Price Elasticity of Luggage in Switzerland Optimizing Airlines’ Ancillary Revenues

Airlines around the world change their luggage models affecting significantly customer experi-ence and their behavior. Prices of airfares erode what forces airlines to unbundle luggage from the base airfare. Airlines therefore offer cheaper airfares and realize ancillary revenues. This thesis investigates the use of a base ticket option without any luggage apart from a personal item. It aims to elaborate the price elasticity for different ticket options used by various airlines.
To evaluate the price elasticity of luggage a choice-based conjoint analysis with over 200 partic-ipants in the German-speaking part of Switzerland is conducted. The analysis of the results shows the importance of different luggage attributes. The utility of the different attribute levels and the share of preference result in the elaboration of the price elasticity of ten different ticket options. The results revealed a higher price elasticity for ticket options with hand-luggage only than for options with checked luggage.
The results of this thesis can be used by low-cost and full-service airlines likewise to optimize their luggage options or to implement a flexible luggage pricing depending on the capacity utili-zation of a flight by using newly elaborated ticket options. The focus therefore is to maximize the capacity utilization of overhead and cargo compartments and to take advantage of the price elasticity of the ticket options.