The purpose of this paper is to assess consumer behavior in the airline industry from a perspective beyond the effects of price discrimination. First the consequences of dynamic pricing will be assessed before looking at the role of social media and offline social influences, consumer satisfaction and airline equilibrium networks and their effects on consumer loyalty. Final implications on aviation revenue management will be drawn.

The development of air transport industry contributes to the economic growth worldwide. It evolves from a luxury form of transportation to an affordable and quick way to move between places. The airline operation model evolves from a traditional point-to-point operation to a hub-and-spoke model, where airline funnels passenger through a centralized location called hub. This model, while reducing operational cost and increasing connectivity, is also adding more time and distance to one’s journey. The development in aircraft technology however, allows airline to by-pass the traditional hub and fly directly to their destination with a longer-range aircraft with a low capacity, somehow returning to the original operational model of point-to-point flight. However, this new type of aircraft also allows airline to reach a smaller destination that didn’t justify the use of the high-capacity aircraft that was traditionally used on this long-haul flight. Aside from the lower acquisition cost, this smaller aircraft also burns less fuel and reduce the airline financial risk.   The study was focused on locating a new hypothetical hub to connect Europe with Eastern Asia, the top two aviation market by passenger number. This new hub will be strategically located between the two markets, unlike the current Middle-Eastern hub that requires a significant detour. The Buffer Tool that is available in ArcGIS will be utilized to draw a radius between each airport in the study area, where the radius’ values were based on the range of the Airbus A321NEO (New Engine Option). Area with the most intersection will be further analyzed to determine the most reasonable location for the new hub, based on the airport infrastructure and the country’s socio-economic index.   The result of this study shows that the Central Asian region has the most overlapping circle, with the city of Almaty in Kazakhstan emerged as the most potential location for this new hub. The geographical advantage, backed by a relatively strong economy and stable socio-political condition, made Almaty left the other candidates behind.

After the complete liberalization of the airline industry during the 1990s the industry has faced a rapid growth in passenger numbers. This has mainly been caused by the emergence of so-called Low Cost Carrier (LCC) that offer a simplified product (i.e. point-to-point flights without any frills) at a lower cost than traditional Network Carriers. Furthermore LCC also introduced a less differentiated pricing structure (Restriction Free Pricing) which forced competing network carriers to reduce the degree of price discrimination which they were able to practice until then in order to defend their market shares. This has led to a decrease of average yields, which resulted in difficulties for (smaller) Network Carriers to cover their fixed costs, related to the operation of a hub & spoke network. In this environment network airlines are looking for new revenue sources as well as further sources of cost reduction. This development has amplified the consolidation trend of the airline industry and led to the emergence of several multi-hub networks (e.g. Lufthansa runs hub-operation in Frankfurt, Munich, Zurich and Vienna). One way to leverage the fact that multi-hub networks allow several routings for one origin-destination city pair would be the introduction of flexible tickets, where the actual routing of the passenger is not defined at the moment of purchase but only a certain time prior to departure. This allows airlines to raise the load factor on their network by increasing the degree of overbooking which they currently practice by pooling the risk that more passengers arrive than there is capacity among several flights. Furthermore these tickets might allow network carriers to compete in the low-cost-airline segment without having to further reduce the price level of their regular product (with specified routing). The present dissertation examined possible designs of such a ticket and their impact on the acceptance by passengers by means of a choice based conjoint study among 356 travelers. The findings suggest that while 77.5% of leisure travelers are willing to accept flexible time-range tickets in their relevant set, only 56% of business travelers are considering using this kind of ticket. More particular the results also showed that business travelers are not willing to compromise on travel duration and departure times, and are subsequently willing to pay a premium for specified tickets. A market share simulation showed that depending on the selected product layout flexible time-range tickets are able to gain up to 60% market share when offered at a discount of up to 33% relative to traditional tickets. When it comes to the actual layout, the largest lever to increase the acceptance is to exclude connection flights from the potential set of flights. The results contribute to the young research area on flexible products by assessing the disutility which is experienced by customers with regard to particular product characteristics of flexible products. Furthermore the results aim at providing airline managers with a comprehensive overview of the possibilities which flexible time-range tickets bring along when it comes to increasing the load factor and thereby the revenues in a multi-hub network. (author's abstract)