Based on a case study involving passengers from Lufthansa, Croatia Airlines and Germanwings, we
examine the determinants of passenger loyalty among users of traditional full-service airlines and of
low-cost carriers. In particular, using formative modeling the study analyzes the effects of service quality
and price on carrier choice and loyalty.
The PLS model results are shown in Fig. 1. For each relationship,
two path coefficients are provided with the first coefficient
describing effect-sizes for TA passengers, and the second coefficient
for LCC passengers.
A look at the path structures in the inner model reveals that the
image of airlines strongly impacts customer loyalty for both
passenger segments. There are, however, differences with regard to
the hypothesized antecedents of airline image. Among TAs
passengers’ perceptions of airline-SQ have a much stronger impact
on airline image than price-perceptions, whereas these effects are
balanced among LCC passengers. The path estimates further reveal
that all service components have very similar effect-sizes across the
segments, with the ticket purchase experience having the strongest
impact on SQ-perceptions, indicating the important role of convenience
and simplicity when collecting information about flights
and making reservations.
Several differences between passenger segments can be found
at the indicator-level of the service components. Weekly flight
frequencies exhibit a strong and significant effect among TA
passengers, but only a weak, insignificant effect among LCC
passengers. This may in part be because LCC passengers often plan
their trips some time in advance to obtain low fares, and thus
a large number of flights to a particular destination during the week
might not be useful for them even when attractive point-to-point
destinations are offered by the airline.
Another difference is in terms of the flight experience. Food and
beverages services strongly impact on the experiences of TA
passengers, but not of LCC passengers, which is to be expected
because LCCs typically charge passengers for food and beverages.
Consequently, many LCC passengers simply do not buy food and
beverages on their flights, which could explain the insignificance of
this service element in their perceptions of the flight experience.
However, since this is an important service element for TA
passengers, the introduction of convenient tickets by LCCs that
include a meal, seat reservations or one or more pieces of baggage
(e.g. Germanwings Best tariff with 25% discount on additional
services) has been one strategy by LCCs to make their services more
appealing to TA passengers.
The data also point to a significant difference regarding
perceptions of service reliability. LCC passengers seem to be much
more concerned about airline safety than about on-time performance,
whereas for TA passengers it is the other way round. Since
service reliability is the second most influential service component
in explaining passenger perceptions of SQ, this would seem relevant
in terms of LCCs marketing and public relations strategies.
Finally, the analysis shows that ticket prices have a strong effect
on overall price perceptions. However, whereas ticket prices are the
most influential indicator among LCC passengers, among TA
passengers it is discounting/rewarding within loyalty programs
that is germane. In this regard, the recent rise of loyalty programs in
the LCC sector may also be seen as a strategy to tie-in TA passengers
who have used LCCs.