A Stated choice analysis of passenger's willingness to pay for service attributes of nonstop, direct, and connected itineraries in Indian domestic aviation market

With the growing competition in the aviation market, airline service attributes (ancillary services) have gained importance and become a key revenue source for airlines. Therefore, it is essential to understand the expectations of passengers and offer personalized travel experiences. This paper investigates the airline itinerary choice behavior of passengers among three different types of airline itineraries (nonstop, direct and connected) while accounting for systematic (considering the interaction between demographics and itinerary attributes) and random preference heterogeneities. The results reveal significant heterogeneity in passenger preferences regarding connection time and fare. While some passengers prefer nonstop itineraries despite higher fares, others are willing to accept longer connections in exchange for cost savings. Further, this study investigates the willingness to pay (WTP) for the service attributes like seat width, legroom, meals, and on-time-performance (OTP) for the three different itineraries. Results indicate that for extra legroom on nonstop itineraries, respondents are willing to pay between 10.5 and 18.6 USD; for wider seats between 8.8 USD to 12.7 USD; and for free meals, 10.8 to 20.5 USD. Moreover, this study highlights the importance of OTP in itineraries. The findings report a WTP ranging between 16 USD to 21 USD for an improvement from 60% OTP. Direct and cross elasticities for fare and connection time are also investigated and a strong substitution effect in direct itineraries, compared to nonstop and connected itineraries, is observed due to fare and connection time. A percent increase in fare of direct itineraries leads to a 4.79% increase in the share of nonstop itineraries and a 3.30% rise in connected itineraries, highlighting passengers' sensitivity to price changes. Similarly, a percent increase in connection time of direct itineraries results in a 2.95% and 2.02% shift to nonstop and connected itineraries, respectively. Finally, the findings highlight that with age longer connection times become less appealing and sensitivity to fare increases. These insights may provide important inputs to the airline industry.