A Study on Service Choice Behavior of LCC Passengers: An Example of Route Taiwan-Japan

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The increasing route expansion in Asia by low-cost airlines has intensified competition in the aviation market. Traditional airlines are no longer the only choice for international leisure and business travelers. Low-cost airlines provide travelers with choice of lower prices based on the ‘user pays’ concept by embracing a business model other than the traditional one while practicing economy by cutting unnecessary expenses. However, to continue operating in the fiercely competitive aviation market, all airlines are launching unique ‘value added services’ to attract travelers. Providing an in-depth discussion of the values delivered by these services is the major contribution of this study. In the process of this study, the investigation focused on choice behavior among travelers on Japan routes operated by low-cost airlines in terms of value added services. A survey was conducted on such travelers departing from Taoyuan International Airport to understand how they chose value added services and the prices they were willing to pay. The double hurdle model was used for analysis and sorting. The conclusion and suggestions summarized in this study can provide valuable insights for Taiwan’s low-cost airlines in their development of marketing and pricing strategies. The results of this study show that three different scenarios (baggage allowance, seat pre-selection and combined price) are affected by different variables. Specifically, variables that significantly affect the choice in the three scenarios are booking channel, number of co-travelers, ticket payer and additional purchase experience for ‘baggage allowance’; ticket payer, additional purchase experience, annual air travel frequency and purchase decision-maker for ‘seat pre-selection’; and booking channel, reason for purchase and additional purchase experience for ‘combined price’. In addition, income level remains a key determinant for travelers’ choice regarding various value added services.