Sustainable Development Strategy of Low-Cost Airlines: Empirical Evidence for Indonesia Based on Analysis of Passenger Loyalty

The rapid progress in the competitive business environment has increased customer expectations and demands, thus leading to a situation where many companies are competing fiercely, especially low-cost airline companies or low-cost carriers (LCCs). The company carries out a strategy of providing satisfaction for its passengers to generate great loyalty. The purpose of this study is to find out what factors can affect passenger loyalty, such as service quality (SQ), price (P), customer satisfaction (S), and perceived value (PV) on LCC airlines in Indonesia. This study used quantitative methods through surveys which were conducted on 313 respondents in Indonesian, via online questionnaire data collection in July-August 2021. To test the relationship between variables, this study used statistical analysis with LISREL structural equation modelling (SEM). The present study was conducted concerning LCC companies in Indonesia and refers only to Indonesian consumers. There are 7 hypotheses in this study, of which 4 hypotheses are confirmed and 3 are invalidated. Some results obtained show that, in this case and with reference to Indonesian consumers only for the substitution service offered by LCCs, we have to discuss atypical manifestations of consumer behaviour (good SQ does not necessarily lead to increased S and lower price does not necessarily lead to increased S, etc.). At the same time, this study shows that consumer loyalty remains the essential factor for the survival of LCCs in the market.

Automated summary

This study aims to investigate the factors influencing passenger loyalty in Indonesian low-cost carriers, including service quality, price, customer satisfaction, and perceived value. Quantitative methods were employed, and a survey was conducted on 313 Indonesian respondents using online questionnaires. The results, analyzed through LISREL structural equation modeling, confirm 4 hypotheses and reject 3 hypotheses. The findings indicate that consumer behavior exhibits atypical manifestations in the context of Indonesian consumers, where good service quality does not necessarily lead to increased satisfaction and lower prices do not necessarily result in increased satisfaction. Additionally, this study emphasizes the significance of consumer loyalty for the survival of low-cost carriers in the market.