Abstract:
This thesis explores means of restoring profitability to the airline industry by
cultivating intrinsically motivated brand loyalty between passengers and airlines
in today’s fragile environment. The air transport industry is caught up in
traditional transaction-based strategies. Airlines rely on archaic frequent flyer
programs (FFPs) to maintain loyalty which deter customers from choosing
alternative airlines by increasing the cost associated with switching. In contrast,
other industries foster loyalty through relationship marketing to increase the
customer’s value of the relationship.
The objectives of this thesis are to 1) establish the link, if any, between
passenger value, loyalty and increased airline profitability as well as 2) develop
a competitive strategy for relationship marketing in the airline industry. The
methodology comprises a ‘reverse value segmentation’ of passengers on value
data collected in the New York – London market. The result is a model which
segments customers into value profiles characterised by attitudes and
behaviours towards loyalty.
This dissertation extends the knowledge of passenger buying behaviour and
choice as well as establishing passenger value as a foundation for
strengthening industry structure. The results support a shift from the
commoditized low-cost, no-frills model to a low-fare, ‘high-value’ model focusing
on mass customization through CRM technologies.
