Low Cost Airlines, Capstone Project Example

A Comparison of Low Cost Airlines with Non Low Cost Airlines Relative to Passenger Safety, Airline Marketability, and Accident Rates

Abstract

Low cost airlines have established a position in the airline industry that makes them progressively competitive against the major commercial domestic alternatives.  This is largely due to the ‘no frills services’ they provide customers, but there are significant factors about the business structure of a low cost airline that must also be acknowledged in this comparison.  The problem the success of low cost airlines poses to the airline industry is a possible transition toward companies finding a foothold in the market by sacrificing quality and safety to provide low costs. To evaluate the business models of low cost airlines, literature review data will be collected. To measure safety, accident rate differences will be measured, and to measure quality a qualitative interview results performed by select studies on both crew and customers will be evaluated.

Chapter I

Introduction

Background and Significance of the Problem

Air travel security, while a hot button issues since the attacks of 9/11, has actually had very little reason for change since the late 1960’s.  Accidents have been minor and safety has remained standard for over 50 years of commercial air travel.  While there were some changes that evolved out because of the Deregulation of 1978 as well as the decisions made following the events of 9/11, it could be argued that there has been very little change in terms of need for enhanced safety measures.

There has also been an influx of discount and low cost air fare offers in the industry.  This is having a significant effect on airlines being able to enter the market.  In many ways it is pushing commercial airliners unwilling to slash ticket prices out of the industry all together.  What does this mean for air travel safety?

The purpose of this study is to compare low cost airlines with non low cost airlines to estimate differences in the areas of passenger safety, aircraft reliability and accident rates.  Specific variables to be investigated are identified in the sub-problems.  The core goal here is to determine if there is a relationship between perceived safety and airline ticket price, and if that perceive safety is supported in any way by actual accident report data.

The economy faltered and most industries had a decline in profits; many were pushed out of their industries altogether.  The FAA points out that while the commercial airline industry did have failing prices due to many limitations imposed by the markets consumers looking for low cost travel were not one of their limitations.  “Domestic enplanement market share continued to rise for low-cost and regional carriers in 2010 while network and “other” carrier share decreased (Babbit, 2011, p27).

This boom in commercial air consumers, specifically for domestic travelers looking for affordable deals, can be attributed to the creation of an entirely new, never before tapped, market.  Industry leaders say low cost airlines created an additional demand, and some say they won clients for air traffic who traditionally would have been on trains or car travelers (Babbit, 2011).

Researcher’s Work Setting and Role

I have an undergraduate degree in Aviation Management from Southern Illinois University.  At this time I am working in the Program Management Department for a company whose main purpose is to make Display Systems for various types of commercial aircraft along with military aircraft.  Working within this department allows me to see the measures that are taken when it comes to aircraft safety and reliability.

Statement of the Problem

Do low cost airlines put passenger safety at risk, aircraft reliability, and lead to higher accident rates compared to the major US airlines?  The purpose of this study is to compare low cost airlines with non low cost airlines to estimate differences in the areas of passenger safety, aircraft reliability and accident rates.

Sub problems

Investigate the number of accident occurrences per year that happened in low cost airlines versus those that occurred in airlines with higher rates to determine if there is a significant difference between low prices and airline accident rates.   

 Investigate the perceived quality of travel and safety based on passenger experience on both low coast and non low cost airlines felt by the particular carrier safety.  It actually contains two variables. Consider dividing it into two subproblems. For example:

• Investigate  the perception of  the relative safety  of low cost and non low cost airlines)
• Investigate the relationship between perceived safety of the two types of airlines and the actual accident rates for low cost and non low cost airlines.
• Investigate the factors that airline customers consider most important when selecting an airline.
• Investigate  possible relationships between  willingness to fly low-cost airlines and gender.
• Investigate  possible relationships between  willingness to fly low-cost airlines and frequency of flying.
• Investigate  possible relationships between  willingness to fly low-cost airlines and  reason for flying.
• Assumptions

No matter how efficient the study, there are certain assumptions that must be made.  One assumption that will be made during this study is that all data involving responses of passengers will be truthful.  The second assumptions it that uncontrollable situations, such as weather conditions, will also be presumed to be average across all air lines, but that may not be the case.  The third assumption is that all respondents will have traveled on some airline that is common within the industry such as a Delta, Southwest, or JetBlue. Because the data collection instrument has not been thoroughly tested,  the validity and reliability of the instrument will be assumed.

Limitations

This research report is free of all intentional bias, but the researcher recognizes that there is the possibility for bias that could exist beyond the extent of this paper that could influence the data assessed.  For example, as previously stated, while carriers can easily assess the best low cost air fare for themselves evaluating a commercial airliner’s security protocols is much more difficult.  The same must be assumed for this study.  While there is a wide range of information available in regards to cheap air fare, for information on safe air travel and security measures of domestic and international providers data is more challenging to uncover.  This is especially true of data that establishes a direct correlation between safety and ticket price.

List of Definitions

Act of God (AOG) – is considered a `force majeure’. It defines a situation where airlines are not legally obligated to provide lodging, transport, or other expenses that travelers may incur caused by AOG. This includes weather conditions, civil disruptions, and other unanticipated events may be identified as an AOG. It can also refer to Aircraft is On the Ground, which is when an aircraft urgently needs maintenance on the ground when it should already be in flight.

ATC – is the abbreviation for Air Traffic Control

Bereavement fare– This is discount fare due to accidents or death in the family.

Carrier – A person who undertakes directly by lease, or other arrangement, to engage in air transportation.

Low-cost-airlines – airlines which operate on relatively short distances in a certain region without offering additional services.

Open Ticket – This is a full fare ticket that can be used at any time, as opposed to a discount fare ticket that tends to be set for an exact time frame.

Shoulder Season – is a time of the year where fares are offered based at a medium rate, as this is a complex time to measure fare prices because it’s directly between low cost and high cost ticket season.

Chapter II

Review of Related Literature

Introduction

Characteristics of Low-Cost Airlines

The research in this article defines a low-cost carrier to be an airline operating a point-to point network and paying employees below the industry average wage, with no frill service offered (Nadja, 2003).  The concept of offering no frill could be interpreted as the airline sacrificing quality for revenues, but the key point in this article is that no frills means unnecessary additional amenities have been cut from the flight.  An example is the elimination of the dinner during the flight.  Low-cost carriers have taken a position in the aviation industry that is unparalleled in terms of market share.  Low cost airlines are able to take from their competitors massive numbers of their clientele, simply through having a lower cost.  Nadja notes that, “The low-cost carrier can successfully neutralize the dominance of its competitors, by competing on price” (Nadja, 2003, pp: 8).   In most markets where the conglomerates dominate the customer base, low-cost air line carriers have actually evened out the playing field.

The benefits of low cost airlines are multitudinous and that enhances their competitive capabilities.  In a market where large commercial airliners would seem to have a monopoly on certain flight routes, low cost airlines actually have an upper-hand on the commercial domestic flight travel providers.  As Nadja notes, “low-cost carriers can achieve fast turnarounds and pay less for leasing airport facilities at secondary airports like TF Green airport outside Providence, Rhode Island” (Nadja, 2003, pp: 9). The ability of low cost airlines to take advantage of local discount resources like the one Nadja mentions here is just one minor example of how these companies are able to cut overhead costs and compete with larger commercial airlines.  He goes on to point out that these cost cuts reach the consumer, noting that, “Low airport lease rates and gate costs also contribute to the lower cost structure of low-cost carriers” (Nadja, 2003, p p:9 ). Here the author is pointing out that the low cost rates reach the consumer ultimately through genuine affordable budgeting done by the low cost carrier.  The business model of the low cost carrier is fundamentally different from the larger domestic competitor.

If the two business models of the airline types are paralleled or evaluated side by side, research shows many differences can account for the ability of low cost airlines to compete on such an effective level.  The first aspect of the low-cost airliner business model that is questionable has to do with the number of people on staff for the airline to run safely verses the actual number used for day to day operations.  The one thing that must be considered when comparing the operating staff of a traditional airline to a low cost airline’s staff size is the higher number of personnel needed. As Nadja notes, “in particular, the higher number of personnel required per flight to effectively operate a traditional hub may be an important factor in the different cost structures of traditional and low-cost carriers (Nadja, 2003, pp: 10).  The ability of airlines to cut costs through the use of minimal staff and resources makes it more lean and efficient when it comes to competing within its market space.

There are also market benefits to low cost prices.  The author notes that while low-cost carriers only carry 15% of the domestic traffic in the United States, their impact on prices is significant and broadly distributed over the marketplace (Nadja, 2003).  “A low-cost presence lowers prices at the low end, median, and high-end of ticket prices in all market segments” (Nadja, 2003, pp: 6). The measurable impact of the low-cost carrier’s presence in the industry causes the distribution of prices to flatten and shift left (Nadja, 2003).

Examples of Low-Cost Airlines

JetBlue and Southwest Airlines are identified in the airline market as the two most prominent low-cost carriers.  According to JetBlue and Southwest’s balance sheets, both companies have labor costs of 30% to 40% lower than the mainline carriers (Nadja, 2003).  This could largely be attributed to the companies’ use of leasing services and resources from low cost suppliers.  This puts both companies in the ideal position to be competitive with larger markets.

Figure 1: JetBlue aircraft on take off. Reprinted from “Beantown showdown: JetBlue and Southwest face off in Northeast”, by S. Bomkamp, 2009, Lubbock Avalanche-Journal, pp: 1. Copyright [2012] by Lubbock Avalanche-Journal.

Southwest Airlines

Southwest Airlines is known for its use of the no frills service making it arguably America’s most unique airline.  It is credited as being the first low cost airline to incorporate the use of no frills at a cut price.  The company identified its market as a traveler just trying to get from point A to B.  Southwest also became identified for its customer friendly aircraft initiatives.  A pioneer of the single aircraft type fleet, Southwest also initiated customer friendly initiatives such as electronic ticketing while maintaining a competitive fare structure (Nadja, 2003). Southwest’s aggressive pricing forces its competitors to price closer to marginal costs (Nadja, 2003).  This ultimately makes business in the industry very tight on profits for the major players.  Major commercial airlines are bloated with formality and procedure regulations, Southwest, on the other hand, has become renowned for getting its planes unloaded, cleaned and reloaded in 25 minutes.  This is the fastest turn time in the industry.  Rosato notes that, “Southwest planes to fly an average of 11 hours a day (vs. an average of nine at the majors)” (Rosato, 2004, pp: 1).

Jet Blue Airlines

JetBlue, is an upstart airline that has been competing with the major carriers on long haul transcontinental routes from John F. Kennedy (JFK) airport (Nadja, 2003, pp: 20)“Likewise, powerful New York politicians, upset with high intra New York state fares, provided JetBlue with a remarkable 75 slots at JFK, a slot restricted airport (New York Times 08/27/01) (Nadja, 2003, pp:20).”  Analyst’s estimates show Southwest, JetBlue and other carriers like them have labor costs 30%-40% cheaper than their larger competitors.  To be specific, “United Airlines, American Airlines, Northwest Airlines, and Continental Airlines all have costs at least 40% higher than Southwest” (Nadja, 2003, pp:10).  And according to the Wall Street Journal even though Delta Air Lines and Alaska Airlines are the cheapest to manage out of all of the major airliners, each of them has unit costs 30% higher than Southwest’s (Najda, 2003, pp: 10).

Average Cost per Passenger per Mile

By cutting costs through the leasing of services, and minimal staff requirements, low cost airlines are able to cut down the average expenses to deliver a value to the consumer.  The cost of the ticket price for the consumer is a direct result of the cost incurred by the air line to provide the service.   This can be due to a wide range a factors, one being that discounters also tend to have much newer planes than the larger competitors which allow them be more fuel efficient and in many ways much safer as they require less maintenance.  Fewer maintenance requirements also lead to less demand on resources which allows lost airlines to utilize their employees for other activities, “That’s why, for example, AirTran, JetBlue and Southwest can “cross train” their workers, so pilots can load bags and flight attendants can clean planes.  Most employees of low-cost carriers don’t earn as much as their counterparts at major carriers; those that do work more hours for that pay.  The result is lower labor costs: 2.3¢ per seat per mile compared with 3.5¢ at the majors” (Rosato, 2004, pp: 1).

The relationship between the cost of fuel and airline capacity can be seen in the figure 2 below.  This value is measured by available seat miles (ASMs). , which shows the cost of fuel per gallon and domestic passenger capacity on routes operated by both legacy and low cost carriers (Firestine & Guarino, 2012).

Figure 2: Cost per Gallon of Fuel and Available Seat Miles on Domestic Flight Segments Operated by Both Legacy and Low Cost Carriers – January 1990 to March 2011. Reprinted from “A Decade of Change in Fuel Prices and U.S. Domestic Passenger Aviation Operations” by T. Firestine & J. Guarino, 2012, Rita: Bureau of Transportation Statistics, pp:5. Copyright [2012] by the  Bureau of Transportation

ASMs are a commonly used measure of airline capacity.  They are calculated by the number of available seats multiplied by miles flown.  This is a metric that measures capacity and the changes that result from both changes in the size of aircraft used on a specific flight, as well as changes in flight schedule.  As researchers note, “A reduction in the number of flights and/or the substitution of smaller aircraft reduces capacity as measured in ASMs (Firestine & Guarino, 2012, pp: 22).”  This cost difference gives low cost airlines a major advantage over their competitors.

Commodities – Comparison of Low-Cost with Non-Low Cost Airlines

One major difference between low cost airlines and the larger commercial entities can be seen in regards to their use of commodities.  Researchers note that, “A traditional major carrier often has a number of tools at its disposal, which it can use to deter entry or lessen the competitiveness of recent entrants.  These tools include predatory pricing, loyalty programs, and congestion at the nation’s most popular airports (Nadja, 2003).  This system provides customers with a high level of convenience but creates operating inefficiencies as well (Nadja, 2003).

A disadvantage that low cost airlines have compared to that of major commercial providers can be seen in the deals commercial airlines established with other carriers. If a flight is unavailable or canceled after being booked, the affiliate carrier will take on the flight.  This is something that low cost carriers like Southwest and JetBlue just don’t offer (Rosato, 2004, pp: 1).  The author is clear to point out that while these major airlines have a lot of perks, like frequent flyer miles, those perks  also come with a lot of rules and regulations.

Low cost airliners rarely offer frequent flier miles the way the major airlines do, but they have their own set of deals and arrangements.  As Rosato notes, “Some do offer great value:  You can earn a free round-trip ticket on Frontier Airlines after flying just 15,000 miles (it’s 25,000 for most airlines)” (Rosato, 2004, pp: 1). Rosato goes on to note that previous generations of these carriers made passengers feel one step removed being cargo but this new generation of low cost airlines has truly revamped their business model and is taking on the commercial providers like none other.  The author says, “even Southwest, the king of no-frills flying, is installing comfortable leather seats throughout its entire fleet and offers a generous 33 inches of legroom at most seats, two more than the coach standard.  Little things, after all, can make all the difference (Rosato, 2004, pp: 1).”  This means much stronger competition for big air travel.

Safety of Low-Cost Airlines

Extensive research on the safety of low cost airlines has concluded that there is no discernible difference in safety risk compared to larger commercial providers.  Rosato notes that, “Though public confidence in low-cost airlines was shaken by the 1996 ValuJet crash that killed 110 people, the truth is that discounters are as safe as traditional carriers (Rosato, 2004, pp:1).”  In regard to safety regulations, Rosato goes on to note that “Federal regulations require rigorous training exercises for pilots twice a year.  Flight attendants also go through safety exams and annual retraining.  Some discounters outsource maintenance, but so do some majors–and in any case there’s no evidence that outsourcing undermines safety (Rosato, 2004).  Safety regulations across the entire market considering low cost and major commercial providers show that they are relatively the same in regards to performance.  “An airline passenger stands a 1-in-8-million chance of dying in a crash, according to an MIT study.  You’d have to fly every day for about 22,000 years for the odds to turn against your arriving safely at your destination (Rosato, 2004 pg: 1).”

There is virtually very little difference in regards to safety when it comes to low cot airlines and major carriers, “in fact, an analysis of Federal Aviation Administration accident and incident data for the past four years shows only a marginal difference between low-cost and traditional airlines (Rosato, 2004).  This puts major carriers in a very dangerous position of being pushed out of the market if they don’t reduce their costs, and procedures.

History

Before 911

Low prices were not always a part of the commercial Air Travel industry.  Southwest started offering low prices in 1950’s and the in the 1950’s by Pacific Southwest, and from 1967 on Southwest also offered this service but initially they could only offer it in Texas.  Actual nation-wide low cost air travel was the Aircraft Deregulation Act, from 1978.  This freed the market for competitive prices between U.S. commercial air travel providers. (Office of System Safety Federal Aviation Administration, 1997)

The Office of System Safety and Federal Aviation Administration performed studies on air transportation and as noted, “Conclusions common to these studies are that the risk of death or serious injury for air travelers is exceedingly small, that this risk fell dramatically between the 1970s and the 1980s, and has remained at these lower levels since then (Office of System Safety Federal Aviation Administration, 1997, pp: 1).”  These were results found prior to the terrorist attacks of 9/11, also little evidence was found that focused on accident and incident safety data, in regards to carriers that were among differing “homogeneous peer groups”  (Office of System Safety Federal Aviation Administration, 1997, pp:1).

These studies also showed that U.S. travelers had fewer reported accidents than those in underdeveloped countries.  They also found that travelers on major domestic jet aircraft are less likely to have accidents than the smaller U.S. regional commuters.  There has been a wide range of changes made in the commercial aviation industry since the deregulations passed in 1978.  It should also be recognized that most commercial airline providers are under extreme levels of surveillance (Office of System Safety Federal Aviation Administration, 1997).

This applies to both new and low cost carriers, which means it would be wrong to assume low cost air travel providers have substandard safety practices (Office of System Safety Federal Aviation Administration, 1997).  In most cases, the low cost air travel providers in the U.S. domestic travel market are offering their prices to gain a foothold in the market, but they are also heavily more observed.

For the most part, it is considerably easy for consumers to make their own decisions about price and flight schedule, but it is highly more difficult for them to make decisions about flight safety.  This is why studies that focus on the safety of air travel providers are essential for consumer reporting.  The office of System Safety Federal Aviation notes that prior to 9/11, since the risk of accidents were so minimal, it enhancing safety technology for air travel was rarely a major focus as it was viewed as a potential increase in cost (Office of System Safety Federal Aviation Administration, 1997).

After-911

There were some considerable changes that could be likened to the drastic airline policy renovations that occurred after the deregulations of 1978.  In the U.S. companies like JetBlue and Southwest have been differentiating themselves through the issuance of low cost travel prices which has been blocking other providers from entrants into the low cost market.  Researchers report that the commercial airline industry expanded from competing with one another to competing with all forms of low travel markets.

In the wake of the global recession, demand for low cost travel drove the market in a direction that very few airline travel providers could have anticipated especially after terrorist attacks of 9/11 had posed the threat of a decline in the market.  FAA reports that, “The grim operating environment faced by the carriers at the start of the global recession has revolutionized how they operate today (Babbitt, 2011, pp: 1).”

This had a powerful effect on the market infusing an entirely new consumer group into the industry.  Despite the decline in the economy, the commercial airline industry was actually gaining headway as the authors go on to note, “In 2010 system revenue passenger miles (RPMs) increased 2.2 percent as enplanements increased 1.2 percent.  Commercial air carrier domestic enplanements were up 0.7 percent while international enplanements were up 5.2 percent (Babbitt, 2011, pp: 1).”

Figure: 3 Types-of-Accidents-by-U.S.-Carriers. Reprinted from , “Airline Accident Rates” by PlaneCrashInfo.com, 2011, Retrieved  from http://www.planecrashinfo.com/rates.htm. Copyright [1997-2012] by PlaneCrashInfo.com

Out of the major carriers in the US and Canada, South West Airlines is the only airline with no passenger fatality. In past 29 years it has no in air fatalities but had only one fatality on the ground. But American airlines have had 13 events in more than 25 million flights, United Airlines had 11 events in more than 22 million flights and US airways had 9 events in about 18 million flights (Innovateus.net, 2011, pp:1).”The 10 major airlines with least number of accidents from 1989 to 2008 are: Airlines in North America: Delta Airlines, South West Airlines, North West Airlines, Continental Airlines, Air Canada, American Airlines, Alaska Airlines or Horizon Air, US Airways, Hawaiian Airways, American Eagle (Innovateus.net, 2011, pp:1).”

How is accident rate calculated?

Accident rate is calculated as follows:
Accident rate= ((A*(B/C))-D)
Where A= number of million flights completed by the airline
B= adjusted fatal accidents of all airlines in the list
C= number of million flights for all airlines on list
D= adjusted fatal accidents of the airline

The accident rate is calculated for each airline and compared to the average accident rate of all airlines. For airlines with no fatal accidents the more the departures the more favorable the accident rate becomes (Innovateus.net, 2011, pp:1).

Southwest Airlines focuses on safety and the price is very low. The company is technologically advanced . In their 29 years of operation it did not have any fatal accidents. It is the fourth largest airline in the country carrying passengers. They do their own maintenance and have a fleet of 737s, which are the youngest air planes on the market with an average age of eight years. They have efficient customer service and convenient boarding facilities (Innovateus.net, 2011). The two key reasons are, they can easily replace an ailing plane with a functional plane and secondly pilots and mechanics are well trained and transferred.  These are the reasons why the Southwest Airlines have top quality safety, low cost and reduce delays or cancellations (Innovateus.net, 2011).

Major-Carriers-Operating-Through-Regional-Problems

Regional airlines account for half of all scheduled domestic flights in the U.S.; and according to a joint Frontline and Investigative Report,  major airlines use regional carriers to help keep fares low, leading to low pay and sometimes onerous working conditions for pilots and others (Rentz, 2010). The majors do exercise some control.  For example, US Airways gives all employees working on behalf of the airline a pamphlet titled, “Impressions of Excellence” (Rentz, 2010).

Majors began to outsource to regional carriers after 1978 deregulation of the airline industry. Intense competition following deregulation meant that majors needed to cut costs to lower prices and effectively compete; regional’s with their smaller planes and non-unionized employees often offer a cheaper way to fly from A to B.  Continental Airlines, for example, now outsources 60 percent of its flights to regional, including Colgan Air (Rentz, 2010).

The arrangements also permit the majors to contract away much of the responsibility and liability inherent in flying millions of people around the nation. For example, federal safety records reflect only the planes an airline actually operates. If a major airline outsources flights to an independent operator, any accidents or incidents involving those flights will be reflected in the outsourced operator’s records – they will not appear in the major’s safety record (Rentz, 2010, pp:1).”

Market-Affect-of-Low-Cost-Airlines

The market affect of low cost airlines is a common phenomenon where companies like Southwest, or other low-cost carriers (LCA), are entering the airline industry and challenging competitors to match their lower prices, which ultimately drives down overall fares. Figure 4   illustrates the impact of low-cost carriers on one airport.

Figure 4:  Air Impact at Bloomington. Reprinted from “Will the ‘Southwest Effect’ Weaken?” by M. Phillips, 2008, The Wall Street Journal, pp:1 Copyright [2012] by Dow Jones & Company, Inc.

The success of low cost airlines is rapidly increasing. They are becoming the preferred option over major commercial domestic carriers. Figure 4 demonstrates that when low cost airlines enter the market, they influence the market value of travel. As the authors note, on that score, the carrier’s fares are already rising. In Southwest’s second-quarter earnings report, the company reported that average fares were up 8.4%, to $114.48, compared to the second quarter of 2007. That increase followed a 6.1% bump in average fares between the first quarter of 2007 and 2008 (Phillips, 2008).

History and Begining of Low Cost: Consequences

Figure 5:  Air Traffic Hubs 2007. Reprinted  from “The Delta-Northwest Merger”,  by A. Hall, A. Sheik & D. Schwartz, 2008, Group Project  pp: 8. Copyright [2008]

Deregulation allows start-up airlines to enter the market without having to agree to the same demands of the larger more established airlines.

Summary

When low cost airlines are compared to commercial domestic carriers, they appear

to be more effective in and successful in regards to economic advantage within their market share, and the safety and efficiency associated with their product. This is largely due to the fact that major airlines use regional low cost providers to compete within the market. The problem occurs when the major airlines have accidents and they aren’t held accountable due to their regional low cost providers taking the blame. Data shows low cost carriers are less likely to have accidents compared to major commercial domestic carriers. In most results regarding commercial domestic carrier accident rates are skewed by not holding large companies responsible for accidents occurred as a result of outsourcing.

Statement of the Hypotheses

Based on the review of literature and personal experience, the following two hypotheses were posited for this study.

1. The mean number of accidents per year for low cost airlines is greater than the mean number of accidents per year for non low cost airlines
2. The majority of airline passengers perceive that the quality of service on low cost airlines is less than the quality on non low cost airlines.
3. The majority of airline passengers perceive that non low cost airlines are safer than low cost airlines.
4. The perception of safety of low cost airlines  does not match the actual safety record of low cost airlines.
5. Safety is the most important factor  when selecting an airline.
6. Gender is related to willingness to fly low cost airlines.
7. Frequency of flying  is related to willingness to fly low cost airlines
8. Reason for travel is related to willingness to fly low cost airlines.

Chapter III

Research Methodology

Research Model

This is a descriptive study based on both quantitative and qualitative data. The sample data was collected via survey as well as through FAA reports. Please review a copy of the survey instrument in Appendix B.   The sample data was also collected in part by data from FAA files and was summarized in the Treatment of Data section.  The level of measurement of the variables defined in chapter I range from the nominal level to the ratio level.  The research hypotheses stated at the end of Chapter II was tested using appropriate parametric statistical methods and non-parametric statistical   methods where appropriate.  Test results are presented in Chapter IV and the interpretation of those results are in Chapter V.

Survey Population

The impact of the Low Cost Airlines on Consumer Behavior study is based on the responses of 250 passengers who traveled out of BWI airport and flew on Southwest, AirTran, or Jet Blue Airlines. Since the sample was drawn from Baltimore Washington Airport, the findings and conclusions are limited to the population of that city. However, if the assumption that people traveling through BWI are typical of residents in most cities of similar size, the findings and conclusions may apply to a larger population.

Since the crash sample and accident data was drawn from FAA records for the years 2005 – 2011, the assumption may be made that findings and conclusions apply to that same population today.   The population addressed by the FAA records consisted of all commercial aircraft used by domestic airlines in the U.S. A.

An attempt was made to obtain a representative sample of employees of the xxx industry. Based on the assumption that the sample is representative of that population, the findings and conclusions will apply to all employees of that industry. Interviews with these candidates will also be incorporated into the study with actual findings quoted and evaluated for their relevance to the objective of the study and presented in Chapter IV of this document.

Sources of Data

The data came from one survey of a sample of the American traveling public. Specifically 250 low cost airline travelers, who traveled out of BWI airport and flew on Southwest, AirTran, or Jet Blue Airlines, Important factors measured, were a specific set of 12 factors: Safety, Convenience of Schedules, On Time Performance, Types of Airlines, Price, Comfort, Food and Drinks, Personnel Behavior, Flight Network, Baggage Services, Airline Images and Cabin Services. The survey instrument was distributed electronically using the services of Survey Monkey Company, Inc.  Due to time and financial constraints, a pilot study was not conducted. However, the survey instrument was reviewed by an institutional review board GCP committee and by a small group of colleagues. Feedback from those reviews was used to enhance the validity and reliability of the instrument.

The sample data from the FAA accident reports used for this study was obtained from FAA records for the years 2005 – 2011.  The procedure for collecting the data involved assessing literature reviews and crash statistics between 2005 and 2011. Although no tests were conducted to establish the validity and reliability of the data, the assumptions of validity and reliability were made because of the reputation of the source.

Treatment of the Data and Procedures

The treatment of data section will need extensive revision after the  subproblems, hypotheses and survey instrument have been revised.

Hypothesis One:  The mean number of accidents per year for low cost airlines is greater than the mean number of accidents per year for non low cost airlines.

The source of the sample data for this hypothesis is FAA data on accident reports documented between 2005 and 2011.  The sample data is presented and summarized through(in) charts, tables, and graphs, formulated either by the FAA, or by the author from data retrieved. The scope of the analysis process involved in

(How is the data to be analyzed?   What are the null and alternate hypotheses?  What statistical procedure   will be used to test the null hypothesis? )

Hypothesis Two: The majority of airline passengers perceive that the quality of service on low cost airlines is less than the quality on non low cost airlines.

To confirm this hypothesis as valid or invalid, a survey of evaluating 250 respondents was assessed. All respondents were recent travelers of low cost airlines who have experience traveling commercial carriers in the past.

Hypothesis Three: The majority of airline passengers perceive that non low cost airlines are safer than low cost airlines.

To confirm the hypothesis as valid or invalid, the data from the survey will be evaluated on the basis of safety. Questions related to perceived safety or reliability, such has “how would you rate the safety of low cost airlines?” were delivered to respondents. Their responses were evaluated for their relevance to project objectives.

Variables and Null Hypothesis

In this study there are three different variables, accidents, quality, and safety.  For the variable accidents, the null hypothesis is, “The mean number of accidents per year for low cost airlines is greater than the mean number of accidents per year for non low cost airlines.” This means, it is assumed that low cost airlines have higher accident rates.  After the study, if the null hypothesis is rejected, it can be assumed that low cost airlines don’t have higher accident rates than non-low cost airlines.

For the variable quality, “The majority of airline passengers perceive that the quality of service on low cost airlines is less than the quality on non low cost airlines.” This means, it is assumed that low cost airlines have lower quality in their services than the main airlines.  After the study, if the null hypothesis is rejected, it can be assumed that low cost airlines don’t have less quality in their services they offer than non-low cost airlines.

For the variable safety, the null hypothesis is “The majority of airline passengers perceive that non-low cost airlines are safer than low cost airlines.” This means, it is assumed that non-low cost airlines are predominantly perceived as being safer than low cost airlines. After the study, if the null hypothesis is rejected, it can be assumed that non-low cost airlines are not predominantly perceived as safer than low cost airlines.

Reference List

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