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Investigating airline customers’ premium coach seat purchases and implications for optimal pricing strategies

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  • Mumbower, Stacey
  • Garrow, Laurie A.
  • Newman, Jeffrey P.

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%.

Suggested Citation

  • Mumbower, Stacey & Garrow, Laurie A. & Newman, Jeffrey P., 2015. "Investigating airline customers’ premium coach seat purchases and implications for optimal pricing strategies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 73(C), pages 53-69.
    • Handle: RePEc:eee:transa:v:73:y:2015:i:c:p:53-69
    DOI: 10.1016/j.tra.2014.12.008
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    Cited by:

    1. 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.
    2. Ren, Xinhui & Pan, Na & Jiang, Hong, 2022. "Differentiated pricing for airline ancillary services considering passenger choice behavior heterogeneity and willingness to pay," Transport Policy, Elsevier, vol. 126(C), pages 292-305.
    3. Hang Zhou & Shikang Zhou, 2019. "Pricing strategy of multi-oligopoly airlines based on service quality," PLOS ONE, Public Library of Science, vol. 14(6), pages 1-14, June.
    4. 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).
    5. 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.
    6. Leon, Steven & Uddin, Nizam, 2017. "Airline Ancillary Services: An Investigation into Passenger Purchase Behavior," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 56(1), April.
    7. 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).
    8. van Cranenburgh, Sander & Chorus, Caspar G., 2017. "Willingness to Pay-inference in the absence of rejected propositions," Journal of Retailing and Consumer Services, Elsevier, vol. 39(C), pages 35-42.
    9. Rouncivell, Adam & Timmis, Andrew J. & Ison, Stephen G., 2018. "Willingness to pay for preferred seat selection on UK domestic flights," Journal of Air Transport Management, Elsevier, vol. 70(C), pages 57-61.

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