Airline customer loyalty through analysis of stated preference

Abstract

This study evaluates airline customer loyalty and estimates the switching costs for a domestic airline route in Brazil through a stated preference survey. Several structures of discrete choice models were tested to represent the choice of behavior: multinomial logit, mixed logit random coefficients, multinomial logit incorporating systematic variations of preferences, mixed logit error component and mixed logit error component incorporating systematic variations of preferences. The results showed that loyal passengers are more likely to choose the dominant Brazilian airline Tam. The switching costs of passengers loyal to Tam, for this sample, are equivalent to 15% of the fare, which represents much more than the percentage for other companies. These passengers are less sensitive to variations in the fares and incur higher costs not to switch airlines.