Despite the impact of 911 tragedies which resulted in a decrease in air travel between 2001-2004, the air passenger traffic started picking up in the past two years, mostly importantly, the airline industry has seen the growth in load factor which is a measure of the efficiency in the industry. Table 1 presents some of the statistics in the airline industry.
Table 1: Scheduled System (Domestic and International) Airline Travel on U.S. Carriers
2005 2006 Change %
Passengers (in millions) 738.6 744.4 0.8
Flights (in thousands) 10,858 10,548.7 −2.8 Revenue Passenger Miles(in billions) 779.0 797.4 2.4 Available Seat-Miles(in billions) 1,003.3 1,006.4 0.3
Load Factor* 77.6 79.2 1.6
Flight Stage Length** 680.2 697.9 2.6
Passenger Trip Length*** 1,054.7 1,071.1 1.6 Source: Bureau of Transportation Statistics, T-100 Market and Segment.
http://www.bts.gov/press_releases/2007/bts012_07/html/bts012_07.html#table_01. * Change in load factor points. ** The average non-stop distance flown per departure in miles. *** The average distance flown per passenger in miles. Note: Percentage changes based on numbers prior to rounding.
Figure 1 presents the graphical changes in the airline industry from 2004 to 2006. In 2005, the total passenger traffic grew by about 5% over 2004, while 2006 grew by about 1%.
Figure 1: Airline Traffic (Domestic and International) on U.S. Carriers, in million
680 690 700 710 720 730 740 750
2004 2005 2006
Source: Bureau of Transportation Statistics, T-100 Market.
http://www.bts.gov/press_releases/2007/bts012_07/html/bts012_07.html#table_01. Note: Percentage changes based on numbers prior to rounding.
In 2004, the total number of U.S. resident travelers to overseas destinations reached more than 27 million, of which more than 22.3 millions travelers’ trips are for pleasure. Table 2 provides these leisure travelers’ decision making and information sources.
Table 2: Travelers’ decision making and information sources.
Advance Trip Decision, days 95.2
Advance Airline Reservation, days 62.4
Means of Booking Air Trip, %
Travel Agent 43%
Personal Computer 23%
Airline Directly 21%
Company Travel Department 4%
Tour Operator 4%
Information Sources:
Travel Agency 39%
Personal Computer 36%
Airline 25%
Friends, Relatives 18%
Company Travel Dept. 4%
Travel Guides/Timetables 6%
Tour Company 6%
Newspapers/Magazines 2%
State/City Travel Office 2%
SOURCE: U.S. Department of Commerce, ITA, Office of Travel & Tourism Industries, "In-Flight Survey,"
May 2005. http://tinet.ita.doc.gov; http://www.tinet.ita.doc.gov/view/f-2004-101-001/index.html
The Travel Industry Association places total U.S. travel expenditures at $679.4 billion for 2006. Total revenues for the global travel industry are difficult to pin down. However, a reasonable estimate would be $2 trillion for 2006. IATA, the international association that represents 260 of the world’s major airlines, projects global commercial aviation revenues for 2006 to be $450 billion, $359 billion of which is for passenger services. The World Trade Organization places global “exports” of travel services at $625 billion for 2004. Based on that figure, 2006 exports of travel services would be approximately $681 billion. Finally, the World Tourism Organization places total global revenues from international tourists at $682 billion for 2005, and global international tourist arrivals at 808 million. The World Tourism Organization estimates that 16% of international arrivals are traveling for business purposes [2].
In today’s digital economy, online e-tickets in the airline industry have emerged as a leading choice when shopping for flights. The migration to e-ticketing, which could save millions of dollars for airline industry, has been underway for more than 10 years. The benefit of e-ticketing is that you can walk into any travel agent (either online or offline) in the world and buy a ticket on any airline to anywhere in the world [3, 4, 5].
Many airlines in the developed countries have already achieved high percentage of e-ticketing online, while the adoption of e-ticketing is not paralleled in many less developed countries. In the U.S. 96% tickets sold by the airlines are e-tickets purchased online, while in India, only a small fraction of the total e-tickets sold online. China is ahead of India, but e-tickets sold online are far behind that in the U.S. and other developed countries [6].
Since the introduction of e-ticketing, the air travel industry has grown at a steady pace. It has seen rapid expansion since it was first recognized as a major opportunity by the airlines and online travel agents back in the early 1990’s. The e-ticket market has grown and is inundated with vendors selling e-tickets with the most wide-ranging prices and options. The success of e-ticketing is partly founded on the standards that the airline community, facilitated by, the Air Transport Association of America (ATA) and the International Air Transport Association (IATA), has agreed upon. The resolutions contain specifications on file structures and messages for airline applications of e-ticketing. ATA and IATA are largely responsible for formulating any special services that are
offered through purchasing electronic air tickets. They ensure consumer satisfaction and set the rules and regulations those consumers and the airlines must follow. ATA and IATA serve as the mediator between the airline industry and its consumers. For example, several airlines have entered into interline agreements that ease the task of changing e-tickets when travelers have to rearrange their schedules mid-trip due to a change in plans or traffic and weather delays. This alone could serve as a major advantage to the airline industry.
With the current market conditions e-tickets are more convenient than paper ones. The prices of e-tickets are undeniably cheaper than contacting the airline directly or booking through an agency, therefore, making e-ticketing the favorable choice for airline industry around the world. In addition, the corporate environment filled with computers which make purchasing tickets appealing. Airlines and online travel agencies have stated that e-tickets have become one of the biggest time savers for people who do not have time to waste on telephone calls or showing up in travel agencies. It has helped the industry pull through in times of great revenue loss such as the terrorist attacks of September 11, and has made it possible to offer fares that would otherwise be impossible. E-tickets are expanding rapidly and have become the dominant approach to ticket purchasing.
Nearly all US based airlines encourage their customers to buy e-tickets on their own websites for domestic flights, as their primary selling method. Many US based airlines only issue traditional paper tickets if required by government rules (mostly foreign governments) or the passengers request paper tickets that fees may apply. Airlines around the world can cut expenses and see a greater increase in revenue. Through the use of e-tickets, airlines have decreased reservation personnel and cut costs in printing and distributing paper documents. It costs $1 or less to handle an e-ticket system wide, compared to $7 for a paper ticket handled by a travel agency, or $8 for a paper ticket by airlines reservation operators, not to speak of the commissions paid to the travel agencies in the old days, which could be as much as 10% of the fare [7].
Buying paperless tickets online is cost effective, time efficient, and most of all convenient. 77 per cent of tickets have moved away from paper, according to the International Air Transport Association (IATA). IATA is confident that airlines will meet its deadline for all tickets to be electronic by the end of 2007. However, IATA says 100 per cent global penetration will only be achieved if there is a universal capability for e-ticketing [8, 9, 10, 11].
In addition to low fare and the services airlines provide, consumers also concern with many other issues when making their purchase decisions. Before online e-tickets become the only approach to ticket purchasing in the U.S, the airlines as well as e-ticket vendors must address problems and concerns facing the industry. Many consumers are wary of giving credit card information on the Internet due to the prevalence of hackers. It seems that if the airlines and e-ticket vendors come up with an alternative payment methods there would be an increase in customer security and sales would be expected to rise. In addition, there are many consumers who feel purchasing on-line is confusing and frustrating. If the airlines and vendors improve their sites making them more straightforward for inexperienced Internet users sales will increase. As time goes by, these Internet wary people will become more acquainted with the purchasing method and the newer generations will become primary users. This in turn will cause the use of e-tickets to takeover the industry.
Competition between airlines and e-ticket vendors has increased tremendously. There are numerous sites for which a passenger can purchase e-tickets. Each site has its own terms and polices not to mention low fares. A consumer may go to directly an airline website or search for sites which provide various airlines and wide range of scheduling choices such as expedia.com, travelocity.com, and others. In many cases consumers choose to go to e-ticket vendors rather than the airlines directly for the purposes of receiving more options. When you go directly to an airline website you are forced to use that specific airline. Whereas, going to a vendor you have unlimited airlines, and time frames to choose from. This may seem like a good choice but going through an airline directly will ensure better customer service. Having these options makes purchasing airline tickets a pleasure. Either way a consumer will find a flight at a lower rate.
Air ticketing in developing country is somewhat different from those in the developed countries. China World Trade Corporation has indicated recently that 75% of its domestic air-ticket sales have been achieved through electronic air-ticketing. Figures showed that the e-ticket sales revenue nationwide in 2005 was US$530 million, which is five times the US$120 million as recorded in 2003. It is also estimated that the e-ticket sales revenue will
be reaching over US$630 million in 2006. Given the lack of a comprehensive electronic payment in China, however, most consumers are actually paying cash off-the-line. As of February 23 2006, an average of 40% of air-ticket sales in Chinese IATA BSP travel agencies has been achieved through e-ticketing. Big Chinese cities like Beijing, Chengdu, Haikou have recorded an even higher proportion of 55% or above [12].
Primarily e-tickets are used for domestic flights but can be used oversees as well. However, in many countries paper tickets are still the proof of flight, tickets may cause complications, and the authorities deny e-tickets in some countries, even in the countries where internet users have grown rapidly in the recently years.
Currently the United States held the largest number of internet users with 153 million, but growth was just two percent in 2006. China was a close runner up with 137 million internet users, the registered number of online shoppers was 43.1 million in 2006 and the number is expected to surge to 55 million 2007. While the strongest growth of internet users was seen in India, where the number of internet users increased 33 percent to 21.1 million.
That placed India with the eighth largest Internet population, just behind France [13, 14, 15].
The online e-ticket problem has been partially resolved in China in our recent interviews with a few passengers and investigations on the airlines’ websites. Air China (CA), China Southern Airlines (CZ), and China Eastern (MU) airlines, the three largest airlines in China have launched a web-based e-ticketing system. Their systems offer online ticket reservation and ticketing to corporate, leisure travelers and travel agencies for domestic flights, or overseas flight originated from a Chinese city, while for international flights originated in a foreign city, particularly those travelers outside China, i.e. in U.S and in U.K., it is not impossible to purchase e-tickets online, nor they can purchase tickets from Air China, since it does not have ticket operators to handle the calls, and the answering massage informs customers to contact travel agencies. As a result, travelers have to make phone calls to the local travel agencies to shop for their tickets. These Chinese Airlines still pay hefty commissions for tickets handled by travel agencies.
To find out what is going on with online air ticketing systems with those Chinese airlines, this empirical study focused on the air ticketing purchase decisions in a narrowly defined market in New York area where the concentration was the passengers who fly from New York to Beijing on Air China. The study also compared the issues of travelers’ air ticket purchasing and airline selection decisions.
METHODOLOGY
The air ticket purchase and airline selection decision variables stemmed from the literature review. A survey questionnaire was designed to investigate these decision variables that were highly important for the airline industry to know. Based on the literature review, the following variables were selected.