Low Cost Strategy as a Remedial Prescription for Resuscitating Nigeria’s Ailing Domestic Airline Industry: The customers’ perspective

Abstract

The number of domestic airlines operating in the Nigerian aviation industry have been on a steady decline for a number of years. This is despite a gradual increase in the average number of domestic travelers. Reasons adduced for this anomaly is related to high operational costs, debt burden and outstanding financial obligations. This study therefore examined low cost strategy as a prescription for struggling airlines in the Nigerian domestic airline industry. Stated preference theory served as the theoretical framework because it allowed the construction of realistic alternatives that respondents could choose from based on their preferences. The study was conducted in two phases using conjoint analysis. The first phase identified competitive tools relevant to Nigeria while the second phase involved respondents choosing from an orthogonal content analysis matrix based on selected factors and their attribute levels. Results indicated a high internal correlation value between observed and estimated preferences while no significant correlations was observed between the competitive tools, suggesting good model fit. Findings revealed that out of the six competitive tools, Refund policy and In-Flight Menu were the most important to passengers while Channel of ticket purchase was the least important. Based on the computer-generated path-worth utility matrix, the authors suggested a workable low-cost model that airlines could adopt to ensure survival and profitability. Implications are discussed.

Keywords

• airline industry
• low-cost strategy
• competitive tools
• conjoint analysis
• customer preferences.