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Assessment of product debundling trends in the US airline industry: Customer service and public policy implications

Author

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  • Garrow, Laurie A.
  • Hotle, Susan
  • Mumbower, Stacey

Abstract

This paper reviews product debundling trends that have occurred in the US airline industry. Multiple sources of ancillary fees related to ticketing refunds and exchanges, checked baggage, on-board pets, preferred and/or advanced seating assignments, frequent flyer ticket redemptions, and day of departure standby policies are reviewed. Despite the fact that both low cost and network carriers stress the importance of future ancillary fees in their investor reports, our assessment suggests that these fees will be more broadly adopted by low cost carriers. We anticipate that many network carriers will eliminate ancillary fees, particularly as they begin to recognize how these fees can impact other system performance objectives such as minimizing the number of misconnecting passengers. We estimate that the debundling phenomenon has diluted revenues to the US Airport and Airways Trust Fund by at least 5%.

Suggested Citation

  • Garrow, Laurie A. & Hotle, Susan & Mumbower, Stacey, 2012. "Assessment of product debundling trends in the US airline industry: Customer service and public policy implications," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(2), pages 255-268.
  • Handle: RePEc:eee:transa:v:46:y:2012:i:2:p:255-268
    DOI: 10.1016/j.tra.2011.09.009
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    References listed on IDEAS

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    1. Wendy W. Moe & Peter S. Fader, 2004. "Dynamic Conversion Behavior at E-Commerce Sites," Management Science, INFORMS, vol. 50(3), pages 326-335, March.
    2. Alan L. Montgomery & Shibo Li & Kannan Srinivasan & John C. Liechty, 2004. "Modeling Online Browsing and Path Analysis Using Clickstream Data," Marketing Science, INFORMS, vol. 23(4), pages 579-595, November.
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    Cited by:

    1. Hugon-Duprat, Cindy & O'Connell, John F., 2015. "The rationale for implementing a premium economy class in the long haul markets – Evidence from the transatlantic market," Journal of Air Transport Management, Elsevier, vol. 47(C), pages 11-19.
    2. 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.
    3. Scotti, Davide & Dresner, Martin, 2015. "The impact of baggage fees on passenger demand on US air routes," Transport Policy, Elsevier, vol. 43(C), pages 4-10.
    4. Chiew, Esther & Daziano, Ricardo A. & Garrow, Laurie A., 2017. "Bayesian estimation of hazard models of airline passengers’ cancellation behavior," Transportation Research Part A: Policy and Practice, Elsevier, vol. 96(C), pages 154-167.
    5. Scotti, Davide & Dresner, Martin & Martini, Gianmaria, 2016. "Baggage fees, operational performance and customer satisfaction in the US air transport industry," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 139-146.

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