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

Gerben de Jong, Christiaan Behrens and Jos van Ommeren ()

International Journal of Industrial Organization, 2019, vol. 62, issue C, 251-272

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: Brand loyalty; Frequent flier programs; Geographic regression discontinuity; Extensive margin; Intensive margin; Airline industry (search for similar items in EconPapers)
JEL-codes: L11 L13 L93 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:62:y:2019:i:c:p:251-272

DOI: 10.1016/j.ijindorg.2018.02.005

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