WHAT PRODUCT FACTORS ALLOW AIRLINES TO COMMAND A PRICE PREMIUM IN THE SYDNEY-LOS ANGELES MARKET?

Abstract

Recent changes to the competitive environment in the highly contested Sydney to Los Angeles market have impacted the route profitability of almost 20 carriers. In particular the commencement of non-stop services by Delta Airlines and V Australia has mpacted route profitability of almost 20 carriers. This paper investigates the product factors that enable airlines to command a price premium the Sydney to Los Angeles market. A sample of business and economy class net fare quotes, in addition to data collected on seven product factors is used in this study to estimate the relationship between price and product. The regression results show that service quality, space, connectivity and alliance membership all have a positive influence on price in this particular market. In a practical setting, the research outcomes are particularly relevant to the areas of Airline Pricing & Yield Management, Airline Strategy, Airline Marketing and Product Planning.