Investigating airline customers' premium coach seat purchases and implications for optimal pricing strategies. (March 2015)

• Record Type: Journal Article
• Authors: Mumbower, Stacey; Garrow, Laurie A.; Newman, Jeffrey P.
• Is Part Of: Transportation research. Volume 73(2015)
• Page Start: 53
• Page End: 69
• Publication Date: 2015-03
• Subjects: Airline revenue -- Seat fees -- Product debundling; Transportation -- Research -- Periodicals; 388.011
• DOI: 10.1016/j.tra.2014.12.008
• Languages: English
• ISSNs: 0965-8564

Abstract

Highlights: We model premium coach seat purchases using online price and seat map data. Seat fees and seat displays impact purchasing behavior. Revenues increase if airlines use time-dependent seat fees. Revenues increase if airlines show seats as being "occupied" in the front of the plane. Abstract: We investigate factors that influence airline customers' purchases of premium coach seats using a database of online prices and seat map displays collected from JetBlue's website. Results show that multiple factors influence purchasing behavior; these factors include the amount of the seat fee, how far in advance the ticket is purchased, the number of passengers traveling together, and load factors (as revealed through seat map displays). We find that customers are between 2 and 3.3 times more likely to purchase premium coach seats (with extra legroom and early boarding privileges) when there are no regular coach window or aisle seats that can be reserved for free. In addition, we find that customers who purchase tickets closer to the departure date are less price-sensitive and are willing to pay higher seat fees. We use these model results to show that JetBlue's seat fees are currently underpriced in many markets; an optimal static fee would increase revenues by 8% whereas optimal time-dependent fees would increase revenues by 10.2%. In addition, if JetBlue were to leave their seat fees unchanged and instead reserve certain rows of seats for premier customers, they could potentially increase revenues by 12.8%.