IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v59y2017icp134-142.html
   My bibliography  Save this article

Willingness to pay for airlines’ premium economy class: The perspective of passengers

Author

Listed:
  • Kuo, Chung-Wei
  • Jou, Rong-Chang

Abstract

This study investigates how much extra air travellers are willing to pay to upgrade to premium economy class by using a suitable econometric model. Since a large portion of travellers' willingness to pay for premium economy class is zero, the spike model is applied to overcome the issues that may occur when traditional statistical models are used. Three flight distances, short, medium, and long hauls were separately estimated to investigate the effects of flight distance on willingness to pay. Travellers’ willingness to pay to upgrade from economy class to premium economy class round-trip was US$138 ,1 US$309, and US$545 for short-, medium-, and long-haul, respectively. The research results should be a helpful reference for the civil aviation industry in strategic pricing planning.

Suggested Citation

  • Kuo, Chung-Wei & Jou, Rong-Chang, 2017. "Willingness to pay for airlines’ premium economy class: The perspective of passengers," Journal of Air Transport Management, Elsevier, vol. 59(C), pages 134-142.
  • Handle: RePEc:eee:jaitra:v:59:y:2017:i:c:p:134-142
    DOI: 10.1016/j.jairtraman.2016.12.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699716303751
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jairtraman.2016.12.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Balcombe, Kelvin & Fraser, Iain & Harris, Liam, 2009. "Consumer willingness to pay for in-flight service and comfort levels: A choice experiment," Journal of Air Transport Management, Elsevier, vol. 15(5), pages 221-226.
    2. Chiambaretto, Paul & Baudelaire, Clément & Lavril, Thibaut, 2013. "Measuring the willingness-to-pay of air-rail intermodal passengers," Journal of Air Transport Management, Elsevier, vol. 26(C), pages 50-54.
    3. Elisabetta Strazzera & Riccardo Scarpa & Pinuccia Calia & Guy Garrod & Kenneth Willis, 2003. "Modelling zero values and protest responses in contingent valuation surveys," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 133-138.
    4. Bente Halvorsen & Kjartan Sœlensminde, 1998. "Differences between Willingness-to-Pay Estimates from Open-Ended and Discrete-Choice Contingent Valuation Methods: The Effects of Heteroscedasticity," Land Economics, University of Wisconsin Press, vol. 74(2), pages 262-282.
    5. Zhang, Yahua, 2012. "Are Chinese passengers willing to pay more for better air services?," Journal of Air Transport Management, Elsevier, vol. 25(C), pages 5-7.
    6. Hu, Wuyang, 2006. "Use of Spike Models in Measuring Consumers' Willingness to Pay for Non-GM Oil," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 38(3), pages 525-538, December.
    7. Seung-Hoon Yoo & Chul-Oh Shin & Seung-Jun Kwak, 2006. "Inconvenience cost of spam mail: a contingent valuation study," Applied Economics Letters, Taylor & Francis Journals, vol. 13(14), pages 933-936.
    8. Hugon-Duprat, Cindy & O'Connell, John F., 2015. "The rationale for implementing a premium economy class in the long haul markets – Evidence from the transatlantic market," Journal of Air Transport Management, Elsevier, vol. 47(C), pages 11-19.
    9. Chang, Li-Yen & Sun, Pei-Yu, 2012. "Stated-choice analysis of willingness to pay for low cost carrier services," Journal of Air Transport Management, Elsevier, vol. 20(C), pages 15-17.
    10. Espino, Raquel & Martín, Juan Carlos & Román, Concepción, 2008. "Analyzing the effect of preference heterogeneity on willingness to pay for improving service quality in an airline choice context," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(4), pages 593-606, July.
    11. Hagmann, Carmen & Semeijn, Janjaap & Vellenga, David B., 2015. "Exploring the green image of airlines: Passenger perceptions and airline choice," Journal of Air Transport Management, Elsevier, vol. 43(C), pages 37-45.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhao, Guihong & Cui, Yue & Cheng, Shaoyu, 2021. "Dynamic pricing of ancillary services based on passenger choice behavior," Journal of Air Transport Management, Elsevier, vol. 94(C).
    2. Özlem Atalık & Mahmut Bakır & Şahap Akan, 2019. "The Role of In-Flight Service Quality on Value for Money in Business Class: A Logit Model on the Airline Industry," Administrative Sciences, MDPI, vol. 9(1), pages 1-15, March.
    3. Eunmin (Min) Hwang & Yen-Soon Kim & Hyo Geun Song, 2023. "Airline Passengers’ Willingness to Reserve Inflight Meals Online and Their Willingness to Pay for Meal Upgrades: The Case Study of U.S. Students," Sustainability, MDPI, vol. 15(10), pages 1-22, May.
    4. Hyman, Max J. & Savage, Ian, 2022. "The effect of vertical product differentiation on fare and market share: Evidence from Delta Air Lines’ middle seat policy," Economics of Transportation, Elsevier, vol. 31(C).
    5. Zhang, Le & Duan, Peng & Jiang, Hai, 2024. "Modeling joint row- and column-wise correlation in air passenger seat selection: A cross-nested logit approach," Journal of Air Transport Management, Elsevier, vol. 114(C).
    6. Jou, Rong-Chang & Kuo, Chung-Wei & Chiu, Yi-Chun, 2022. "Bidding behaviors for international airline seats in short/long distance flights," Transportation Research Part A: Policy and Practice, Elsevier, vol. 163(C), pages 55-79.
    7. Kluge, Ulrike & Ringbeck, Jürgen & Spinler, Stefan, 2020. "Door-to-door travel in 2035 – A Delphi study," Technological Forecasting and Social Change, Elsevier, vol. 157(C).
    8. Jeon, Mi-Sun & Lee, Jang-Ho, 2020. "Estimation of willingness-to-pay for premium economy class by type of service," Journal of Air Transport Management, Elsevier, vol. 84(C).
    9. Sun, Xiaoqian & Wandelt, Sebastian & Zhang, Anming, 2022. "STARTUPS: Founding airlines during COVID-19 - A hopeless endeavor or an ample opportunity for a better aviation system?," Transport Policy, Elsevier, vol. 118(C), pages 10-19.
    10. Jun Hwan Kim & Hyun Cheol Lee, 2019. "Understanding the Repurchase Intention of Premium Economy Passengers Using an Extended Theory of Planned Behavior," Sustainability, MDPI, vol. 11(11), pages 1-19, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jeon, Mi-Sun & Lee, Jang-Ho, 2020. "Estimation of willingness-to-pay for premium economy class by type of service," Journal of Air Transport Management, Elsevier, vol. 84(C).
    2. Koo, Tay T.R. & Hossein Rashidi, Taha & Park, Jin-Woo & Wu, Cheng-Lung & Tseng, Wen-Chun, 2017. "The effect of enhanced international air access on the demand for peripheral tourism destinations: Evidence from air itinerary choice behaviour of Korean visitors to Australia," Transportation Research Part A: Policy and Practice, Elsevier, vol. 106(C), pages 116-129.
    3. Jun Hwan Kim & Hyun Cheol Lee, 2019. "Understanding the Repurchase Intention of Premium Economy Passengers Using an Extended Theory of Planned Behavior," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    4. Munoz, Claudia & Laniado, Henry, 2021. "Airline choice model for international round-trip flights: The role of travelers’ satisfaction and personality traits," Research in Transportation Economics, Elsevier, vol. 90(C).
    5. Chiambaretto, Paul, 2021. "Air passengers’ willingness to pay for ancillary services on long-haul flights," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 147(C).
    6. Wen, Chieh-Hua & Huang, Chia-Jung & Fu, Chiang, 2020. "Incorporating continuous representation of preferences for flight departure times into stated itinerary choice modeling," Transport Policy, Elsevier, vol. 98(C), pages 10-20.
    7. Rong-Chang Jou & Yuan-Chan Wu & Ke-Hong Chen, 2011. "Analysis of the environmental benefits of a motorcycle idling stop policy at urban intersections," Transportation, Springer, vol. 38(6), pages 1017-1033, November.
    8. Jou, Rong-Chang & Chiou, Yu-Chiun & Chen, Ke-Hong & Tan, Hao-I, 2012. "Freeway drivers’ willingness-to-pay for a distance-based toll rate," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(3), pages 549-559.
    9. Tsai, Tsung-Hsien, 2016. "Homogeneous service with heterogeneous products: Relationships among airline ticket fares and purchase fences," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 164-175.
    10. Hugon-Duprat, Cindy & O'Connell, John F., 2015. "The rationale for implementing a premium economy class in the long haul markets – Evidence from the transatlantic market," Journal of Air Transport Management, Elsevier, vol. 47(C), pages 11-19.
    11. Eunmin (Min) Hwang & Yen-Soon Kim & Hyo Geun Song, 2023. "Airline Passengers’ Willingness to Reserve Inflight Meals Online and Their Willingness to Pay for Meal Upgrades: The Case Study of U.S. Students," Sustainability, MDPI, vol. 15(10), pages 1-22, May.
    12. Jou, Rong-Chang & Chen, Yi-Wen, 2013. "Drivers’ acceptance of delay time at different levels of service at signalised intersections," Transportation Research Part A: Policy and Practice, Elsevier, vol. 58(C), pages 54-66.
    13. Stacey Mumbower & Susan Hotle & Laurie A. Garrow, 2023. "Highly debated but still unbundled: The evolution of U.S. airline ancillary products and pricing strategies," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(4), pages 276-293, August.
    14. Shao, Shuai & Kauermann, Göran & Smith, Michael Stanley, 2020. "Whether, when and which: Modelling advanced seat reservations by airline passengers," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 490-514.
    15. Rong-Chang Jou . & Ke-Hong Chen, 2015. "How Much Will I Pay for Freeway Real-Time Traffic Information?," Sustainability, MDPI, vol. 7(10), pages 1-12, September.
    16. Irawan, Muhammad Zudhy & Simanjuntak, Nurvita I.M. & Bastarianto, Faza Fawzan & Dwitasari, Reslyana & Herawati,, 2020. "Predicting the impact of Trans Java Toll Roads on demand for intercity air travel in Indonesia," Journal of Air Transport Management, Elsevier, vol. 87(C).
    17. Tay T. R. Koo & Carlo Caponecchia & Ann Williamson, 2018. "How important is safety in making flight choices? Evidence from simple choice experiments," Transportation, Springer, vol. 45(1), pages 159-175, January.
    18. Soojung Kim & Jinsoo Hwang, 2023. "Airline CSR and Quality Attributes as Driving Forces of Passengers’ Brand Love: Comparing Full-Service Carriers with Low-Cost Carriers," Sustainability, MDPI, vol. 15(9), pages 1-14, April.
    19. Hunt, Jennifer & Truong, Dothang, 2019. "Low-fare flights across the Atlantic: Impact of low-cost, long-haul trans-Atlantic flights on passenger choice of Carrier," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 170-184.
    20. Maria Grazia Bellizzi & Luigi dell’Olio & Laura Eboli & Carmen Forciniti & Gabriella Mazzulla, 2020. "Passengers’ Expectations on Airlines’ Services: Design of a Stated Preference Survey and Preliminary Outcomes," Sustainability, MDPI, vol. 12(11), pages 1-14, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:59:y:2017:i:c:p:134-142. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.