Incorporating attitudes in airline itinerary choice : modeling the impact of elapsed time

Abstract

Network airlines traditionally try to minimize the elapsed time of their passengers in connecting travel, based on the assumption that longer elapsed times would make their itinerary less competitive and thus reduce their revenue potential in a given origin destination market. Contrary to the traditional assumption, we hypothesize that passengers assign a lower utility to connections close to the minimum connecting time published by airports. We hypothesize that there are three factors related to connection time that a customer might consider when choosing an itinerary: The risk of misconnection, the discomfort associated with rushing through an airport terminal, and the trust in an airline to provide reliable connections. Attitudes toward these constructs are latent and cannot be directly observed. In aggregate, we expect an n-shaped utility function for the time additional to the minimum connecting time, with increasing utility close to the minimum connecting time, followed by a time window of indifference, followed by decreasing utility due to value of time aspects. We first present a case study using airline booking data that shows that up to 25% of passengers in a sample market voluntarily choose a longer connection, all else equal. In the subsequent chapters, a model to evaluate systematically the impact of length of connecting time is developed. We extend an existing airline survey to incorporate this question. A stated preference experiment is designed and conducted to collect choice data. Psychometric indicators are used to capture attitudes that are explained with socio-demographics and trip characteristics in a multiple indicator-multiple causes (MIMC) model. The MIMC model is then combined with the choice model to simultaneously estimate an integrated choice and latent variable model, quantifying the interactions of latent attitudes and connecting time. The results demonstrate the non-monotonicity of connecting time utility and the disutility associated with short connecting times. The inclusion of the latent variables risk, rush and trust demonstrates the effect of these constructs on choice. Individuals who are risk averse, rush averse or have a low level of trust into airlines' scheduling reliability have a higher utility for slightly longer connecting times. This is the first research in the airline choice literature to demonstrate the nonlinearity of connecting time utility. It is also the first research to include attitudes into itinerary choice models, thereby providing a richer explanation for passenger airline choice. Airlines can use the findings to better align their service offerings with their customers' preferences and at the same time reduce their operational costs.