This study comprehensively examined a number of airline ancillary services and factors that may
influence the purchase of them on international flights to or from the United States. In the investigation of ancillary services, we answered: 1) which ancillary services should airlines sell and to whom should they sell on U.S. international flights, and 2) can airlines use intention to purchase to predict if customers will purchase ancillary services on U.S. international flights.
As with the finding in Leon and Uddin (2017), answering these questions has several managerial applications. First, the findings can assist airline management in developing current and prospective ancillary services. Second, the findings can assist in developing associated sales, marketing, and training strategies, leading to increases in revenue. Taking a keen approach to sales and marketing efforts toward customers who are most likely to purchase ancillary services, airlines can increase revenue and reduce the risk of new ancillary service
implementation.
Such a pointed approach enables a better
understanding of the passengers’ traits that lead to ancillary purchases, and which ancillary services customers are willing to purchase. Generally though, passengers are not fond of purchasing ancillary services in the first place. However, compared to the U.S. domestic airline study by Leon and Uddin (2017), this study found that passengers on
international flights have higher intention scores. Thus, international passengers are more likely to purchase ancillary services on longer flights. This study also found that the number of domestic and international flights a passenger flies in a year and trip purpose were significant factors when examining intention to purchase ancillary services. Moreover, the significance of these factors change based on the ancillary service in question. Thus, some passengers show a clear preference for certain ancillary
services.
When actual ancillary service purchase behavior was investigated, this study found that, the number of domestic and international flights a passenger flies in a year, trip purpose, and to a lesser extent income levels and age, were significant factors. Our results show that gender is not a significant factor in predicting intent to purchase or the actual purchase of ancillary services. In their daily lives, Generation Y/Millennial behave differently than older
generations in many ways. However, we found that this is not true in the case of purchasing airline services.
If passengers are grouped together and asked which ancillary services they have purchased or are likely
to purchase, onboard meals, onboard Wi-Fi, and extra legroom rank higher than others. However, without taking the analysis further we lose some of the heterogeneity among passengers, and airlines might be leaving money on the table. For example, passengers who have flown more than five domestic flights in a year are more likely to purchase extra legroom and Wi-Fi than those who have flown fewer flights. Moreover, while paying extra for aisle seats, seats in front of the airplane, and reserved overhead space does not appear high on the list of ancillary purchases, passengers who have flown three or more domestic flights or two or more international flights are more likely to purchase these ancillary services.
Given these insights, airlines now have a path to increasing revenue per passenger by narrowly focusing on which passengers are most likely to purchase a specific ancillary service. Airlines can provide information and training to front line
employees such as gate and reservation agents, and flight attendants in the identification of more likely buyers, and sales techniques where they can offer the most relevant ancillary services, at the
appropriate time, and to the most appropriate customers.
This study also supports the belief that intent to purchase ancillary services predicts actual purchases behavior of ancillary services. This is important because it provides an opportunity to reduce the risk of implementing new ancillary services. If airlines survey customers and non-customers about their intention to purchase certain ancillary services, the airline gains valuable information about whether passengers will purchase the ancillary service, prior to any significant investment or asset allocation. This study followed the same approach as Donald, Cooper and Conchie (2014), Stran et al. (2016), and Leon and Uddin (2017) where intention and behavior were measured at the same time. However, a longitudinal study could reaffirm our results. Additionally, potential studies could include other factors that might influence ancillary purchases such as traveling in groups or families, or whether passengers are frequent fliers or not.
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BIOGRAPHIES
Steven Leon is an Assistant Professor of Supply Chain Management in the CIS and SCM Department of
the Walker College of Business, Appalachian State University. His research interests are in the areas of air transportation, global supply chain strategy, and service operations. His research has appeared in SCM: An International Journal, International Journal of Logistics Management, Transportation Journal, and Journal of the Transportation Research Forum. His PhD is in Transportation and Logistics from North Dakota State University and his MBA is in International Business from Loyola University Maryland. E-Mail:
Nizam Uddin is a Professor at the Statistics Department of University of Central Florida. He earned his
BSc and MSc in Statistics, both from Dhaka University, Bangladesh and MSc in Mathematics from the University of Saskatchewan. He completed his PhD in Statistics at Old Dominion University. His refereed articles have appeared in a variety of core statistics journals including Biometrika, Annals of Statistics, Journal of Statistical Planning and Inference, Communications in Statistics, and in many other applied journals in Psychology, Transportation, Health Care, and Environmental Science areas. E-Mail: [email protected]