Journal of Air Transport Management 82 (2020) 101735

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Journal of Air Transport Management

journal homepage: http://www.elsevier.com/locate/jairtraman

An analysis of traveler need for and willingness to purchase airline dynamic

packaging: A Korean case study
Woon-Kyung Song, Hyun Cheol Lee *
School of Business, Korea Aerospace University, 76 Hanggongdaehak-ro, Deokyang-gu, Goyang-si, 10540, South Korea

A R T I C L E I N F O A B S T R A C T

Keywords: This study analyzes (1) the need among air travelers for commission-based ancillary products and services from
Airline profitability airline websites via dynamic packaging and (2) the willingness to purchase them. For this purpose, a survey is
Airline retail conducted with 2030 airline customers in Korea. This study aims to provide insights into Korean traveler
Ancillary revenue
preference to enable airlines serving Korean customers to formulate and implement successful business strategies
Commission-based ancillary
Dynamic packaging
that incorporate dynamic packaging into airline websites to expand ancillary revenues. The results confirm that
Korean travelers demonstrate the need for and willingness to purchase commission-based ancillaries when
purchasing tickets from airlines. On average, commission-based ancillary products are positively received by
respondents. Airport transfers (e.g. rail and shuttle services), foreign currency exchange offers, and travel in­
surance are the most popular. Female travelers, travelers in their 20s, and frequent travelers (10 þ times a year)
report a significantly higher need for and willingness to purchase a set of commission-based ancillaries with
flights from airline websites. Willingness to purchase third-party products from airlines is higher than in previous
studies, and the preference rankings also differ. This study supports the viability of commission-based ancillary
offerings from airline websites targeting Korean travelers. It shows the potential for airlines to successfully upsell
and cross-sell via dynamic packaging strategies, one of the first steps toward becoming competitive travel
retailers.

1. Introduction Warnock-Smith et al. (2017) attributed the improved financial perfor­

Until very recently, the airline industry has struggled to provide
required returns to investors. A decade of crises and external pressures
on the industry, including natural disasters, terror attacks, political
instability, financial crises, and volatile oil prices, have hurt the indus­
try’s profitability (IATA, 2011). There are other factors that have
exacerbated some of the problems the industry is facing. The
capital-intensive nature of airline operations requires high operating
leverage, fare competition has intensified due to the entry of low-cost
airlines, and increasingly transparent online fare quotes have hurt
profit margins. Despite these obstacles, positive signs appeared in 2015.
For the first time, airline investors were rewarded with higher returns
relative to the cost of capital. Profitability improved as airlines
endeavored to (1) achieve high load factors while keeping the breakeven
low, (2) raise aircraft utilization rates, and (3) focus on boosting ancil­
lary revenues (IATA, 2016, 2017a). The airline industry recorded a
$34.5 billion net profit on $754 billion in revenues in 2017, and strong
profitability is forecasted to continue in the future (IATA, 2017b).
mance to ancillary revenues. They cited a study presented at the 2014
IATA World Passenger Symposium, which showed a positive correlation
between carrier operating margins and the proportion of their overall
revenue specifically earned from selling ancillaries. Indeed, ancillary
revenues constitute the fastest growing revenue category (CAPA, 2014).
IdeaWorks estimated 2017 ancillary revenues to be $82.2 billion, more
than 10% of the overall industry’s estimated total revenue (Reed, 2017).
Increasing ancillaries accounted for unprecedented profits for US air­
lines, where the five largest US carriers generated more than half of the
industry’s profits (CAPA, 2018; IATA, 2017b).
Ancillary revenues usually refer to revenues generated from non-
ticket sources. A broadly accepted definition of ancillaries in the
airline industry is that employed by IdeaWorks, who asserts that ancil­
laries are “revenue beyond the sales of tickets that is generated by direct sales
to passengers, or indirectly as a part of the travel experience.” Airline an­
cillaries are categorized into 1) a la carte products and 2) third-party
products. A la carte products include unbundled flight products such
as onboard food and beverages, checked baggage and excess baggage

* Corresponding author.
E-mail addresses: wsong@kau.ac.kr (W.-K. Song), hclee@kau.ac.kr (H.C. Lee).

https://doi.org/10.1016/j.jairtraman.2019.101735
Received 17 October 2018; Received in revised form 6 October 2019; Accepted 7 October 2019
Available online 15 October 2019
0969-6997/© 2019 Elsevier Ltd. All rights reserved.
W.-K. Song and H.C. Lee
fees, assigned seats and seating preferences, priority check-in and early
boarding privileges, wireless internet access, and many other paid op­
tions not listed (IdeaWorks). Punitive charges such as itinerary change
fees, cancellation fees, credit card processing fees, and no-show pen­
alties are also included in the group of a la carte products (Warnock-­
Smith et al., 2017). Third-party products include commission-based
ancillaries, including commissions received from hotels, car rentals,
travel insurance offers, foreign currency exchanges, and tourism pack­
ages sold on the airline’s websites. Frequent flier programs offering
mileage points to program members in exchange for products or services
offered through business affiliates or partnerships also fall into
third-party products category. Another more recent trend in this cate­
gory is the occurrence of advertising sales from placements in the
aircraft (e.g. in overhead bins, seat backs, trays, or in-flight magazines)
or on boarding passes (IdeaWorks 2018, Warnock-Smith et al., 2017).
A la carte ancillaries involving unbundling (i.e. the practice of
charging separately for products/services that have been traditionally
included in the fare price) have been a current focus for both practi­
tioners and researchers. Airline profitability turnaround has been
attributed to a paradigm shift in fare pricing that originated in low-cost
carriers (LCCs) and spread to full-service carriers (FSCs). Along with
commission-based ancillaries, dynamic packaging has started attracting
attention due to its vast potential to restructure airline revenue models
in different ways (O’Connell, 2011).
Dynamic packaging refers to conveniently booking complete travel
packages that include any combination of flights, accommodation,
airport transfers, or tourist experiences with one click (Finntastic Mar­
keting, 2005). It is referred to as dynamic because inventory, travel
components, and pricing are dynamically determined online in real-time
(O’Connell, 2011). It also allows for cheaper prices because opaque
package pricing enables companies to pass on more discounts to cus­
tomers. When it first drew attention in the mid-2000s, dynamic pack­
aging was expected to change the way travel agents and travel operators
did business (Genesys, 2005). However, airlines themselves quickly saw
clear opportunities and benefits of using dynamic packaging. The
SITA/Air Transport World (ATW) Passenger Self-service survey high­
lighted a dramatic increase in the percentage of passengers using airline
websites to book or purchase ancillary services (Rose, 2011). In the third
Annual World Low Cost Airlines Congress, participants discussed dy­
namic packaging as a way to increase their ancillary revenue, citing
Ryanair’s increased conversion rate after offering dynamic packaging
(Compart, 2006). Ryanair reportedly recorded increasing ancillary
revenue, primarily from hotel bookings, car hires, and travel insurance
sales (Compart, 2006; O’Connell, 2011). The airline’s dynamic pack­
aging at that time constituted bolt-on hyperlinks on their website. It was
less integrated compared to the current way dynamic packaging is
structured; it outsourced through external links like Booking.com for the
hotel reservation process, and to Hertz for car hires (O’Connell and
Bouquet, 2015). British Airways launched a more integrated dynamic
packaging system online in 2009. It offered simple and easy packaging
for flight, hotel, car rental, and tourist experiences (from cultural
sightseeing to adventures), including thousands of options at better
prices (British Airway, 2009). Ryanair launched a similar holiday
packaging service in 2016 in an attempt to become ‘the Amazon of air
travel’ with its 119 million annual passengers (Conghaile, 2016).
Nowadays, airlines strive to become true online retailers (Rose,
2011). This has been dubbed the airline retail revolution (Open­
JawTech, 2017). Airlines are incorporating complementary product
offers into their websites’ ticket booking process seamlessly in one
transaction. This has been well-received by customers because it feels
natural as a part of the planning process (Rose, 2011). The new direction
and revenue models have been made possible by new online travel data
technology solutions and outsourcing to vendors such as Peakwork,
Distribution Travel, and OpenJawTech. According to Peakwork (2017),
Air France, Austrian Airlines, Condor, Corendon Airlines, Easyjet,
Edelweiss, Emirates, Eurowings, Germania, KLM, Lufthansa, SkyWork
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Journal of Air Transport Management 82 (2020) 101735
Airlines, SunExpress, Swiss, Tap Portugal, Transvania, TUIfly.com, and
Veuling are directly or indirectly utilizing Peakwork’s dynamic pack­
aging system. It should be noted that airline dynamic packaging is most
actively offered by European airlines. Starting in 2017, Ryanair began
offering dynamic packaging in the UK, Ireland, Germany, and Spain,
while Easyjet’s dynamic packaging has only been available in Germany
(FVW, 2017). Dynamic packaging has become so prevalent in Europe
that it was even blamed for the demise of the charter airline business in
short-haul markets on the continent (O’Connell and Bouquet, 2015).
The US has also seen an increasing customer preference for dynamic
packaging. A few airlines, including Allegiant, have managed to exploit
dynamic packaging opportunities (De Wit and Zuidberg, 2012). How­
ever, US airlines have a limited ability to cross-sell (i.e. the selling of
complementary products to an existing airline customer) or upsell (i.e.
the marketing of higher-end complementary products to an existing
airline customer) during the primary airline booking process. Packages,
static or dynamic, have had better selling success in Europe because the
US package market is more fragmented and less vertically integrated
than the European market. Moreover, many US airlines have outsourced
their holiday packaging process to third-party suppliers. This has pre­
vented US airlines from gaining valuable insight into customer mar­
keting data, behavior, and preferences. Still, there is no doubt that
airlines can seize opportunities to implement dynamic packaging as an
additional revenue generator during the current ongoing transition to
online packaging (Rose, 2011). Therefore, airlines have been investing
in IT systems to gather information about their customers and their
preferences to increase sales through direct channels such as websites
(SITA, 2013).
Despite the business potential and utility of packaging travel prod­
ucts and services on airline websites, many airlines serving Korean
travelers have yet to actively capitalize on the idea. In particular, there is
a definite lack of dynamic packaging in Korean airlines. This is partly
explained in that Asian airlines were initially slow to adopt and develop
the LCC business model (O’Connell and Williams, 2005), and they
therefore had less time to strategically focus on ancillary revenue. Prior
survey results indicated that Korean passengers were less likely to use
technology for their airline and travel product purchases despite the
country’s advanced technology penetration (SITA, 2016). This may have
been because dynamic packaging was not offered by airlines serving
Korean customers including airlines in Korea. If the airlines continue to
avoid jumping into the dynamic packaging game, they will soon lose
their competitiveness, experience smaller operating margins, face
decreasing customer loyalty, create fewer partnerships, and miss op­
portunities to establish channels to digest distressed inventory without
negatively influencing their brand.
Based on a survey of 2030 airline customers in Korea, this paper aims
to study the need of Korean international air travelers for commission-
based ancillaries on airline websites via dynamic packaging, as well as
their willingness to purchase such ancillaries. It then attempts to provide
further information about customer preferences to airlines catering to
Korean travelers to help them improve their business strategies.
2. Literature review
There have been several studies regarding ancillary revenue as it has
become more widespread in the industry and a more important factor
contributing to airline profitability. Because ancillary products and
services were aggressively offered first by LCCs as a part of their business
strategy, ancillary revenue was frequently incorporated into discussions
on LCC business models. Ancillary revenue as a percentage of overall
company revenue has been higher for LCCs (De Wit and Zuidberg,
2012). The success of LCCs has been attributed to ancillary revenues
resulting from fare unbundling and simplification (Graham and Shaw,
2008; Doganis, 2010). Ancillary revenue resulting from the unbundling
of their core transportation products was also shown to be critical in the
profitability of low-cost, long-haul flights (Francis et al., 2007; Daft and
W.-K. Song and H.C. Lee
Albers, 2012; De Poret et al., 2015). Daft and Albers (2012) anticipated
higher demand and prices for ancillary services for long-haul LCC flights
compared to the traditional LCC routes, considering their longer flight
times and the higher likelihood that the long-haul destinations would be
socially and culturally different (making packaged travel services more
attractive to inexperienced travelers). De Wit and Zuidberg (2012)
emphasized increasing ancillary revenue as a solution to the LCCs’
organic growth limits. Because LCCs have become dominant players in
air travel, especially in Europe (Dobruszkes, 2013), a trend was observed
in which FSC and LCC business models converged (Daft and Albers,
2013, 2015). Presently, FSCs are raising ancillary revenue to improve
profitability while, at the same time, LCCs are adapting by offering fare
bundling to target upmarket customers (Klophaus et al., 2012; Fageda
et al., 2015).
Many of the literature on ancillaries has focused on the unbundling
of air fares and air services. Garrow et al. (2012) reviewed the rapid
de-bundling trends in the US airline market. They anticipated that new
ancillary fees would continue to be introduced but also warned about
the potential for customer backlash and US regulatory intervention.
Regarding the price of unbundled ancillaries, Waguespack and Curtis
(2013) found no evidence of perceived price unfairness among existing
and potential customers. Wittmer and Rowley (2014) found that econ­
omy class passengers were willing to purchase value-adding supple­
mentary services and argued that FSCs should create new
supplementary services available for an additional charge instead of
unbundling existing services.
A few studies have looked at dynamic packaging, but most have
focused on technological applications. Zach et al. (2008) studied
tourism-driven networks to provide insights and implications for tech­
nology design in dynamic packaging systems. Akoumianakis et al.
(2011) introduced the concept of cross-organizational virtual partner­
ships to better develop dynamic packaging systems. Ayazlar (2014)
investigated the existing dynamic packaging applications of online
travel agencies and found that they featured specifications that focused
on choice, customization, and flexibility. In another study, O’Connell
and Bouquet (2015) analyzed tourist willingness to purchase
travel-related products on airline websites and found positive results.
The Accenture Amadeus Alliance (2017) recognized dynamic packaging
as an important growing trend in airline ancillaries. They pointed out
the importance of ancillary merchandising in airline revenues, and how
the optimal mix of ancillaries based on customer data would bring in
subsequent travel-related business to airline websites.
The present study is most similar to O’Connell and Warnock-Smith
(2013) and Warnock-Smith et al. (2017). O’Connell and
Warnock-Smith (2013) investigated traveler preferences and their
acceptance levels of ancillary products and services. They found that
travelers were most willing to pay for airport car parking from
commission-based ancillaries and additional checked baggage fees from
a la carte ancillaries. Still, they concluded that travelers had a low up­
take for ancillary products and services, and the uptake was even lower
for commission-based ancillaries. Warnock-Smith et al. (2017)
expanded on O’Connell and Warnock-Smith (2013)’s study by investi­
gating passenger willingness to pay and incorporating the analysis of
different acceptable price points. The authors found a significantly
different willingness to pay for each ancillary service, and the willing­
ness depended on variables such as carrier type, length of flight, and
purpose of travel. They also showed that travelers were less willing to
pay for commission-based ancillaries than other unbundled products
that were perceived as necessities. The results of both studies showed
that commission-based ancillaries were less well-received by travelers.
This study attempts to determine whether there exists a need among
Korean air travelers for commission-based ancillaries within a dynamic
packaging system, and whether there is a willingness to purchase for
such ancillaries. The concepts of need and willingness to purchase were
first separated in the study by O’Connell and Warnock-Smith (2013),
who investigated the traveler preferences and acceptance levels of
3
Journal of Air Transport Management 82 (2020) 101735
airline ancillaries. They assumed that acceptability decreased with
opportunistic ancillary sales and preference increased with greater value
to passengers compared to ancillary costs. To interpret the results more
intuitively, we used need instead of acceptability and willingness to
purchase in place of preference. We also focus on examining Korean
customers whose preferred airlines’ ancillary practices are generally
lagging behind the competition. There has been previous literature
examining the effects of airline alliance services on passenger percep­
tion, demand, and purchasing behavior in Korea (Suh and Kang, 2008).
However, Suh and Kang (2008) focused on strategic alliances and
partnerships for marketing purposes. This study focuses more on trav­
eler needs that don’t relate to actual flights or fares, but rather to
customer demand for, and willingness to purchase ancillary products
and services that are cross-sold or up-sold on airline websites via dy­
namic packaging. Through this process, we garner insights into how to
formulate and implement successful ancillary business strategies for
airlines catering to Korean customers that are not currently taking full
advantage of their business potential.
3. Methodology
The data was collected by Research 21, a Korean research company
specializing in data collection, upon request from the Institute of Busi­
ness Research at Korea Aerospace University in February 2016. The
research company sent email invitations for an online survey to a panel
of 3500 individuals recruited from representative probability samples of
the Korean population. Panel participants were asked to participate only
if they had international air travel experience. 2030 responses were
obtained, giving a response rate of 58%. In studying traveler preferences
and opinions, using an online survey was deemed the most appropriate
method (Evans and Mathur, 2005; O’Connell and Warnock-Smith,
2013). The online survey method’s strength was its access to, and use
of, comprehensive large data samples. Previous literature has used
surveys of aviation experts based on their air travel experience, applying
a simplified, minimal convenience sampling approach. For example,
O’Connell and Warnock-Smith (2013) used samples of 170 aviation
professionals, and Warnock-Smith et al. (2017) used 159 samples
selected from a group of aviation conference attendees. Previous surveys
have gained the collective wisdom and experience of experts in the field,
but the survey used in this study was designed specifically to collect data
from the actual Korean air passenger population. The demographic
profiles of respondents (Table 1) and the travel-related characteristics of
respondents (Table 2) are presented below.
The sample contained slightly more males than females, with 1185
male respondents (58.4%) compared to 845 (41.6%) female re­
spondents. In terms of age, 67% of the respondents were in their 30s and
40s, and among the overall respondents, the largest group (35.7%) were
in their 40s. About half of the respondents reported an annual income
between KRW 30 mil and 59.9 mil. 51.1% of respondents were either
office workers or engineers. In terms of travel frequency, 43.4% of re­
spondents said they traveled internationally via air once or twice a year.
79.3%of the respondents answered that they traveled for leisure. Asia
(78.8%), especially Japan and China (41.6%), turned out to be the most
frequently-visited outbound destinations among the respondents.
Compared to the Korean outbound traveler statistics provided by the
2016 Korea National Tourism Survey from the Korea Culture and
Tourism Institute, this sample was adequate at representing the de­
mographic and travel-related characteristics of Korean outbound trav­
elers, but with some limitations. In 2016, Koreans traveling abroad were
slightly more male (51.1%) than female (48.9%). Of Korean outbound
travelers, 21.1% were in their 30s and 19.9% were in their 40s. The
average travel frequency was 1.36 times a year. 83.4% traveled for
leisure. Approximately 85% went to Asian countries, including Japan
and China (45%) (Korea Culture and Tourism Institute, 2016). The
Korean outbound travel trend of traveling to Asian countries for leisure
(Sejong University Tourism Industry Research Lab and Consumer
W.-K. Song and H.C. Lee Journal of Air Transport Management 82 (2020) 101735

Table 1 The survey questions were specifically tailored to better understand

Demographic profile of respondents (N ¼ 2030). the customer need for and willingness to purchase commission-based
Characteristics Number of Respondents Frequency (%) ancillaries during the ticket buying process from airline websites.
These ancillaries include car rentals, travel insurance, hotels, airport car
Gender
Male 1185 58.4 parking, airport transfers (such as rail and shuttle services), foreign
Female 845 41.6 currency exchange, tourist attractions, travel amenities and necessities
(such as travel bag and voltage converter), and baggage delivery ser­
Age vices. Initially, all of the commission-based products and services found
20-29 289 14.2
in previous literature (Rose, 2011; O’Connell and Warnock-Smith, 2013;
30-39 641 31.6
40-49 725 35.7
Warnock-Smith et al., 2017) were considered for inclusion in the survey.
50 and over 375 18.5 Upon consulting airline executives, duty free was dropped from the final
set. Duty free is a commission-based ancillary that Korean travelers are
Annual Income already using to a profound extent, and airlines in Korea are actively
Less than KRW 20 mil 170 8.4 implementing it into their strategies. In 2007, Korean Air was in the top
KRW 20 mil-29.9 mil 319 15.7
KRW 30 mil-39.9 mil 477 23.5
10 airlines in terms of generating ancillary revenues (Warnock-Smith
KRW 40 mil-49.9 mil 294 14.5 et al., 2017), mainly from its duty free commissions. The survey also
KRW 50 mil-59.9 mil 249 12.3 included questions regarding prior purchasing experiences of
KRW 60 mil-69.9 mil 203 10.0 commission-based ancillaries and what motivated these purchases.
KRW 70 mil-79.9 mil 124 6.1
None of the questions were open-ended, and they were simplified to
KRW 80 mil-89.9 mil 75 3.7
KRW 90 mil-99.9 mil 61 3.0 avoid any ambiguity or confusion. A translated copy of the survey
KRW 100 mil or more 58 2.9 questionnaire can be found in the appendix. For the data analysis, we
first examined the need of Korean air travelers for commission-based
Occupation ancillaries available for ticket buyers and the willingness to purchase
Government or Military 56 2.8 them on airline websites. As in O’Connell and Warnock-Smith (2013),
Entrepreneur or Manager 92 4.5
Office worker or Engineer 1037 51.1
the disaggregate-level results for the demographic and travel-related
Sales or Service 89 4.4 characteristics of the respondents were analyzed to determine whether
Professional 168 8.3 the characteristics had an impact on need and willingness. We then
Production or Skilled worker 59 2.9 focused on the differences between the respondents’ answers regarding
Self-employed 168 8.3
need and willingness.
Student 86 4.2
Housewife 189 9.3
Retired 19 0.9 4. Results and discussion
Unemployed 37 1.8
Other 30 1.5
Six hundred and four (29.8%) respondents answered that they had
previously purchased commission-based ancillary products (e.g. airtel
and aircartel) from airlines. This number is noticeably lower than that
Table 2 found in the results from the 2010 SITA/ATW 2010 passenger
Travel-related characteristics of respondents (N ¼ 2030). self-service survey. The SITA/ATW survey reported that more passen­
Characteristics Number of Respondents Frequency (%) gers were using airline websites for car rentals (35%), travel insurance
Number of Air Travel per year (International Round-trip Basis) (29%), hotels (37%), and airport transfers (14%, respectively). This is
Less than 1 695 34.2 also not in line with the 2014 Frost & Sullivan/Amadeus 2014 study that
1-2 881 43.4 asserted that 79% of travelers preferred to buy ancillaries directly from
3-4 285 14 airlines. Air travelers with higher annual incomes, frequent air travelers
5-9 116 5.7
10 or more 53 2.6
who travel more than three times a year, business travelers, and trav­
elers visiting long-distance destinations such as Europe and North
Purpose of Travel America tended to have more experience in purchasing ancillaries, as
Leisure 1610 79.3 seen in Table 3.
Business 339 16.7 Respondents who answered that they had previously purchased
Visiting friends/relatives 75 3.7
commission-based ancillaries from airlines indicated convenience (i.e.
Other 6 0.3
remove the need to visit other websites, 65.6%) as the primary reason,
Most Frequently-visited Destinations followed by economy (i.e. cheap price or extra mileage benefits, 30.8%)
Japan or China 844 41.6 and reliability (i.e. trustworthiness of airline partnerships, 3.6%), as
Southeast Asia 755 37.2 presented in Table 4. Compared to the average, respondents in their 20s
Europe 225 11.1
cited economy more, respondents over 50 mentioned convenience more.
North America 165 8.1
Oceania 28 1.4 Interestingly, respondents who travel more than 10 times a year placed a
Middle East or Africa 13 0.6 higher-than-average value on economy and reliability. From the results,
it can be inferred that Korean travelers are not yet fully or actively using
airline websites for commission-based ancillaries. This indicates that
Insight, 2018) was well captured in the sample. However, the age de­ there is plenty of room for growth in the market, and there is potential
mographics of Korean outbound travelers were not represented properly for airlines serving Korean customers including Korean airlines to adapt
in the collected sample. Travelers in their 30s and 40s were over­ and innovate by developing and incorporating dynamic packaging into
represented, while those over 50 years of age were underrepresented. their websites to boost ancillary revenue.
Six of the respondents were in their 70s, including the oldest at 78 years Korean international air travelers’ need for and willingness to pur­
of age, and 37 respondents were in their 60s. The underrepresentation of chase various commission-based ancillaries with flights on airline
the over-50 age group, accounting for 18.5% in the sample but 27.5% of websites were surveyed. Respondents were first asked whether they
actual Korean outbound travelers, could be attributed to the online thought commission-based ancillary products needed to be offered with
survey method. flight tickets on airline websites on a scale of 1 (not necessary at all) to 5

4
W.-K. Song and H.C. Lee Journal of Air Transport Management 82 (2020) 101735

Table 3 Table 4
Previous experience in purchasing commission-based ancillaries (N ¼ 2030). Reason for previous commission-based ancillary purchases (N ¼ 604).
Experience (%) No Experience (%) Economy Convenience Reliability
(%) (%) (%)
Total 29.8 70.2
Total 30.8 65.6 3.6
Gender
Male (n ¼ 1185) 31.5 68.5 Gender
Female (n ¼ 845) 27.3 72.7 Male (n ¼ 373) 27.6 68.1 4.3
Female (n ¼ 231) 35.9 61.5 2.6
Age
20–29 (n ¼ 289) 25.3 74.7 Age
30–39 (n ¼ 641) 28.9 71.1 20–29 (n ¼ 73) 37.0 57.5 5.5
40–49 (n ¼ 725) 32.7 67.3 30–39 (n ¼ 185) 32.4 66.5 1.1
50 and over (n ¼ 375) 29.1 70.9 40–49 (n ¼ 237) 31.2 65.0 3.8
50 and over (n ¼ 109) 22.9 70.6 6.5
Annual Income
Less than KRW 20 mil (n ¼ 170) 22.4 77.6 Annual Income
KRW 20 mil-29.9 mil (n ¼ 319) 26.6 73.4 Less than KRW 20 mil 28.9 65.8 5.3
KRW 30 mil-39.9 mil (n ¼ 477) 23.9 76.1 (n ¼ 38)
KRW 40 mil-49.9 mil (n ¼ 294) 26.2 73.8 KRW 20 mil-29.9 mil 38.8 55.3 5.9
KRW 50 mil-59.9 mil (n ¼ 249) 36.5 63.5 (n ¼ 85)
KRW 60 mil-69.9 mil (n ¼ 203) 32.0 68.0 KRW 30 mil-39.9 mil 32.5 64.9 2.6
KRW 70 mil-79.9 mil (n ¼ 124) 38.7 61.3 (n ¼ 114)
KRW 80 mil-89.9 mil (n ¼ 75) 46.7 53.3 KRW 40 mil-49.9 mil 31.2 63.6 5.2
KRW 90 mil-99.9 mil (n ¼ 61) 31.1 68.9 (n ¼ 77)
KRW 100 mil or more (n ¼ 58) 55.2 44.8 KRW 50 mil-59.9 mil 26.4 69.2 4.4
(n ¼ 91)
Number of Air Travel per year KRW 60 mil-69.9 mil 30.8 67.7 1.5
Less than 1 (n ¼ 695) 15.5 84.5 (n ¼ 65)
1–2 (n ¼ 881) 29.3 70.7 KRW 70 mil-79.9 mil 25.0 75.0 0.0
3–4 (n ¼ 285) 45.3 54.7 (n ¼ 48)
5–9 (n ¼ 116) 58.6 41.4 KRW 80 mil-89.9 mil 28.6 68.6 2.8
10 or more (n ¼ 53) 77.4 22.6 (n ¼ 35)
KRW 90 mil-99.9 mil 31.6 68.4 0.0
Purpose of Travel (n ¼ 19)
Leisure (n ¼ 1610) 28.2 71.8 KRW 100 mil or more 28.1 65.6 6.3
Business (n ¼ 339) 38.6 61.4 (n ¼ 32)
Visiting friends and relatives (n ¼ 75) 24.0 76.0 Number of Air Travel per year
Other (n ¼ 6) 16.7 83.3 Less than 1 (n ¼ 108) 27.8 69.4 2.8
1–2 (n ¼ 258) 31.4 64.7 3.9
3–4 (n ¼ 129) 32.6 65.9 1.5
Most Frequently-visited Destination
5–9 (n ¼ 68) 25.0 72.1 2.9
Japan or China (n ¼ 844) 29.1 70.9
10 or more (n ¼ 41) 39.0 48.8 12.2
Southeast Asia (n ¼ 755) 27.4 72.6
Europe (n ¼ 225) 34.7 65.3
North America (n ¼ 165) 35.8 64.2 Purpose of Travel
Oceania (n ¼ 28) 28.6 71.4 Leisure (n ¼ 454) 32.2 64.8 3.0
Middle East or Africa (n ¼ 13) 46.2 53.8 Business (n ¼ 131) 27.5 67.9 4.6
Visiting friends and relatives 22.2 72.2 5.6
(n ¼ 18)
Other (n ¼ 1) 0.0 0.0 100.0
(absolutely necessary). Table 5 summarizes the average ratings for the
need of each ancillary, the standard deviation, and the percent of re­ Most Frequently-visited Destination
spondents that said the service was necessary/unnecessary in their re­ Japan or China (n ¼ 246) 32.5 63.8 3.7
sponses. The statistical test value in Table 5 was derived from the one- Southeast Asia (n ¼ 207) 31.9 65.2 2.9
way ANOVA test to determine whether there was a significant differ­ Europe (n ¼ 78) 24.4 71.8 3.8
North America (n ¼ 59) 23.7 69.5 6.8
ence in ratings. The null hypothesis (H0 : μ1 ¼ μ2 ¼ ⋯ ¼ μk ) was that
Oceania (n ¼ 8) 37.5 62.5 0.0
all average ratings were identical, and the alternative hypothesis was Middle East or Africa (n ¼ 6) 66.7 33.3 0.0
that at least one average rating was different. Throughout the paper, we
tested this set of hypotheses with a standard criterion of p-value < 0.05.
Overall, Korean travelers indicated that they felt the need for The results indicated that there were some significant differences in
commission-based ancillaries as part of their online purchasing of airline ratings depending on the respondents’ demographic and travel-related
services, the average ratings were all greater than 3 (neutral). Among characteristics. Female respondents were more positive toward the
the commission-based ancillaries in the survey, the number of re­ need for commission-based ancillaries optional to ticket buyers from
spondents who indicated each service as necessary was clearly greater airlines. Ratings from female respondents were higher (except for car
than the number of respondents who answered otherwise. Respondents rentals) and the differences were generally significant. The higher need
indicated a higher need for airport transfers, foreign currency exchange, for foreign currency exchange, tourist attractions, travel amenities and
and travel insurance. The statistical test result indicated that there was a necessities, and baggage delivery ancillaries were confirmed for re­
statistical difference in average ratings between the types of ancillaries spondents in their 20s. This is interesting because travel amenities and
rejecting the null that all average ratings were the same. necessities and baggage delivery were two of the least popular
Table 6 summarizes the disaggregated need survey results by the commission-based ancillaries. Those 50 and over showed a significantly
demographic and travel-related characteristics. The statistical test higher need for travel insurance. Respondents in the higher annual in­
values in Table 6 were derived from the one-way ANOVA tests to come group showed a lower need for foreign currency exchange and
determine whether there was a significant difference in ratings between tourist attractions. This may have been due to the availability of more
the groups with different demographic or travel-related characteristics. favorable exchange rates at their banks, as well as the probability that

5
W.-K. Song and H.C. Lee Journal of Air Transport Management 82 (2020) 101735

Table 5 compared to the need survey. The paired sample t-tests were conducted
Need for commission-based ancillaries from airlines between the types of to test whether there was a significant difference in traveler need and
ancillaries. willingness to purchase ratings. The results are presented in Table 8. For
Average Standard % of respondents % of respondents popular commission-based ancillaries (airport transfers and foreign
Rating Deviation who indicated who indicated currency exchange), there was no statistical difference in the need and
(1–5) ancillaries as ancillaries as willingness to purchase ratings. But for less favored commission-based
unnecessary necessary
ancillaries (airport car parking, travel amenities and necessities, and
(answered 1 and (answered 4 and
2) 5) baggage delivery), there confirmed statistically lower willingness to
purchase ratings compared to the need ratings.
Car rentals 3.38 0.90 14.19 46.80
(RNTL) Table 9 summarizes the survey results for the disaggregated will­
Travel 3.84 0.89 6.65 69.16 ingness to purchase as per demographic and travel-related characteris­
insurance tics. The statistical test values in Table 9 were derived from the one-way
(INSR) ANOVA tests to determine whether there was a significant difference in
Hotels (HTL) 3.55 0.83 9.06 55.02
Airport car 3.40 0.92 14.09 46.70
ratings between the groups with different demographic or travel-related
parking characteristics. The results indicated that there were some significant
(PARK) differences in ratings according to the respondents’ demographic and
Airport 3.87 0.87 5.62 69.75 travel-related characteristics. Still, the female respondents showed a
transfers
greater willingness to purchase commission-based ancillaries with flight
(TRSF)
Foreign 3.85 0.92 6.90 68.18 tickets from airlines. Ratings from the female respondents were higher
currency (except for car rental and airport car parking), but the significance in
exchange differences dropped slightly compared to the need survey results. It was
(FRX) confirmed that there were different preferences in commission-based
Tourist 3.64 0.93 9.90 58.18
ancillary types by age group. Respondents in their 20s were signifi­
attractions
(ATTR) cantly more willing to purchase commission-based ancillaries such as
Travel 3.27 0.91 16.50 37.64 hotels, airport transfers, foreign currency exchange, tourist attractions,
amenities travel amenities and necessities, and baggage delivery from airlines
and
compared to other age groups. They were also significantly less willing
necessities
(AMNT) (but not unwilling) to purchase car rentals and airport car parking. This
Baggage 3.43 0.87 10.99 45.76 does not necessarily mean that the respondents in their 20s preferred
delivery outlets other than airline websites for car rentals and airport car parking.
(BAG) Rather, the results can be interpreted that travelers in their 20s prefer
public transportation to renting a car while traveling due to economic
F-statistics (p-value) 133.29 (<0.01).
reasons. In fact, 37% of the respondents in their 20s indicated economy
as the reason they had purchased commission-based ancillary products
those travelers would have already been to major tourist attractions. or services from airlines in the past (refer to Table 4). This age group was
Respondents who travel internationally 10 or more times a year reported also more likely to take airport transfers to the airport, which would
a higher need for all ancillary products and services, with an average explain why they were less willing to purchase airport car parking.
score of 3.9 (close to 4 indicating commission-based ancillaries offering Respondents in their 30s generally showed lower willingness to pur­
from airlines are necessary). The respondents’ purpose of travel and chase commission-based ancillaries from airline websites. Respondents
most frequently-visited destinations had little influence on the results, in the higher annual income group showed a lower willingness to pur­
although business travelers did convey a lower need for tourist chase tourist attractions. Respondents who travel via air 10 or more
attractions. times a year reported a significantly higher willingness to purchase
The respondents were subsequently asked whether they were willing commission-based ancillary products and services, with an average
to purchase commission-based ancillaries from airlines if offered on score of 3.95 (close to 4, indicating a willingness to purchase
their websites during the ticket sales process on a scale of 1 (not willing commission-based ancillaries from airlines). Note that 77.4% of the re­
at all) to 5 (absolutely willing). Table 7 summarizes the average ratings spondents who travel by air more than 10 times a year had already
for the willingness to purchase each ancillary, the standard deviation purchased ancillaries from airlines (refer to Table 3). Business travelers
rating, and the percent of respondents that answered that they were showed a significantly lower willingness to purchase travel insurance,
willing/unwilling to purchase the product. The statistical test value in tourist attractions, and travel amenities and necessities. Again, these
Table 7 was derived from the one-way ANOVA test to determine results could be interpreted as indicative that this group would not have
whether there was a significant difference in ratings between the types needed to buy such ancillaries themselves. Travel insurance is often
of ancillaries. covered by companies, business travelers are less likely to seek out
The survey results suggested that Korean travelers were generally tourist attractions, and travel amenities and necessities are likely to
willing to purchase commission-based ancillaries with flights from air­ already be equipped for repeat travelers. Most frequently-visited desti­
lines; the average ratings were all greater than 3 (neutral). Respondents nations, which can approximate flight distance and time, had no influ­
showed a higher willingness to purchase airport transfers, foreign cur­ ence on the willingness to purchase commission-based ancillaries from
rency exchange, and travel insurance, which coincided with the need airlines.
results. For every ancillary, the number of respondents who indicated Compared to the results from the previous study on customer
that they were willing to purchase the service was greater than the
number of respondents who indicated that they were not willing. Travel
amenities and necessities, airport car parking, and baggage delivery
were the least popular commission-based ancillaries. The statistical test
result indicated that there was a statistical difference in average ratings
between the types of ancillaries, rejecting the null hypothesis that all
average ratings were identical.
The average willingness to purchase rating was significantly lower

6
W.-K. Song and H.C. Lee Journal of Air Transport Management 82 (2020) 101735

Table 6
Disaggregated need survey results by demographic and travel-related characteristics.
RNTL INSR HTL PARK TRSF FRX ATTR AMNT BAG

Gender
Male (n ¼ 1185) 3.39 3.81 3.55 3.38 3.80 3.79 3.55 3.23 3.39
Female (n ¼ 845) 3.36 3.89 3.56 3.44 3.96 3.93 3.78 3.32 3.50

F-statistics (p-value) 0.59 (0.44) 4.08 (0.04) 0.04 (0.84) 2.13 (0.14) 15.41 10.79 30.98 4.51 8.20
( < 0.01) ( < 0.01) ( < 0.01) (0.03) ( < 0.01)

Age
20–29 (n ¼ 289) 3.36 3.90 3.58 3.31 3.97 4.01 3.91 3.41 3.58
30–39 (n ¼ 641) 3.29 3.75 3.53 3.38 3.83 3.80 3.59 3.20 3.40
40–49 (n ¼ 725) 3.45 3.83 3.56 3.46 3.83 3.82 3.59 3.25 3.39
50 and over (n ¼ 375) 3.39 3.98 3.55 3.41 3.91 3.85 3.63 3.29 3.45

F-statistics (p-value) 4.02 5.67 0.33 (0.80) 1.99 (0.11) 2.28 (0.08) 3.94 9.63 3.64 3.96
( < 0.01) ( < 0.01) ( < 0.01) ( < 0.01) (0.01) ( < 0.01)

Annual Income
Less than KRW20mil 3.34 3.81 3.49 3.39 3.87 3.94 3.76 3.37 3.46
(n ¼ 170)
KRW20mil-29.9mil 3.36 3.89 3.61 3.36 3.93 3.95 3.77 3.36 3.52
(n ¼ 319)
KRW30mil-39.9mil 3.29 3.81 3.52 3.39 3.86 3.86 3.68 3.20 3.41
(n ¼ 477)
KRW40mil-49.9mil 3.48 3.93 3.55 3.41 3.87 3.90 3.60 3.22 3.43
(n ¼ 294)
KRW50mil-59.9mil 3.36 3.72 3.46 3.33 3.82 3.78 3.54 3.23 3.33
(n ¼ 249)
KRW60mil-69.9mil 3.39 3.86 3.55 3.48 3.85 3.75 3.48 3.26 3,46
(n ¼ 203)
KRW70mil-79.9mil 3.45 3.87 3.65 3.47 3.85 3.74 3.63 3.29 3.43
(n ¼ 124)
KRW80mil-89.9mil (n ¼ 75) 3.46 3.88 3.66 3.48 3.88 3.77 3.59 3.26 3.44
KRW90mil-99.9mil (n ¼ 61) 3.48 4.05 3.61 3.36 3.92 3.80 3.62 3.31 3.41
KRW100mil or more 3.31 3.67 3.69 3.48 3.76 3.66 3.48 3.38 3.43
(n ¼ 58)

F-statistics (p-value) 1.52 (0.13) 1.65 (0.10) 1.70 (0.08) 0.78 (0.64) 0.42 (0.92) 2.01 (0.03) 2.43 1.18 0.88 (0.54)
( < 0.01) (0.31)

Number of Air Travel per year

Less than 1 (n ¼ 695) 3.39 3.90 3.48 3.41 3.87 3.90 3.64 3.24 3.40
1–2 (n ¼ 881) 3.34 3.81 3.56 3.34 3.87 3.83 3.64 3.23 3.42
3–4 (n ¼ 285) 3.38 3.78 3.61 3.45 3.84 3.75 3.55 3.32 3.47
5–9 (n ¼ 116) 3.40 3.84 3.62 3.49 3.75 3.84 3.73 3.34 3.49
10 or more (n ¼ 53) 3.87 3.94 3.91 3.94 4.09 4.04 3.92 3.75 3.74

F-statistics (p-value) 4.44 1.43 (0.22) 4.19 6.11 1.52 (0.20) 2.08 (0.08) 2.14 (0.07) 4.75 2.22 (0.06)
( < 0.01) ( < 0.01) ( < 0.01) (0.01)

Purpose of Travel
Leisure (n ¼ 1610) 3.37 3.86 3.57 3.44 3.88 3.86 3.68 3.27 3.44
Business (n ¼ 339) 3.39 3.76 3.49 3.27 3.81 3.76 3.46 3.22 3.37
Visiting friends and relatives 3.45 3.83 3.41 3.33 3.93 3.91 3.68 3.41 3.60
(n ¼ 75)
Other (n ¼ 6) 3.33 4.00 3.17 3.00 3.67 4.17 4.00 2.83 3.83

F-statistics (p-value) 0.22 (0.89) 1.41 (0.24) 2.02 (0.11) 3.62 (0.01) 0.71 (0.55) 1.49 (0.21) 5.58 1.36 1.89 (0.13)
( < 0.01) (0.25)

Most Frequently-visited Destination

Japan or China (n ¼ 844) 3.34 3.82 3.54 3.35 3.88 3.84 3.64 3.27 3.44
Southeast Asia (n ¼ 755) 3.39 3.89 3.55 3.46 3.87 3.84 3.63 3.22 3.40
Europe (n ¼ 225) 3.40 3.83 3.57 3.37 3.80 3.86 3.67 3.32 3.48
North America (n ¼ 165) 3.50 3.84 3.56 3.45 3.80 3.90 3.72 3.32 3.47
Oceania (n ¼ 28) 3.32 3.79 3.79 3.54 4.14 4.07 3.61 3.36 3.61
Middle East or Africa 3.31 3.46 3.23 3.38 4.00 3.62 3.38 3.31 3.38
(n ¼ 13)

F-statistics (p-value) 0.93 (0.46) 1.05 (0.38) 0.87 (0.50) 1.39 (0.23) 1.10 (0.36) 0.66 (0.65) 0.53 (0.76) 0.71 0.61 (0.70)
(0.62)

7
W.-K. Song and H.C. Lee Journal of Air Transport Management 82 (2020) 101735

Table 7 demand for commission-based ancillary services by O’Connell and

Willingness to purchase commission-based ancillaries from airline. Warnock-Smith (2013),1 the results from this study indicated that
Average Standard % answered that % answered that Korean travelers had a higher willingness to purchase third-party
Rating Deviation unwilling to willing to products from airlines. In O’Connell and Warnock-Smith (2013), many
(1–5) purchase purchase respondents answered that they were not willing to purchase
(answered 1 and (answered 4 and
commission-based ancillaries from airlines, and the average willingness
2) 5)
to purchase ratings trended slightly toward negative. The preference
Car rentals 3.36 0.99 17.00 48.47 rankings for the commission-based ancillaries also differed. In the
(RNTL)
Travel 3.76 0.95 8.77 65.12
O’Connell and Warnock-Smith (2013) study, travel insurance was re­
insurance ported as the most popular commission-based ancillary product, fol­
(INSR) lowed by accommodations and airport parking. On average, respondents
Hotels (HTL) 3.54 0.90 9.56 53.00 were not willing to purchase surface transportation or attractions from
Airport car 3.27 1.01 19.60 41.87
airlines. In our study, willingness to purchase airport transfers (i.e.
parking
(PARK) surface transportation) ranked highest, followed by foreign currency
Airport 3.83 0.92 7.29 67.73 exchange, travel insurance, and tourists attractions (i.e., attractions).
transfers Also, even unpopular commission-based ancillary products such as
(TRSF) travel amenities and necessities received positive willingness to pur­
Foreign 3.81 0.96 8.37 65.42
currency
chase ratings from respondents.
exchange With significantly different average need rating of 3.58 and average
(FRX) willingness to purchase rating of 3.53 (refer to Table 8), we attempted to
Tourist 3.68 0.95 9.66 60.30 analyze the viability of ancillary products and services. Fig. 1 captures
attractions
the viability grouping of ancillary products and services based on trav­
(ATTR)
Travel 3.19 0.96 19.75 35.67 eler need and willingness to purchase. The group in the top right
amenities quadrant in Fig. 1 includes ancillaries that demonstrated higher than
and average traveler need combined with a higher than average willingness
necessities to purchase, airport transfers, foreign currency exchange, travel insur­
(AMNT)
ance, and tourist attractions. This is the group of ancillaries that should
Baggage 3.36 0.94 14.19 42.71
delivery be prioritized and implemented first on airline websites to cater to the
(BAG) traveler demand confirmed in this study. The second quadrant group
includes hotels. The second quadrant results show a higher than average
F-statistics (p-value) 136.25 (<0.01). rating for willingness to purchase but a lower than average traveler need
rating for the same service. The lower than average need rating for hotel
and accommodation services on airline websites is understandable
Table 8
because there are already many well-established competitive websites
Difference in traveler need and willingness to purchase ratings.
that specialize in booking accommodation. The results could be inter­
Average Average Difference T-statistics preted that even though travelers comparatively feel less strongly about
Needs Willingness to (p-value)
the need for accommodation booking services as part of the online flight
Ratings Purchase ratings
booking process, if this ancillary were offered on the airline website,
Car rentals 3.38 3.36 0.02 0.46 (0.64)
they would be relatively more willing to use it. This demonstrates a high
(RNTL)
Travel insurance 3.84 3.76 0.08 2.82
potential for expanding dynamic packaging products.
(INSR) ( < 0.01) The third quadrant group contains products and services that had
Hotels (HTL) 3.55 3.54 0.01 0.49 (0.62) lower than average ratings for both traveler need and willingness to
Airport car 3.40 3.27 0.13 4.30 purchase in the survey. It is important to note that although the ancil­
parking ( < 0.01)
laries in this group received lower ratings, the numbers were still greater
(PARK)
Airport transfers 3.87 3.83 0.04 1.14 (0.25) than 3 (neutral); implying a positive need and willingness to purchase.
(TRSF) Car rentals, baggage delivery, and airport car parking were less favored
Foreign currency 3.85 3.81 0.04 1.32 (0.19) commission-based ancillaries, although they were still positively
exchange
received by travelers. These results are unexpected because car rentals
(FRX)
Tourist 3.64 3.68 0.04 1.27
were considered a key service offered in dynamic packaging (Compart,
attractions (0.20) 2006; O’Connell, 2011). This inconsistency could be explained by the
(ATTR) fact that 78.8% of the respondents answered that they frequently visited
Travel amenities 3.27 3.19 0.08 2.71 Japan, China, or Southeast Asia, where tourists do not usually rent a car
and necessities ( < 0.01)
during their stay. To support this explanation, the ratings for both the
(AMNT)
Baggage delivery 3.43 3.36 0.07 2.70 need for and willingness to purchase for car rentals by respondents who
(BAG) ( < 0.01) traveled most frequently to Europe and North America were higher
Average 3.58 3.53 0.05 4.79
though not statistically significant (refer to Tables 6 and 9). Our results
( < 0.01) also differed from O’Connell and Warnock-Smith (2013)’s results

1
O’Connell and Warnock-Smith (2013) used different scaling system of 1
(very willing) to 6 (not at all willing).
2
The correlation coefficient between the average need ratings and the
average willingness to purchase ratings (n ¼ 18) was 0.98 (p-value: <0.01); the
correlation coefficient between the need ratings and the willingness to purchase
ratings (n ¼ 36,540, two 2030 observations for each ancillary) was 0.72
(<0.01).

8
W.-K. Song and H.C. Lee Journal of Air Transport Management 82 (2020) 101735

Table 9
Disaggregated willingness to purchase survey results by demographic and travel-related characteristics.
RNTL INSR HTL PARK TRSF FRX ATTR AMNT BAG

Gender
Male (n ¼ 1185) 3.39 3.74 3.53 3.28 3.75 3.75 3.58 3.17 3.28
Female (n ¼ 845) 3.33 3.79 3.54 3.26 3.95 3.89 3.82 3.21 3.46

F-statistics (p-value) 2.11 (0.15) 1.46 0.06 (0.80) 0.19 (0.66) 24.87 10.59 33.49 0.78 (0.38) 18.79
(0.23) ( < 0.01) ( < 0.01) ( < 0.01) ( < 0.01)

Age
20–29 (n ¼ 289) 3.24 3.80 3.62 3.07 3.97 4.01 3.96 3.34 3.51
30–39 (n ¼ 641) 3.28 3.69 3.45 3.29 3.78 3.71 3.62 3.11 3.29
40–49 (n ¼ 725) 3.46 3.77 3.58 3.33 3.80 3.78 3.61 3.16 3.31
50 and over (n ¼ 375) 3.41 3.84 3.55 3.30 3.89 3.86 3.71 3.25 3.43

F-statistics (p-value) 5.80 2.35 3.37 (0.02) 4.79 3.65 (0.01) 6.79 10.63 4.68 5.10
( < 0.01) (0.07) ( < 0.01) ( < 0.01) ( < 0.01) ( < 0.01) ( < 0.01)

Annual Income
Less than KRW20mil 3.24 3.65 3.52 3.26 3.85 3.88 3.84 3.36 3.44
(n ¼ 170)
KRW20mil-29.9mil 3.28 3.76 3.59 3.24 3.89 3.86 3.77 3.27 3.46
(n ¼ 319)
KRW30mil-39.9mil 3.30 3.76 3.48 3.22 3.82 3.84 3.72 3.10 3.29
(n ¼ 477)
KRW40mil-49.9mil 3.40 3.82 3.53 3.28 3.85 3.83 3.65 3.13 3.34
(n ¼ 294)
KRW50mil-59.9mil 3.42 3.65 3.47 3.29 3.78 3.76 3.59 3.17 3.28
(n ¼ 249)
KRW60mil-69.9mil 3.40 3.81 3.55 3.22 3.83 3.75 3.51 3.15 3.34
(n ¼ 203)
KRW70mil-79.9mil 3.52 3.83 3.64 3.42 3.81 3.73 3.65 3.23 3.38
(n ¼ 124)
KRW80mil-89.9mil (n ¼ 75) 3.47 3.86 3.61 3.46 3.80 3.73 3.58 3.20 3.40
KRW90mil-99.9mil (n ¼ 61) 3.44 3.90 3.60 3.41 3.80 3.70 3.56 3.20 3.34
KRW100mil or more 3.40 3.74 3.69 3.47 3.76 3.66 3.48 3.28 3.47
(n ¼ 58)

F-statistics (p-value) 2.08 (0.03) 1.36 1.31 (0.22) 2.04 (0.03) 36 (0.95) 0.98 (0.45) 2.55 1.59 (0.11) 1.14 (0.33)
(0.20) ( < 0.01)

Number of Air Travel per year

Less than 1 (n ¼ 695) 3.35 3.79 3.47 3.24 3.81 3.84 3.69 3.15 3.31
1–2 (n ¼ 881) 3.30 3.75 3.53 3.21 3.85 3.80 3.70 3.14 3.33
3–4 (n ¼ 285) 3.41 3.71 3.56 3.39 3.79 3.68 3.56 3.23 3.39
5–9 (n ¼ 116) 3.52 3.76 3.74 3.41 3.83 3.93 3.67 3.34 3.49
10 or more (n ¼ 53) 3.89 3.91 3.98 3.87 4.19 4.02 3.94 3.91 3.85

F-statistics (p-value) 5.52 0.82 5.89 7.32 2.42 (0.05) 2.47 (0.04) 2.31 (0.06) 9.27 4.84
( < 0.01) (0.51) ( < 0.01) ( < 0.01) ( < 0.01) ( < 0.01)

Purpose of Travel
Leisure (n ¼ 1610) 3.36 3.79 3.56 3.28 3.84 3.83 3.73 3.20 3.37
Business (n ¼ 339) 3.37 3.63 3.43 3.24 3.81 3.71 3.45 3.09 3.26
Visiting friends and relatives 3.36 3.85 3.56 3.41 3.87 3.91 3.68 3.41 3.48
(n ¼ 75)
Other (n ¼ 6) 2.67 3.83 3.33 3.17 3.67 4.00 3.83 3.50 3.67

F-statistics (p-value) 1.01 (0.38) 2.92 1.98 (0.11) 0.64 (0.59) 0.16 (0.92) 1.81 (0.14) 8.09 2.79 (0.04) 1.85 (0.14)
(0.03) ( < 0.01)

Most Frequently-visited Destination

Japan or China (n ¼ 844) 3.33 3.73 3.50 3.23 3.86 3.81 3.66 3.18 3.34
Southeast Asia (n ¼ 755) 3.38 3.82 3.56 3.29 3.77 3.79 3.69 3.17 3.33
Europe (n ¼ 225) 3.40 3.69 3.56 3.25 3.88 3.84 3.76 3.24 3.45
North America (n ¼ 165) 3.44 3.79 3.59 3.40 3.85 3.84 3.67 3.23 3.43
Oceania (n ¼ 28) 3.18 3.86 3.75 3.50 4.04 4.00 3.64 3.18 3.32
Middle East or Africa 3.15 3.38 3.31 3.08 3.92 3.46 3.23 3.08 3.23
(n ¼ 13)

F-statistics (p-value) 0.83 (0.53) 1.59 0.90 (0.48) 1.22 (0.30) 1.22 (0.29) 0.72 (0.60) 1.03 (0.40) 0.28 (0.92) 0.89 (0.48)
(0.16)

showing that airport parking was preferred by travelers but surface
transport less so. Our survey results indicated that airport transfers were
most popular commission-based ancillaries but airport car parking was
one of the least popular. The differences could be explained by Korean
traveler behavior and characteristics that the preference for airport
parking in O’Connell and Warnock-Smith (2013) was being replaced by
the preference of airport transfers among Korean travelers. This could be
because of more convenient airport transfer systems and/or more
expensive airport parking rates in Korea. Travel amenities and neces­
sities offered on the airline websites were the least favored ancillaries in

9
W.-K. Song and H.C. Lee
Fig. 1. Need and willingness to purchase commission-based ancillaries from airline websites.2
the survey. This reflects the fact that demand for travel amenities and
necessities is low for repeat travelers. Those items are not frequently
purchased beforehand when the trip is being planned and packaged.
5. Conclusion
This study analyzed traveler need for and willingness to purchase
ancillaries from airline websites via dynamic packaging based on a
survey of 2030 airline customers in Korea. Increased ancillary revenue
has played an important role in the recent success of the airline industry.
In an effort to expand ancillary offerings and ultimately become air
travel retailers, airlines have been scrambling to incorporate dynamic
packaging into their websites. Dynamic packaging is the simple and easy
packaging of flights, hotels, car rentals, and tourist experiences with
real-time dynamic inventory and pricing. Despite the global trend in this
area, many airlines catering to Korean travelers have been slow to
develop and implement dynamic packaging, which could seriously
threaten their competitiveness.
The study confirms that Korean travelers demonstrated the need for
and willingness to purchase ancillaries with flights from airline websites
despite having had proportionately less experience purchasing
commission-based ancillaries from airlines. Less than 30% of the re­
spondents indicated that they had previously purchased commission-
based ancillaries (e.g. airtel and aircartel) from airlines. Convenience
(65.6%) and economy (30.8%) were the main reasons for previous
purchases. Every commission-based ancillary was positively received by
the respondents. Airport transfers (e.g. rail and shuttle services), foreign
currency exchange, and travel insurance had the highest respondent
ratings for both the need for and willingness to purchase. Travel ame­
nities and necessities (e.g. travel bag and voltage converter) had the
lowest acceptance and preference ratings among Korean travelers. In­
consistencies between the findings in this study and previous studies (i.
e. the higher willingness to purchase third-party products from airlines
and the relatively inverted rankings of preferred ancillaries) could be
attributed to the different travel behaviors and preferences of Koreans.
The female respondents, the respondents in their 20s, and the re­
spondents who travel via air 10 or more times a year reported a
10
Journal of Air Transport Management 82 (2020) 101735
significantly higher need for and willingness to purchase a set of ancil­
lary products and services. However, respondents’ most frequently-
visited destinations, which could be interpreted as flight distance and
time, generally did not influence the results.
This study supports the viability of ancillary offerings from airline
websites targeting Korean travelers. The results show a high potential
for successful upselling and cross-selling strategies via dynamic pack­
aging. Despite lower than average survey ratings for the need of hotel
ancillaries on airline websites, there was higher than average willing­
ness to purchase if the service were offered. The results imply that, with
carefully designed incentives, promotions, and discounts, airlines tar­
geting Korean travelers can become true online retailers. Airlines have
distinct advantages and strong leverage in the travel retail market; their
websites are large storefronts that travelers first peer into when planning
a trip. By focusing on, understanding, and fulfilling customer needs to
provide value-added experiences to customers, airlines catering to
Korean customers can become real “retailers with wings” (Open­
JawTech, 2017).
The limitations of this study are as follows. First, the sample data did
not represent Korean outbound travelers properly in terms of the age
demographics. The sample overrepresented those in their 30s and 40s
and underrepresented those 50 and over. This could have increased the
overall ratings because it is believed that younger generations are more
tech-savvy and comfortable with shopping online, and they are hence
more positive regarding purchasing commission-based ancillaries from
airline websites. In actuality, the results found that the average ratings
from those in their 30s were lower than those 50 and over (refer to
Tables 6 and 9). We should be more concerned of the downward impact
of the sample data on the ratings. Also, this study’s implications are
limited to airlines serving Korean travelers because it is a Korean case
study based on survey data of 2030 Korean air travel customers. How­
ever, this study also shows that acceptance level of and preference for
each ancillary product could be country-specific, which would be useful
to all airlines in developing regional ancillary revenue strategies. In
addition, actual price questions, which would shed light on dynamic
pricing and provide more information regarding the viability of dynamic
packaging in Korea, were not asked along with the willingness to
W.-K. Song and H.C. Lee
purchase questions in the survey due to issues and challenges in the
implementation. This has been left for future research.
Funding
This research did not receive any specific grant from funding
agencies in the public, commercial, or not-for-profit sectors.
Declaration of competing interest
None.
Appendix A. Supplementary data
Supplementary data to this article can be found online at https://doi.
org/10.1016/j.jairtraman.2019.101735.
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