Post-deregulation passenger selection of US airports A thesis submitted to the University of Manchester for the degree of Doctor of Business Administration in the Faculty of the Humanities Year of submission, 2018 Rex K. Hammond The University of Manchester/Alliance Manchester Business School Contents Post-deregulation passenger selection of US airports .................................................. 1 Contents ......................................................................................................................................................................................... 2 Abstract ......................................................................................................................................................................................... 5 Declaration ............................................................................................................................................. 6 Copyright Statement ............................................................................................................................... 6 Dedication ............................................................................................................................................... 6 Author ..................................................................................................................................................... 6 1. Bridge Introduction .............................................................................................................................................................. 7 1.A. Epistemological influence on the research design ........................................................................ 11 1.B. Research design ............................................................................................................................. 21 1.C. Key literature ................................................................................................................................. 23 1.D. Questions emerge ......................................................................................................................... 24 1.E. Methods ........................................................................................................................................ 26 1.F. Thesis development ....................................................................................................................... 39 Article 1: Post-deregulation passenger selection of US airports ........................... 43 Abstract................................................................................................................................................. 43 1. Introduction .......................................................................................................................................................................... 44 1.A. Price elasticity of demand ............................................................................................................. 47 2. Literature ............................................................................................................................................................................... 57 2.A. Price leadership from the low cost carriers ................................................................................... 59 2.B. Price discrimination and traveler types ......................................................................................... 63 2.C. Cost control and narrowing the price gap ..................................................................................... 70 2.D. Bankruptcies and mergers collapse competition .......................................................................... 74 3. Methods ................................................................................................................................................................................... 81 3.A. Methods observations ................................................................................................................... 84 4. Study findings ....................................................................................................................................................................... 86 Figure 1: Total Passenger enplanements and population growth (1979 - 2014) ................................. 87 Figure 2: Five-year incremental, annual and period growth (1979-2014) ............................................ 88 Figure 3: Airports and Number of Air Carriers, 2015 ............................................................................ 89 Figure 4: Annual changes in growth rate for total airports and groups ............................................... 89 Figure 5: Group characteristic of Large, Medium, Small and Nonhub airports .................................... 90 2 5. Conclusions ............................................................................................................................................................................ 91 6. Future research .................................................................................................................................................................... 94 Article 2: Consumer nested preferences and switching in airport selection ... 96 Abstract................................................................................................................................................. 96 1. Introduction .......................................................................................................................................................................... 97 Figure 1: Primary air service relationships ............................................................................................ 99 1.A. Airports compete to retain travelers in deregulated market ........................................................ 99 2. Literature ............................................................................................................................................................................ 106 2.A. Distinguishing between consumer switching and migration....................................................... 107 2.B. Migration theory forms basis for switching in general business ................................................. 109 2.C. Consumer switching and retention in the air service industry .................................................... 111 2.D. Airlines manage critical switching factors ................................................................................... 112 2.E. Rewards programs allow airlines to fight for profitable passengers ........................................... 113 2.F Dynamic pricing model positions airlines to maximize revenue ................................................... 116 2.G. Customer satisfaction -- a challenging mixed bag for the airlines .............................................. 119 2.H. Public and private interests converge to shape airport development ........................................ 121 2.I. Small airports tout advantages in competition for passengers .................................................... 123 3. Methods ................................................................................................................................................................................ 127 3.A. Nonhub originating airports and nested methods design ........................................................... 129 3.B. Methods summary ....................................................................................................................... 132 Figure 2: Conceptual framework diagram of traveler purchasing profiles ......................................... 135 4. Study findings .................................................................................................................................................................... 135 4.A. The “Trader” traveler profile ....................................................................................................... 139 4.B. The “Simplifier” traveler profile................................................................................................... 141 4.C. The “Broken” traveler profile ...................................................................................................... 143 4.D. The “Gamer” traveler profile ....................................................................................................... 148 4.E. New conceptual framework reveals distinct traveler profiles ..................................................... 152 5. Conclusions ......................................................................................................................................................................... 154 6. Topics for future study ................................................................................................................................................... 156 Article 3: Mature deregulated market is purging nation’s nonhub airports . 158 Abstract............................................................................................................................................... 158 1. Introduction ....................................................................................................................................................................... 159 3 1.A. Airport services dictate a region’s development