This project report describes the study about the premium economy class that has recently been introduced in the airlines as a brand extension to leverage the brand potential and reach closer to brand actualization. This project report considers certain variables which are assumed to effect the price of premium economy class seats with respective to economy class seats, these variables are listed in the report.
This report portrays the regression analysis done on R, to find out the factors affecting the price of premium economy class seats in airlines. This regression analysis uses the data collected for different airlines for various factors, which are mentioned in the report. This project is done to understand the price setting of the premium economy class seats in airlines. This reports also shows calculation done for jet airways in particular to compare it with rest of airlines put together in the study.
2. Acknowledgement
In a span of time, few achievements of note have been the product of effort of one person.
Instead, they were been accomplished through efforts of group. Similarly, the outcome of our
Project report would have been impossible without the cooperation, diligence, understanding
and encouragement of number of people. First, we are thankful to all those known and
unknown entities that helped us throughout our project work.
We would like to express our deep sense of gratitude to Prof. Sameer Mathur for
giving us the required guidance and support and motivation required during our project work.
3. Executive Summary
This project report describes the study about the premium economy class that has recently
been introduced in the airlines as a brand extension to leverage the brand potential and reach
closer to brand actualization. This project report considers certain variables which are assumed
to effect the price of premium economy class seats with respective to economy class seats,
these variables are listed in the report.
This report portrays the regression analysis done on R, to find out the factors affecting the price
of premium economy class seats in airlines. This regression analysis uses the data collected for
different airlines for various factors, which are mentioned in the report. This project is done to
understand the price setting of the premium economy class seats in airlines. This reports also
shows calculation done for jet airways in particular to compare it with rest of airlines put
together in the study.
4. Table of contents
Contents
..........................................................................................................................................................0
Acknowledgement............................................................................................................................1
Executive Summary..........................................................................................................................2
Brand Extension: ..............................................................................................................................5
Advantages of Brand Extension ...................................................................................................5
Disadvantages of Brand Extension...............................................................................................5
About Jet Airways: ...........................................................................................................................6
Jet Airways – Value Proposition ...................................................................................................7
JetPrivilege....................................................................................................................................7
Advertisements.............................................................................................................................8
Nomenclature used............................................................................................................................9
Model 1...........................................................................................................................................11
Residuals:.....................................................................................................................................11
Coefficients:.................................................................................................................................11
Inferences....................................................................................................................................11
Model 2...........................................................................................................................................12
Residuals:.....................................................................................................................................12
Coefficients:.................................................................................................................................12
Analysis of Variance Table.............................................................................................................12
Inferences:...................................................................................................................................13
Model 3...........................................................................................................................................13
Residuals......................................................................................................................................13
Coefficients ..................................................................................................................................13
Inferences....................................................................................................................................14
Model 4...........................................................................................................................................14
Residuals......................................................................................................................................14
Coefficients ..................................................................................................................................14
Analysis of Variance Table.............................................................................................................15
Inferences:...................................................................................................................................15
6. Brand Extension:
Brand extension is a marketing strategy in which a firm introduces a product using the same
brand name. This is a way of using brand potential. This takes the firm closer to brand
actualization. An airline firm introducing premium economy seat is brand extension.
Advantages of Brand Extension
It increases brand image.
It reduces the risk perceived by the customers.
It increases the likelihood of gaining distribution.
Economies of scale
Cost of developing new brand is saved.
Consumers can now seek for a variety.
The expense of introductory and follow up marketing programs is reduced.
It revives the brand.
It allows subsequent extension.
It clarifies the Brand meaning.
It increases market coverage as it brings new customers into brand franchise.
Disadvantages of Brand Extension
Brand extension in unrelated markets may lead to loss of reliability.
There is a risk that the new product may generate implications that damage the image
of the original brand.
It can confuse the loyal customers.
It can encounter retailer resistance.
It may cannibalize sales of the parent brand.
It can dilute the brand meaning.
7. About Jet Airways:
Jet Airways, based in Mumbai is an Indian airline. With 21.2% passenger market share, as of
February 2016, it is the second largest airline in India after IndiGo. It operates over 300 flights
daily to 68 destinations worldwide from its main hub at Chhatrapati Shivaji International Airport
and secondary hubs at Amsterdam Airport Schiphol, Chennai International Airport, Indira
Gandhi International Airport, Kempegowda International Airport and Netaji Subhas Chandra
Bose International Airport.
Jet airways was Incorporated in April 1992 as a limited liability company, this airline began
operations as an air taxi operator in 1993. It began full-fledged operations in 1995 with
international flights added in 2004. The airline went public in 2005 and in 2007, it acquired Air
Sahara. It became the largest carrier in the country by 2010.
8. Jet Airways – Value Proposition
“The Joy of Flying” – with this slogan Jet Airways are dedicated into giving the customers the
best service that they can provide. It indulges the consumer needs and also allows the following
partners to use its marketing codes in order to provide further routes to passengers, names
listed below:
Air Canada Kenya Airlines
All Nippon Malaysian Airlines
Brussels Airline Qantas
Etihad South African Airways
Garuda Indonesia Thalys
JetKonnect United Airlines
Jet Airways has 145 Interline Partners of which 95 are Interline eTicketing Partners. All existing
eTicketing eligible sectors of Jet Airways and the below Interline eTicketing Partner are
applicable for Interline eTicketing. JetPrivilege Partners: boasts of 140 partners across various
categories like airline, car rental, co-brand card, codeshare, conversion, dining, eRetail, lifestyle,
entertainment, hotel, lifestyle, publishing, retail and telecommunication. Through Check-in
Partners: through check-in facility for our guests travelling on our flights and connecting on 42
through check-in partner airlines across the globe.
JetPrivilege
With JetPrivilege, members enjoy a truly rewarding experience with unique privileges across
five membership tiers: Blue, Blue Plus, Silver, Gold and the exclusive Platinum.
JetPrivilege members can expect to earn more miles, enjoy more benefits, quicker tier upgrades
and easier tier retention, enhanced rewards and easier redemption.
JetPrivilege has won Freddie Awards considered 'Oscars' of frequent flyer programmes across
the world, for five consecutive years including the most coveted 'Program of the Year' Award
2007 and 2006 for the Japan, Pacific, Asia and Australia region.
Some of the key features that make the JetPrivilege programme a winner are: ease of
enrolment, five membership levels, faster tier upgrades, personalized web access and much
more
9. Advertisements
Jet Airways have been advertisings effectively through a variety of mediums including but not
limited to Billboards, TV, Web Ads and also their own inflight magazine. They advertise for the
customers and also for recruitment. Some examples of advertisements are shown below
10. Nomenclature used:
For AIRLINE:
0: British Airways
1: Emirates Airways
2: Delta Airways
3: Air France
4: Singapore Airlines
5: Virgin airlines
7: Jet Airways
8: Etihad Airways
For AIRCRAFT:
0: Boeing
1: Airbus
FLIGHT_DURATIONis total flight duration in hours
For MONTH:
1: January
2: February
3: March and so on
For INTERNATIONAL:
1: if international
0: if domestic
SEATS_ECONOMY: Number of economy seats
SEATS_PREMIUM: Number of premium economy seats
PITCH_ECONOMY: Pitch in economy class
PITCH_PREMIUM: Pitch in premium economy class
WIDTH_ECONOMY: Width in economy class
WIDTH_PREMIUM: Width in premium economy class
11. PRICE_ECONOMY: Price of economy seat in dollars
PRICE_PREMIUM: Price of premium economy seat in dollars
PRICE_RELATIVE: Difference between price of premium economy seat and economy class
divided by price of economy seat
N: number of economy seats plus number of premium economy seats
QUALITY: difference between pitch of premium economy and economy class
WIDTH: difference between width of premium economy and economy
NAME:
S denotes Sir’s data
A denotes data collected by group A
12. Model 1
model1 <- lm(air$PRICE_PREMIUM ~ air$PRICE_ECONOMY +
air$FLIGHT_DURATION + air$INTERNATIONAL + air$N + air$LAMBDA +
air$QUALITY + air$WIDTH)
Residuals:
Min 1Q Median 3Q Max
-1020.2 -289.5 -74.6 128.5 5412.2
Coefficients:
Estimate Std. Error t value Pr(>|t|)
(Intercept) -585.70285 121.26003 -4.830 1.71e-06 ***
air$PRICE_ECONOMY 1.07347 0.02774 38.693 < 2e-16 ***
air$FLIGHT_DURATION 54.61932 7.50862 7.274 1.04e-12 ***
air$INTERNATIONAL -166.04587 97.73876 -1.699 0.089835 .
air$N 1.05752 0.33165 3.189 0.001500 **
air$LAMBDA 2021.48908 408.18759 4.952 9.42e-07 ***
air$QUALITY 14.72581 11.54144 1.276 0.202457
air$WIDTH 90.94018 25.76154 3.530 0.000446 ***
---
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
Residual standard error: 586.8 on 632 degrees of freedom
Multiple R-squared: 0.8196, Adjusted R-squared: 0.8176
F-statistic: 410.2 on 7 and 632 DF, p-value: < 2.2e-16
Inferences :
P-value is 2.2e-16 < 0.05 hence it is significant. Model is good as adjusted r-square value is
0.8176. This model is without interaction and it implies that with increase in one unit of lambda
(no. of premium seats as compared to total seats, it increases price of premium economy by
$2021.48. Similarly for one unit (1 hour) increase in flight duration the prices of premium
economy increases by $54.6.
14. Inferences:
Anova is used to check the difference between variances of means between two models. Here
the p-value is 5.758e-05 which shows there is significant difference between two models.
Model 2’s P-value is 2.2e-16 < 0.05 hence it is significant. Model 2 is good as adjusted r-square
value is 0.8242 better than previous model. This model is with interaction between quality and
international variable and it implies that with increase in one unit of lambda (no. of premium
seats as compared to total seats, it increases price of premium economy by $1741. Similarly for
international flight the prices of premium economy increases by $795.4. but the interaction
shows with one unit increase in interaction the prices of premium economy decreases by
$326.2.
Model 3
Model3 <- lm(air$PRICE_PREMIUM ~ air$PRICE_ECONOMY +
air$FLIGHT_DURATION + air$INTERNATIONAL + air$N + air$LAMBDA +
air$QUALITY + air$WIDTH + air$WIDTH * air$N)
Residuals:
Min 1Q Median 3Q Max
-1169.3 -258.7 -70.1 119.5 5431.2
Coefficients:
Estimate Std. Error t value Pr(>|t|)
(Intercept) -247.12455 133.19232 -1.855 0.064006 .
air$PRICE_ECONOMY 1.05425 0.02733 38.579 < 2e-16 ***
air$FLIGHT_DURATION 51.31472 7.36068 6.971 7.93e-12 ***
air$INTERNATIONAL -19.17026 99.08095 -0.193 0.846645
air$N -1.06226 0.50012 -2.124 0.034057 *
air$LAMBDA 1766.62744 401.46224 4.400 1.27e-05 ***
air$QUALITY 21.79317 11.34846 1.920 0.055262 .
air$WIDTH -197.89489 57.68558 -3.431 0.000642 ***
air$N:air$WIDTH 1.42068 0.25530 5.565 3.88e-08 ***
---
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
Residual standard error: 573.4 on 631 degrees of freedom
Multiple R-squared: 0.828, Adjusted R-squared: 0.8259
F-statistic: 379.8 on 8 and 631 DF, p-value: < 2.2e-16
15. Inferences :
There is significant difference between two models model 2 and model 3. Model 3’s P-value is <
2.2e-16 < 0.05 hence it is significant. Model 2 is good as adjusted r-square value is 0.8259
better than previous model. This model is with interaction between N and width variable and it
implies that with increase in one unit of lambda (no. of premium seats as compared to total
seats, it increases price of premium economy by $1766.62. Similarly for flight duration the
prices of premium economy increases by $51.31 with increase in one unit of flight duration but
the interaction shows with one unit increase in interaction the prices of premium economy
increases by $1.42.
Model 4
Model4 <- lm(air$PRICE_PREMIUM ~ air$PRICE_ECONOMY +
air$FLIGHT_DURATION + air$INTERNATIONAL + air$N + air$LAMBDA +
air$QUALITY + air$WIDTH + air$WIDTH * air$FLIGHT_DURATION + air$WIDTH *
air$INTERNATIONAL + air$WIDTH * air$N+ air$WIDTH * air$LAMBDA)
Residuals:
Min 1Q Median 3Q Max
-2547.3 -254.1 -64.4 107.5 5440.1
Coefficients:
Estimate Std. Error t value Pr(>|t|)
(Intercept) -291.26812 185.98491 -1.566 0.117833
air$PRICE_ECONOMY 1.04554 0.02729 38.318 < 2e-16 ***
air$FLIGHT_DURATION 49.42426 11.91697 4.147 3.83e-05 ***
air$INTERNATIONAL 112.16311 109.59277 1.023 0.306488
air$N -1.19694 0.61619 -1.942 0.052527 .
air$LAMBDA 1749.84422 699.97720 2.500 0.012678 *
air$QUALITY 24.13541 11.67381 2.067 0.039098 *
air$WIDTH 465.30012 138.17037 3.368 0.000805 ***
air$FLIGHT_DURATION:air$WIDTH 0.43182 7.72832 0.056 0.955459
air$INTERNATIONAL:air$WIDTH -664.32257 119.48666 -5.560 4.00e-08 ***
air$N:air$WIDTH 1.39341 0.36634 3.804 0.000157 ***
air$LAMBDA:air$WIDTH -146.87483 255.58302 -0.575 0.565723
---
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
Residual standard error: 560.8 on 628 degrees of freedom
Multiple R-squared: 0.8363, Adjusted R-squared: 0.8334
F-statistic: 291.6 on 11 and 628 DF, p-value: < 2.2e-16
16. Analysis of Variance Table
Model 1: air$PRICE_PREMIUM ~ air$PRICE_ECONOMY + air$FLIGHT_DURATION +
air$INTERNATIONAL + air$N + air$LAMBDA + air$QUALITY + air$WIDTH +
air$QUALITY * air$INTERNATIONAL
Model 2: air$PRICE_PREMIUM ~ air$PRICE_ECONOMY + air$FLIGHT_DURATION +
air$INTERNATIONAL + air$N + air$LAMBDA + air$QUALITY + air$WIDTH +
air$WIDTH * air$FLIGHT_DURATION + air$WIDTH * air$INTERNATIONAL +
air$WIDTH * air$N + air$WIDTH * air$LAMBDA
Res.Df RSS Df Sum of Sq F Pr(>F)
1 631 212117629
2 628 197488869 3 14628760 15.506 9.662e-10
Inferences:
Here the p-value is 9.662e-10 which shows there is significant difference between two models,
model 3 and model 4.
Model 4’s P-value is <2.2e-16 < 0.05 hence it is significant. Model 4 is good as adjusted r-
square value is 0.8334 better than previous model. This model contains 4 interaction. They are
between width and flight duration variable, between width and international variable, between
width and N variable & between width and lambda variable, and it implies that with increase in
one unit of lambda (no. of premium seats as compared to total seats, it increases price of
premium economy by $1749.82. Similarly for width the prices of premium economy increases
by $465.3 but two interaction shows almost zero value change whereas two interaction shows
that with one unit increase will decreases prices of premium economy by $664.3 and $146.8
for interaction international and width , and between lambda and width respectively.
Model 5
Model5 <- lm(air$PRICE_PREMIUM ~ air$PRICE_ECONOMY +
air$FLIGHT_DURATION + air$INTERNATIONAL + air$N + air$LAMBDA +
air$QUALITY + air$WIDTH + air$QUALITY * air$FLIGHT_DURATION + air$QUALITY
* air$INTERNATIONAL + air$QUALITY * air$N+ air$QUALITY * air$LAMBDA +
air$WIDTH * air$FLIGHT_DURATION + air$WIDTH * air$INTERNATIONAL +
air$WIDTH * air$N+ air$WIDTH * air$LAMBDA)
Residuals:
Min 1Q Median 3Q Max
-2529.4 -241.4 -57.7 96.7 5462.4
18. Inferences:
Here the p-value is 0.07931 which shows there is no significant difference between two models,
model 4 and model 5 but the adjusted r-square value is 0.8346 which is better than previous
model. So considering this model.
Model 5’s P-value is <2.2e-16 < 0.05 hence it is significant. This model contains 8 interaction.
They are between quality and flight duration, between quality and international variable,
between quality and N variable, between quality and lambda variable, between width and flight
duration, between width and international variable, between width and N variable & between
width and lambda variable, and it implies that with increase in one unit of lambda (no. of
premium seats as compared to total seats, it increases price of premium economy by $692.
Similarly for width the prices of premium economy increases by $465.3 but two interaction
shows almost zero value change whereas two interaction shows that with one unit increase will
decreases prices of premium economy by $716.67 and $669.7 for interaction between
international and width , and between lambda and width respectively. Here with one unit
increases in interaction between lambda and quality suggest that the prices of premium
economy increases by $291.61. Rest 3 interactions have almost negligible interactions.
19. Interactive model 5 in Excel :
To determine the value of price of premium economy, use above model by incorporating few or
all variables to decide the prices.
From
Model
Variables
Insert Values
Here BETAS
Insert 1
or 0
Intercept 1
-
165.64514 1
price economy 3000 1.04727 1
flight duration 18 -25.16013 1
International 0 35.97837 1
N 50 1.45669 1
Lambda 0.4 692.4736 1
Quality 37 -42.90874 1
Width 7 614.69386 1
Flight Duration*Quality 400 13.15122 1
International*Quality 39 13/15122 1
N*Quality 15000 -0.42532 0
Lambda*Quality 7 291.61181 1
Flight Duration*Width 50 -10.06403 1
International*Width 8
-
716.67776 0
N*Width 1300 1.69251 1
Lambda*Width 0 -669.7088 1
PRICE PREMIUM
ECONOMY 12386.90927
20. Values
Range
You can
decide
the
values.
The
range
provided
here are
taken
from the
data
colllected
1
price economy $50.34 to $3593 0
flight duration
0.25 - 21.833
hours
International 0 or 1
N 38 to 441
Lambda 0.04 to 0.55
Quality 0 to 41
Width 0 to 8.5
Flight
Duration*Quality 0 to 454.403
International*Quality 0 to 41
N*Quality 0 to 16400
Lambda*Quality 0 to 9.84
Flight
Duration*Width 0 to 54.32
International*Width 0 to 8.5
N*Width 0 to 1368
Lambda*Width 0 to 2.2
Intercept 1 always
For Jet airways
Model 6
Model6 <- lm(air$PRICE_PREMIUM ~ air$JET.Airways+air$PRICE_ECONOMY +
air$FLIGHT_DURATION + air$INTERNATIONAL+ air$N + air$LAMBDA +
air$QUALITY + air$WIDTH + air$QUALITY * air$FLIGHT_DURATION + air$QUALITY
* air$INTERNATIONAL+ air$QUALITY * air$N+ air$QUALITY * air$LAMBDA +
air$WIDTH * air$FLIGHT_DURATION + air$WIDTH * air$INTERNATIONAL+
air$WIDTH * air$N+ air$WIDTH * air$LAMBDA)
Residuals:
Min 1Q Median 3Q Max
-2515.7 -248.9 -45.6 105.6 5446.2
Coefficients:
Estimate Std. Error t value Pr(>|t|)
(Intercept) -190.58840 392.06696 -0.486 0.627059
air$JET.Airways -266.73185 149.39149 -1.785 0.074674 .
21. air$PRICE_ECONOMY 1.03445 0.02869 36.062 < 2e-16 ***
air$FLIGHT_DURATION -29.87254 33.10820 -0.902 0.367262
air$INTERNATIONAL -21.62423 387.80279 -0.056 0.955550
air$N 1.43628 1.31616 1.091 0.275575
air$LAMBDA 1011.99696 943.82537 1.072 0.284032
air$QUALITY -20.09305 135.35816 -0.148 0.882041
air$WIDTH 648.28948 227.25517 2.853 0.004479 **
air$FLIGHT_DURATION:air$QUALITY 14.63728 5.42835 2.696 0.007198 **
air$INTERNATIONAL:air$QUALITY 40.85430 135.01992 0.303 0.762311
air$N:air$QUALITY -0.46136 0.20121 -2.293 0.022186 *
air$LAMBDA:air$QUALITY 141.78245 202.74559 0.699 0.484618
air$FLIGHT_DURATION:air$WIDTH -16.47422 9.73529 -1.692 0.091105 .
air$INTERNATIONAL:air$WIDTH -716.38779 203.21341 -3.525 0.000454 ***
air$N:air$WIDTH 1.64756 0.39706 4.149 3.8e-05 ***
air$LAMBDA:air$WIDTH -430.01798 445.08537 -0.966 0.334345
---
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
Residual standard error: 557.8 on 623 degrees of freedom
Multiple R-squared: 0.8393, Adjusted R-squared: 0.8352
F-statistic: 203.3 on 16 and 623 DF, p-value: < 2.2e-16
Inferences:
We have included one more variable in the analysis – Jet.Airways, the p-value shows that it is
significant as p-value < 2.2e-16 < 0.05. Adjusted R-square value is 0.8352 which is even better
than previous model. To determine the prices of premium economy for the jet airways consider
following model :
23. Values
Range
You can
decide
the
values.
The
range
provided
here are
taken
from the
data
colllected
1 that variable is included
price economy $50.34 to $3593 0
that variable is not
included
flight duration
0.25 - 21.833
hours
international 0 or 1
N 38 to 441
lambda 0.04 to 0.55
Quality 0 to 41
Width 0 to 8.5
Flight
Duration*Quality 0 to 454.403
International*Quality 0 to 41
N*Quality 0 to 16400
Lambda*Quality 0 to 9.84
Flight
Duration*Width 0 to 54.32
International*Width 0 to 8.5
Jet.Airways 1
N*Width 0 to 1368
Lambda*Width 0 to 2.2
Intercept 1 always