The effects of ancillary revenues on revenue management and passenger preferences in low-cost airlines

After the Covid-19 pandemic, changes have occurred in the economic balances and customer spending both globally and in Turkey. While the demand for low-cost airlines has generally increased, differences have been observed in ancillary revenues and customer preferences after the pandemic. Businesses operating in low-cost airline transportation aim to maximize profits by creating new sources of revenue in the increasing competitive environment through ancillary revenue practices, which are observed as a new trend in revenue management. This situation changes the structure of revenue management and customer preferences in these businesses. This study investigates whether ancillary revenue practices have a significant impact on revenue management and passenger preferences for airlines adopting the low- cost transportation business model. The research was conducted on passengers who receive services from airlines adopting the low-cost business model. A survey was conducted on 191 passengers who have received services from at least one low-cost airline at the domestic and international gates of Antalya Airport between 01.10.2022 and 31.12.2022. The first part of the research included demographic questions, the second part questioned customers' preferences, and the final part asked about the budget allocated by customers for ancillary revenue practices. According to the conducted frequency and factor analyses, it has been found that the majority of passengers prefer ancillary revenue practices during long and medium- haul flights and allocate a significant budget for them. They also indicated a higher preference for ancillary revenue items on long and medium-haul flights compared to short-haul flights. It was determined that the budget allocated for long and medium-haul flights is higher than the budget allocated for short-haul flights. Furthermore, the financial performance of airlines in terms of ancillary revenue was examined in the study, and it was determined that ancillary revenue practices significantly contribute to revenue management. Despite a decrease in passengers' willingness to spend due to the impact of the global economic downturn, it was revealed that passengers predominantly prefer the ancillary revenue services of low-cost airlines and allocate a significant budget that will affect revenue management.