Airline loyalty (programs) across borders: A geographic discontinuity approach

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We analyze brand loyalty advantages of national airlines in their domestic countries using geocoded data from a major international frequent flier program. We employ a geographic discontinuity design that estimates discontinuities in program activity at the national borders of the program's sponsoring airlines in the Schengen area of Europe. We document that foreign consumers earn about 60% less miles and are 70% less likely to be a program member. Controlling for self-selection, we also find suggestive evidence for higher purchase frequency and transaction size by domestic members. These results imply that national airlines enjoy a large loyalty advantage in their domestic country, and contribute to an explanation as to why international flights by third country carriers are still a small share of the market.

LanguageEnglish
Pages1-22
Number of pages22
JournalInternational Journal of Industrial Organization
Volume2018
DOIs
StateE-pub ahead of print - 2 Mar 2018

Fingerprint

Airlines
Loyalty programs
Discontinuity
Self-selection
Purchase
Loyalty
Brand loyalty
Sponsoring

Keywords

  • Airline industry
  • Brand loyalty
  • Extensive margin
  • Frequent flier programs
  • Geographic regression discontinuity
  • Intensive margin

Cite this

@article{a29db1dc16bc47218134deadc572d9c4,
title = "Airline loyalty (programs) across borders: A geographic discontinuity approach",
abstract = "We analyze brand loyalty advantages of national airlines in their domestic countries using geocoded data from a major international frequent flier program. We employ a geographic discontinuity design that estimates discontinuities in program activity at the national borders of the program's sponsoring airlines in the Schengen area of Europe. We document that foreign consumers earn about 60{\%} less miles and are 70{\%} less likely to be a program member. Controlling for self-selection, we also find suggestive evidence for higher purchase frequency and transaction size by domestic members. These results imply that national airlines enjoy a large loyalty advantage in their domestic country, and contribute to an explanation as to why international flights by third country carriers are still a small share of the market.",
keywords = "Airline industry, Brand loyalty, Extensive margin, Frequent flier programs, Geographic regression discontinuity, Intensive margin",
author = "{de Jong}, Gerben and Christiaan Behrens and {van Ommeren}, Jos",
year = "2018",
month = "3",
day = "2",
doi = "10.1016/j.ijindorg.2018.02.005",
language = "English",
volume = "2018",
pages = "1--22",
journal = "International Journal of Industrial Organization",
issn = "0167-7187",
publisher = "Elsevier Inc.",

}

Airline loyalty (programs) across borders : A geographic discontinuity approach. / de Jong, Gerben; Behrens, Christiaan; van Ommeren, Jos.

In: International Journal of Industrial Organization, Vol. 2018, 02.03.2018, p. 1-22.

Research output: Contribution to JournalArticleAcademicpeer-review

TY - JOUR

T1 - Airline loyalty (programs) across borders

T2 - International Journal of Industrial Organization

AU - de Jong,Gerben

AU - Behrens,Christiaan

AU - van Ommeren,Jos

PY - 2018/3/2

Y1 - 2018/3/2

N2 - We analyze brand loyalty advantages of national airlines in their domestic countries using geocoded data from a major international frequent flier program. We employ a geographic discontinuity design that estimates discontinuities in program activity at the national borders of the program's sponsoring airlines in the Schengen area of Europe. We document that foreign consumers earn about 60% less miles and are 70% less likely to be a program member. Controlling for self-selection, we also find suggestive evidence for higher purchase frequency and transaction size by domestic members. These results imply that national airlines enjoy a large loyalty advantage in their domestic country, and contribute to an explanation as to why international flights by third country carriers are still a small share of the market.

AB - We analyze brand loyalty advantages of national airlines in their domestic countries using geocoded data from a major international frequent flier program. We employ a geographic discontinuity design that estimates discontinuities in program activity at the national borders of the program's sponsoring airlines in the Schengen area of Europe. We document that foreign consumers earn about 60% less miles and are 70% less likely to be a program member. Controlling for self-selection, we also find suggestive evidence for higher purchase frequency and transaction size by domestic members. These results imply that national airlines enjoy a large loyalty advantage in their domestic country, and contribute to an explanation as to why international flights by third country carriers are still a small share of the market.

KW - Airline industry

KW - Brand loyalty

KW - Extensive margin

KW - Frequent flier programs

KW - Geographic regression discontinuity

KW - Intensive margin

UR - http://www.scopus.com/inward/record.url?scp=85044150394&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85044150394&partnerID=8YFLogxK

U2 - 10.1016/j.ijindorg.2018.02.005

DO - 10.1016/j.ijindorg.2018.02.005

M3 - Article

VL - 2018

SP - 1

EP - 22

JO - International Journal of Industrial Organization

JF - International Journal of Industrial Organization

SN - 0167-7187

ER -