Building Airline Passenger Loyalty Through an Understanding of Customer Value: A Relationship Segmentation of Airline Passengers

This thesis explores means of restoring profitability to the airline industry bycultivating intrinsically motivated brand loyalty between passengers and airlinesin today’s fragile environment. The air transport industry is caught up intraditional transaction-based strategies. Airlines rely on archaic frequent flyerprograms (FFPs) to maintain loyalty which deter customers from choosingalternative airlines by increasing the cost associated with switching. In contrast,other industries foster loyalty through relationship marketing to increase thecustomer’s value of the relationship.The objectives of this thesis are to 1) establish the link, if any, betweenpassenger value, loyalty and increased airline profitability as well as 2) developa competitive strategy for relationship marketing in the airline industry. Themethodology comprises a ‘reverse value segmentation’ of passengers on valuedata collected in the New York – London market. The result is a model whichsegments customers into value profiles characterised by attitudes andbehaviours towards loyalty.This dissertation extends the knowledge of passenger buying behaviour andchoice as well as establishing passenger value as a foundation forstrengthening industry structure. The results support a shift from thecommoditized low-cost, no-frills model to a low-fare, ‘high-value’ model focusingon mass customization through CRM technologies.