aircompany

services and becomes a devoted

client. Both moral and financial factors influence the positive

perception of information

about airlines. Moral factors include the positive emotions of a client,

confirmed with positive reviews

from the side of relatives, friends, with a territorial location

of airlines that influence the

convenience for a client to take away the booked tickets, or whether

the airline provides a service of

tickets delivery etc. Financial factors include the quality of service

which airlines provide to the client,

cost of air flight and others.

Consumer Loyalty is

dependent on the both the quality of service that he experiences

on the

aircraft as well as

information

that he perceives

during the re-

buying process.

These

informatioj perception

depends on Moral and

Financial

factors and by satisfying

consumer

segments on these factors,

airlines can

increase consumer

loyalty.

Chacon, Juliano, Mason, Keith J


eLibrary - MDI

Independent Variable: Loyalty programs in low cost Airlines, Price, schedule, airport location;

Dependent

variable:

Consumer

Loyalty

Frequent-flier program (FFPs) and range of destinations were found to be the product variables rated highest among the most frequent travelers from network carriers. Passengers of low-cost carriers rated price, schedule, and airport location

most highly. The results show that

network carriers can develop a

sizable group of loyal passengers.

These airlines also have a substantial group of passengers who display

latent loyalty that may be converted

into fully loyal passengers by better meeting their needs. In comparison,

very few travelers displayed any

level of loyalty to their most-used low-cost carrier

In the Indian Context, this helps us identify key drivers of Network Carriers and

low cost

Airlines like

Indigo and

Spicejet.

This article also helps us

develop a

positive correlation

between

price, schedule and airport

location with

consumer loyalty

Thomas Mayr and

Andreas H. Zins

Austria Qualitative and

Quantitativ e

eLibrary - MDI

Independent Variables:

Service levels in Airlines; Dependent Variable: Perceived value

The responses from airline passengers prompt us to assume that both give‐ and get‐components influence perceived value. Give‐ components such as price (unreasonable price and price

assurance) play the dominant role for the overall judgment. However, on‐ board services, together with the entire atmosphere are also important. Perceived value explains a substantial proportion of the observed variance in some major dependent constructs such as satisfaction, loyalty, and word‐of‐ mouth intention. Recognizing that perceived value has a strong effect on satisfaction and word‐of‐mouth is

important. However, satisfaction has a substantial effect on loyalty. Managerially, this means that

service operations should consider

not only functional aspects for their routine service quality monitoring,

but should also observe the

perception of atmospherics emerging from the main service

encounters.

Perceived value shows

a substantial effect on behavioral consequence s. Airlines Service

operations

must observe the

perception of atmospherics

emerging from the

main service

encounters next to

considering

functional

aspects.

Joyce A. Hunter, 2010

U.S Qualitative and Quantitativ e

eLibrary - MDI

Independent Variable: Customer Hospitality;

Dependent

Variable: Consumer

Perception

The items related to “the smile” appeared to have the strongest correlations (ranging from.417 to.538 at the.01 significance level):

Items 1 (“I believe that smiling is the

beginning to good customer service”), 3 (“Customer service with

a smile causes passengers to feel

satisfied”), 4 (“I feel positive energy and positive emotions when I see a

smile”), 5 (“Generally, I return a

smile when someone smiles at me”), and 7 (“Smiling is perhaps the most

important way people communicate

with one another”).

The importance of the smile and smiling customer service for the airline industry is very

important.

“Smiling customer

service” and

“the smile” itself are

effective and

do work! A smile can be

contagious.

Kaynak, Erdener; Kucukem iroglu, Orsay; K ara, Ali

U.S Qualitative eLibrary - MDI

Independent Variable: Consumers' perceptions of airlines; Dependent Variable:

changes and developments

taking place in

global airline industry.

Airline industry is very much influenced by changes taking place in its varied environment. The development of the consumer- oriented marketing concept by airlines industry has been a response to changed environmental

conditions from a sellers' market to one of a buyers' market. Whether a

marketing orientation is needed or

not for organizational prosperity and well being will depend

fundamentally on the prevailing

relationship between the airline and its macro environment.

Study results indicating that airlines s hould be

more conscious of

the fact that

the airline pa ssengers are

becoming

more sophisticated

about flying

and therefore have higher

expectations.

Samuel Bryan

Martin

U.S Qualitative eLibrary - MDI


Airline Revenue Enhancing

Practices ; Dependent

Variable:

Consumer Perceptions

The findings of this study suggest that a few specific and obtrusive

revenue enhancing practices have the potential of challenging if not violating a basic human need, resulting in significantly negative consequences. The findings of this research study have also improved

the understanding of consumer

decision making, specifically as it relates to the specific 119

phenomenon of this study: negative

aspects of domestic airline revenue enhancing practices.

Consumer attitudes,

perceptions, and behaviors are consequentia

l to business. The findings of this

research

study revealed that revenue enhancing

practices of

domestic airlines

produce both

negative and positive

perceptions

in the consumer's mind. Data

analysis

produced a description

concerning

the development

of attitudes

and perceptions

127 regarding revenue

enhancing practices in

the consumer

which led to negative

consequence

s. The importance

of knowing the

consumer, understandin g their lived experience in

reference to

revenue enhancing

practices of

domestic airlines was

the essence

of this study.

Basanta Kumar Kabi and

Prof (Dr)

M. Sajnani

2014

India Qualitative eLibrary - MDI

Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying

behavior – which is potentially

beneficial to the firm

Primary research required to

support the

findings

Neeraj Kaushik, V K

Kaushik and

Girish Taneja;

2008

India Qualitative eLibrary - MDI

Independent Variables: Price, stff, availability

of route ; Dependent

Variable:

Consumer Preference and

satisfaction

Choosing an airline not solely determined by the income level of customers.

Customers‟ preference for the airlines found to be significantly

related to various factors like

product/price/staff

and availability of route

Kaynak, Erdener;

Kucukem iroglu, Orsay;Ka ra, Ali

1994

U.K. Qualitative eLibrary - MDI

Dependent variable:

Customer preference

Most important factors considered while selecting an airline were

reliability, post customer experience and price in the same order

Yasir AliSoom ro, Irfan Hameed, Rehan Shakoor and Atif Shahab

Butt;

2012

U.A.E Qualitative eLibrary - MDI

Dependent variable: Customer preference

Identified Ease of online booking and Boarding and clearance time as the factor affecting choice of airline.

Beatrice Gail Shorter-

Judson,

2000

U.S Qualitative and Quantitativ

e

eLibrary - MDI

Dependent variable: Customer

preference,

Independent variable:

alternative

ticketing methods

A larger sample would

enable

different statistical

analysis

with precision,

assuming

samples

were drawn from

normally

distributed populations

. Past research

demonstrat es that

intent to

purchase is difficult to

prove,

hence, requiring

additional

surveys and analysis to

build on

previous researchers‟

attempt to

use intent as a predictor

o f future

behavior statistical

analysis

with precision, assuming

samples

were drawn from

normally

distributed populations

. Past research

demonstrat es that

intent to

purchase is difficult to

prove,

hence, requiring

additional

At the time the survey was

administered

in October 1998, sixty-

two percent o

f the respondents

who used e-

ticketing indicated

they first purchased a ticket within 12 months from the time o f survey

taking.

Hence, this group falls

into Rogers‟

(1983; 1995) „late

majority‟

adopter classification

scheme.

Eighteen percent o f

users

purchased their first e-

ticket within

twelve to twenty-three

months o f

survey taking, thus,

falling into the category o f “early majority.‟ For

combined

categories, „earlier adopter‟ and

„innovator,‟ twenty

percent

indicated that they

purchased an

e-ticket twenty-four

months or

more

surveys and

analysis to

build on

previous researchers‟

attempt to

use intent as a predictor

o f future

behavior

prior to

taking the

survey.

Nonusers or fifty-one

percent o f

the total population

(n=93) at

the time o f survey taking

fall into

Rogers‟ (1983)

„laggard‟ adopter

category. From

Rogers

(1983; 1995), adopter categories „innovator, early adopter and early

majority‟ fall

within a

„propensity to earlier adoption‟ classification . And, adopter categories

„late majority and laggards‟ fall

within a

„propensity

to later

adoption‟ classification

.

Kaynak, US, Qualitative eLibrary - Independent It seems that the Study results Erdener; Pennsylvani MDI Variables: main reasons for selection of an indicating

Kucukem a iroglu, Orsay;

Kara, Ali,

2015

Service levels in Airlines; Dependent

Variable: Perceived value

airline for those who have traveled frequently (three times or more) are service guality, on-tire, frequent flyer programs, and reliability; while price, safety, and baggage handling were the main reasons for selection for those who

have flown less than three time.

that airlines should be more

conscious of the fact that

the airline

passengers

are becoming

more sophisticated

about flying

and therefore have higher

expectations.

It is found that users of

U.S.

carriers

showed different

demographic

, socio- economic and behavioral characteristic s in selecting an airline for foreign

travel. Statistically

significant differences

were found

between the users of

domestic and

foreign carriers

in the importance

they attached to service

attributes.

study results indicate that

majority of

the

customers used a travel

agent to

make travel arrangements

.

This brings the importance of these institutions in the airline

industry. The

sales promotion

efforts thus

should be mainly

targeted

towards

travel agents. It should be

noted that

marketing mix is one of

several

factors affecting the airline business, i.e., government polices, network

patterns, monopoly

power, and

hub operations.

However,

managers do not have

much control

on most of these factors.

Thus, customer

satisfaction is

very important in

the repeat

purchases.

John Global Qualitative eLibrary - Dependent The ASOM The analysis Ferguson perspective and MDI variable: model shows that

, 2012 Quantitativ Customer considers reductions in

e preference airline runway

scheduling capacity

decision limits at a

strictly given airport

based on will cause

operational airlines to

profitability reduce

rather than schedules for

any markets

decisions served at this

that are airport,

made for reduce

strategic frequency of

positioning. service for

It does not these

model markets,

airline reduce

competition passengers

, except as it flown to

uses pricing these

curves that markets, and

are based reduce

on available seat

competitive miles in the

behavior. schedule.

2. The Additionally

ASOM the airlines

models will increase

chooses airfares,

only increase

profitable average

markets to aircraft size,

serve and reduce fuel

does not burn, and the

consider airlines

staying in profits will

unprofitabl be reduced. It

e markets also shows

during that

down increased

economic aviation fuel

times in prices will

order to cause airlines

retain to reduce

market schedules for

share. markets

Thus, the served at this

model is airport,

likely to reduce

move out of frequency of

markets service for

more these

quickly markets,

than might reduce

actually passengers

occur flown to

during these

recessionar markets,

y periods. reduce

available seat

miles in the

schedule, and

reduce the

average

aircraft size

used in the

schedule.

Ray Wang,

Shu-Li, Hsu, Yuan Hsu Lin, Ming- Lang

Tseng

Taiwan Fuzzy linguistics

method DEMATE L implementi ng steps, Purpose

sampling

method and decision- making

trial

http://www.sc iencedirect.co

m/science/arti cle/pii/S1877 04281200359 X

Direct variables: Income, fares,

Indirect Variables:

service levels,

goodwill, reliability,

assurance,

reaction, care and concern

Ranking of service quality factors of airline companies

1. Truly providing committed services

2. Professional training of flight attendants

3. Flight attendants are able to initiatively take care of passenger

needs

4. Initiatively providing the needs of

passengers

5. Active and rapid response to passenger needs

6. Accuracy of various operations

7. Handling of passenger complaints

8. Rational ticket price

9. Service attitude of check-in

attendant (ticket reservations and

sale)

10. Convenience of baggage check-

in and check-out

11. Seat (designation) and easy

booking processes

12. Internal decorations and cleanliness of flight cabins

13. Comfortable seats in the cabin

14. On-time flights

15. Provision of flight meals

16. Flight safety

17. Books, newspapers and

entertainment programs on the flight

18. Arrangement of flight time

19. Apparel and appearance of the flight attendants

The research

targets are Taiwanese passengers and the research point is the

study of the

service quality of

two

internationa l airline

companies

in the country.

Foreign

passengers and non-

domestic airline

companies

are not in the scope of

this study.

Operations of airline

companies must especially give importance to the attainment of committed

services,

professional training of

service

personnel

and accuracy of various

operations.

Even though flight safety

is the basis

that influences

the service quality of

airline companies,

the research

findings found that

passengers

did not especially

emphasize

flight safety in the overall

performance

of the service

quality of

airline

companies, but paid

attention to

the accuracy and speed

and

professional training of

personnel.

Keng- Chieh Yang,

Tsui- Chuan

Hsieh

Hendrik Li and

Chyan

Yang

Taiwan Structural equation modeling

and Hypothesis

testing.

http://www.sc

iencedirect.co

m/science/arti

cle/pii/S0969

69971100129 3

Independent Variable: Service quality,

airline image, customer value

and behavioral intentions for

passengers to fly

on low cost carriers

depedent Variable: Fares

1. Service quality has a positive impact on customer value.

2. Service quality has a positive impact on airline image.

3. Customer value has a positive

impact on behavioral intentions.

4. Airline image does not have a positive impact on behavioral

intentions.

5. Service quality has a positive impact on behavioral intentions.

Analysis has been performed

considering only

Taiwan population also 87.8 %

of respondents

are single

and hence result can

be biased.

The results thus indicate that service

quality has the greatest

effect on

behavioral intentions,

especially in

terms of reliability,

tangibles,

responsivene ss and

assurance, suggesting

that

customers care not only about low prices, but also about

other service

quality

issues. However,

airline image does not itself significantly influence behavioral

intentions.

Ilias Vlachos

& Zhibin Lin1,

China Hierarchic al

regression analysis,

SERVQU

AL model groups and

Kano‟s

model

http://www.sc iencedirect.co

m/science/arti cle/pii/S1366

55451400132 X


frequency of flights,

schedule, frequent flyer program, ticket

price, and

reputation

Dependent

Variable

safety, punctuality, and aircraft,

attractive factors: in flight food & drinks and in flight

staff service

1. Business traveler loyalty is affected by Airline reputation and

In-flight service.

2. Frequent flyer program, and

modern aircraft fleet also affect Business traveler loyalty.

3. Price does not contribute to

business traveler loyalty.

4. Attractive factors didn‟t influence

Repurchase Intension.

5. Business travelers repurchase is

based on reputation and frequent flyer program

1. This study

focuses on attitudinal

loyalty

only, thus future studies can use the behavioral approach or composite

approach to

develop different

measures of

loyalty.

2, Data was gathered

from one source of

information

and hence can create

common

method

bias.

Findings highlight the

critical importance

of airline reputation,

which is a competitive

factor: a

strong and favorable

reputation

will enhance passenger

satisfaction,

increase their intentions to

repurchase

and to spread positive word

of mouth for

a company. A strong

reputation

can also avoid airlines from

engaging in

price wars, as this study

also shows

that price does not lead

to business

passenger loyalty, i.e.

reputable

airlines have

the

advantage of commanding

a price premium

while

retaining passenger

loyalty.

• Sara

Dolnicar, • Klaus Grabler

and

Bettina Grün

Central,

Eastern

Europe,

Middle east and North

America

Unbiased

recursive

partitionin

g, decision trees

http://www.sc

iencedirect.co

m/science/arti

cle/pii/S0261 51771000172 X

Independent

Variable:overall

image,

consumer perceptions relating to

service-

orientation, reliability,

flexibility,

reputation, airline safety,

comfort,

trustworthiness, competence,

importance of

individual

needs, helpfulness,

quickness of

response to requests/proble

ms, accuracy,

reputation

among the

consumer‟s friends,

ownership, national

identity.

Independent

Variables

availability of flight , Fares

At the level of the entire market,

differences in behavioral loyalty

between consumers can best be

explained by being a member of a frequent flyer program, price, the

fact that the airline is the national

carrier and the reputation of the airline as perceived by friends. Price

and frequent flyer programs have

been identified as key factors in most studies investigating airline choice

or loyalty

Drivers of behavioral airline loyalty

are different for different market segments. Airlines therefore need to

make use of methodologically valid

segmentation approaches in developing and implementing

customized measures aimed at

increasing loyalty. Loyalty programs are strongly

associated with behavioral loyalty

for business travelers and for frequent travelers, but not for casual

and leisure travelers.

Leisure travelers are strongly influenced by price. Factors of satisfaction have not

emerged as drivers of behavioral loyalty. Some reputation factors

have been identified as contributing,

but only at later stages of the splitting process and for the travelers

who were not members of any

frequent flyer program.

Scope of

this study is

limited to

airline loyalty, as

opposed to

airport loyalty or

airport

choice The study is also limited by the fact that the percentage of

explained

variance for all models is relatively

low.

There are

factors that

are

significantly associated

with higher

passenger loyalty. It is

therefore

viable to increase

passenger

loyalty by managing

those factors

pro-actively. These factors

are not the

same across the entire

market, thus

requiring different

loyalty

incentives for different

segments of

the market

For leisure

travelers

price plays the biggest role

currently. The lack of interest from leisure

travelers in

the frequent flyer

programs

may be due to the fact that frequent

flyer

privileges

can generally only be

achieved by

people who also fly for

business,

thus making it an unattractive

proposition

for leisure travelers.

Novel ways

of making loyalty

programs

more attractive for

less regular

flyers may have to be

investigated

to reduce the heavy

dependency

of leisure passenger

loyalty on

price.

http://www.sciencedirect.com/science/article/pii/S026151771000172X










Focus on improving

customers‟ satisfaction has not proven to have a major impact on

loyalty

José-Luis Alfaro Navarroa , María- Encarnac ión Andrés Martínez a, Jean-

François

Trinquec osteb

Madrid– New York

t-test, analyses of variance (ANOVA) or regression

models

http://www.sc iencedirect.co m/science/arti cle/pii/S0969 69971500047

2


Flight prices, timing, flight

departure date,

economic crisis, Multichannel

retailer, E-tailer,

price dispersion, coefficient

variation, Gini

coefficient

Dependent Variables:

Consumer

loyalty

Economic crisis has resulted in a clear increase in airline ticket prices and has also entailed a clear reduction in price dispersion. However, the economic crisis has limited the usual marked increase in

average price that takes place as the

flight departure date approaches. lower demand for flights –

particularly tourist flights - has

meant that intermediaries do not change their prices so much in

reaction to competitor prices, and

has thus led to a reduction in price dispersion. Therefore, the crisis has

motivated changes in the market

with a lower demand for flights and a clear reduction in the number of

flights on offer. This situation has

meant that airlines have changed their pricing behavior.

Only one Flight route was considered which is from

Madrid to New York as data set is

very small and hence

result can

be biased.

Economic crisis affects price behavior both in terms of price level

and

dispersion, with a clear

increase in

price level and decrease

in price

dispersion. Moreover,

the economic crisis has reduced the

usual marked increase in

average price

that takes place as the

flight

departure

date approaches.

4. HYPOTHESIS:

After having reviewed the above mentioned articles we have come up with six set of hypotheses

and also tried to identify different variables to measure these constructs.

The most important factors that a consumer gives importance to while buying a particular

brand of airlines ticket for the first time is the price of the ticket over perception of the

Brand of the Airlines ( built either through word of mouth or by noticing various

advertisements and promotions of that brand of airlines )

Reliability is the most important factor of an airlines which will build up consumer loyalty

over time and help in customer retention

While purchasing a particular brand of airlines ticket for the second time, consumers give

more importance to the previous flight experience that he had over the price and time of

departure in choosing that brand of airlines

As far as in-flight services are concerned, frequent fliers give most importance to

journey comfort than the others

5. RESEARCH METHODOLOGY

5.1. Participants

Our target segment will include respondents from both the working as well as non working

people to diversify the responses. This will diversify the portfolio and give us the clear idea

about the attitudes of people about soft drinks. The respondents will include people from

different income group which will further give us inputs about their preferences.

5.2. Data Collection from Primary Sources

The primary data is based on the objectives of the study, through the survey method that is

questionnaire development and responses will be obtained by floating the questionnaire

developed using Google form to social networking websites and sending it to email ids. For this

purpose also questionnaires can be prepared in such a way that all necessary data would be

collected.

5.3 Data Collection from Secondary Sources

To prepare this project report, we collected external data generated from general library research

sources, textbooks, trade journals, articles from newspapers, and internet websites.

5.4 Research Method Choices

Quantitative – We will use quantitative statistical means to verify our hypotheses, this will be done

by using parametric tests like t- test and ANOVA etc.

6. SAMPLE STATISTICS

In the sample collected, most of the people come under 4-10 lacs income segment

In the sample collected, most of the people said they fly sometimes

In the sample collected, most of the people said they have travelled via 5 or more brands of airlines

7. HYPOTHESIS TESTING

H1: The most important factors that a consumer gives importance to while buying a

particular brand of airlines ticket for the first time is the price of the ticket over

perception of the Brand of the Airlines ( built either through word of mouth or by

noticing various advertisements and promotions of that brand of airlines )

On Performing ANOVA single factor test we get the following results:

SUMMARY Groups Count Sum Average Variance

Rate according to importance in context of airline industry. [Ticket price] 60 262 4.366667 0.60904

Rate the importance of the following factors while buying an airlines ticket for the first time [ Your own perception of the airlines brand from advertisements and promotions ] 60 171 2.85 1.519492

ANOVA Source of Variation SS df MS F P-value F crit

Between Groups 69.00833 1 69.00833 64.84127 7.29E-

13 3.921478

Within Groups 125.5833 118 1.064266

Total 194.5917 119

As from the above results F(Calculated) > F(Critical), which means that the two

parameters are not equal and customers prefer price over brand. Therfore, ypothesis is

correct.

H2: Reliability is the most important factor of an airlines which will build up

consumer loyalty over time and help in customer retention

On comparing average points for all factors and comparing their variations we got

following results

Groups Count Sum Average Variance

Rate according to importance in context of airline industry. [Professional training of flight attendants] 60 227 3.783333 1.562429

Rate according to importance in context of airline industry. [ Handling of passenger complaints] 60 241 4.016667 0.999718


Rate according to importance in context of airline industry. [ Convenience of baggage check-in and check-out] 60 231 3.85 1.112712

Rate according to importance in context of airline industry. [ Internal decorations and cleanliness of flight cabins] 60 215 3.583333 0.484463

Rate according to importance in context of airline industry. [ On-time flights/ Reliability] 60 276 4.6 0.481356

Rate according to importance in context of airline industry. [Books, newspapers and entertainment programs on the flight] 60 162 2.7 0.857627

Rate according to importance in context of airline industry. [Journey Comfort] 60 256 4.266667 0.40226

Rate according to importance in context of airline industry. [Passenger safety measures the aircraft takes] 60 254 4.233333 0.825989

Rate according to importance in context of airline industry. [Loyalty programs like FFPs (Frequent Flier Programs)] 60 188 3.133333 0.99887

Rate the importance of the following factors while buying an airlines ticket for the first time [ Price of Ticket ] 60 102 1.7 0.586441

Rate the importance of the following factors while buying an airlines ticket for the first time [ Availability of the flight at the desired time of the day ] 60 121 2.016667 1.135311

Rate the importance of the following factors while buying an airlines ticket for the first time [ Word of Mouth Advice as to which flight ticket to buy - experience of a near and dear one with that flight ] 60 153 2.55 0.963559


It was observed that among all factors, reliability has highest average with minimum

variance that means the hypothesis is correct.

H3: While purchasing a particular brand of airlines ticket for the second time,

consumers give more importance to the previous flight experience that he had over

the price and time of departure in choosing that brand of airlines

When the customers were asked to answer the question - Rank the factors according to the

importance that you give to them while re-buying an airlines ticket the second time ? we

got following response:

Factor Response

Previous Experience 48

Cheapest + time of departure 6

Analysis of the airline’s recent performance through information gathered from newspapers, internet, etc

3

Word of Mouth of a close one who has recently availed the airlines

3

80 % of customers feel that previous experience is the most important factor they consider

before reburying ticket and hence Hypothesis is correct.

H4: As far as in-flight services are concerned, frequent fliers give most importance to

journey comfort than the others

On comparing average points for all factors and comparing their variations for frequent

flyers we got following results

Groups Count Sum Average Variance

Previous Experience, 48

Cheapest + time of departure, 6

Analysis of the airline’s recent performance

through information

gathered from newspapapers, internet, etc, 3

Word of Mouth of a close one

who has recently availed

the airlines, 3

Rate according to importance in context of airline industry. [Professional training of flight attendants] 12 44 3.666667 1.333333

Rate according to importance in context of airline industry. [ Handling of passenger complaints] 12 48 4 1.090909


Rate according to importance in context of airline industry. [ Convenience of baggage check-in and check-out] 12 44 3.666667 0.969697

Rate according to importance in context of airline industry. [ Internal decorations and cleanliness of flight cabins] 12 45 3.75 0.75

Rate according to importance in context of airline industry. [ On-time flights/ Reliability] 12 56 4.666667 0.606061

Rate according to importance in context of airline industry. [Books, newspapers and entertainment programs on the flight] 12 34 2.833333 1.060606

Rate according to importance in context of airline industry. [Journey Comfort] 12 50 4.166667 0.515152

Rate according to importance in context of airline industry. [Passenger safety measures the aircraft takes] 12 53 4.416667 0.628788

Rate according to importance in context of airline industry. [Loyalty programs like FFPs (Frequent Flier Programs)] 12 37 3.083333 0.810606

Rate the importance of the following factors while buying an airlines ticket for the first time [ Price of Ticket ] 12 20 1.666667 0.606061

Rate the importance of the following factors while buying an airlines ticket for the first time [ Availability of the flight at the desired time of the day ] 12 26 2.166667 2.151515

Rate the importance of the following factors while buying an airlines ticket for the first time [ Word of Mouth Advice as to which flight ticket to buy - experience of a near and dear one with that flight ] 12 27 2.25 0.568182


As per above detail, frequent flyers consider following factors as most important before

making buying decision.

1. Relaibality

2. Ticket Price

3. Safety Measures

Therefore Hypothesis is rejected.

8. RECOMMENDATION

Ranking of factors that leads to buying decision is following. From which it is clear that

consumer give more preference to operational efficiency over other factors.

1. On-time flights/ Reliability

2. Ticket price

3. Journey Comfort

4. Safety measures

5. Handling of passenger complaints

6. Convenience of baggage check-in and checkout

7. Professional training of flight attendants

8. Internal decorations and cleanliness of flight cabins

9. Loyalty programs like FFPs (Frequent Flier Programs)

10. Perception of the airline brand from advertisements and promotions

11. Entertainment programs on the flight

12. Word of Mouth Advice

13. Availability of the flight at the desired time of the day

In order to attract more number of prospects and convert them into customers, airlines

companies should focus on marketing parameters related to operational efficiency. Also,

there is difference in between pre buying and post buying behavior of customers.Customer

pre buying decision is primarily influenced by ticket price, however, post buying decision

depends upon reliability, which in turns affect repeat purchase.

9 QUESTTIONAIRE

Consumer Behavior in Airline Industry What is your Household Income per annum?

o Below 4 lacs

o 4-10 lacs

o 10-15 lacs

o >15 lacs

How regular do you fly?

o Rare

o Sometimes

o Frequently

How many brands of airline have you traveled by?

o 0

o 1-2

o 3-4

o 5 or more

Rank the most important factors of an airline that you judge after you have bought the

tickets ?

o Reliability

o Journey Comfort

o Quality of Service inside the aircraft

o Passenger safety measures the aircraft takes

o Loyalty programs like FFPs (Frequent Flier Programs)

Rank the factors according to the importance that you give to them while re-buying an

airlines ticket the second time ?

o Previous Experience

o Analysis of the airline‟s recent performance through information gathered from

newspapapers, internet, etc

o Word of Mouth of a close one who has recently availed the airlines

o Other:

If you were to fly 20 times in one year, what would be most important factors of an airline

that you would judge during the pre-buying stage which will lead you to prefer one

particular airlines?

o Frequent Flier Programs

o Range of Destinations

o Reliability of the airlines

o Overall Flying experience ( service and comfort )

o Price

Rate according to importance in context of airline industry.

1 Least Imp 2 3 4 5 Most Imp

Professional

training of

flight

attendants

Handling of

passenger

complaints

Ticket price

Convenience

of baggage

check-in and

check-out

Internal

decorations

and

cleanliness of

flight cabins

On-time

flights/

Reliability

Books,

newspapers

and

entertainment

programs on

the flight

Journey

Comfort Passenger

safety

measures the

aircraft takes

Loyalty

programs

like FFPs

(Frequent

Flier

Programs)

Documents

Group5 Section B CB Final Project Report