Sampling and Data Collection Plan

Dyeus Airlines, an international airline, was founded in 2013. Dyeus Airlines is facing challenging competition from other, larger airlines around the world. In the hopes of competing with the various airline companies, Dyeus has decided to pilot a system where the airline waives all excess luggage fees. Most airlines charge a fee for excess baggage, as well as overweight luggage, and it will be the strategy of Dyeus Airlines to waive the first two pieces of luggage from all additional fees. Due to weight restrictions of the Federal Aviation Administration, any bag over the weight of 50 pounds will be subject to a $50 fee for special handling guidelines.

Hypothesis- By not charging for two bags per ticket, it is Dyeus Airlines’ belief that the boarding and unloading of the plane will be quicker, which will mean more precise timing in connecting flights. By pushing the luggage to the baggage handlers and away from checked overhead storage, they can decrease delays in flight times, and get the passengers in and out of the plane faster. The dependent variables would be the flight’s cost in comparison to all other airlines, overall cost to passenger with less baggage fees, and having the potential of fewer flight delays. Another dependent variable will be the volume of flyers, based on lower luggage costs. Dyeus Airlines independent variable is quite simple. This variable will stand alone and is not affected by any other variable. Dyeus Airlines will not charge extra baggage fees moving forward. Of course, this independent variable will affect dependent variables.

Business Problem- Many airlines charge for extra luggage for two reasons one fuel cost and the other is a 7.5% excise tax on tickets. According to, The real reason airlines charge checked fees, and it’s not what you think “the 7.5% federal excise tax on domestic tickets applies to airfare and not to ancillary services. So as long as airlines are able to unbundle, they get a portion of the transportation cost out from under that tax.” (Leff, 2015)The airline maybe losing because they are not charging for the extra bag fee, because they will not be receiving a portion of the transportation fee. In order for Dyeus Airlines to be successful in not charging for the extra baggage and the overnight luggage the company will have to be successful in making sure that all customers understand that luggage cannot weigh over 50 pounds to avoid charging the $50 fee for the special handling guidelines. Dyeus Airline may be able to recoup some of the portion from the transportation fee because they will be saving on fuel with the luggage not weighing as much, the loads will be lighter.

When there are charges for the amount of bags that a customer can bring, customers will generally attempt to stuff one bag to the max in order to avoid the excess baggage fees. By looking only for the weight of the bags, we can determine the overall weight of the plane, and adjust accordingly. In 2009, the airline industry saw its worst performing year in recent memory. (Garrow 2009) The cause of poor revenue was due in part to the economic recession that the world felt. In order to make up for lost revenue, various airlines started to charge extra fees for baggage fees.

With overall fuel prices seeing a steady ebb and flow, another item that Dyeus Airlines can utilize is fuel hedging. Fuel hedging is when a company that uses large amounts of fuel or crude oil, can purchase the oil at an agreed upon price, and will pay that price throughout the year. Many airlines choose not to utilize fuel hedging, and just pass the extra cost onto the customers. (Garrow 2012) By utilizing this technique, our fuel costs can be determined with enough time to have steady pricing. Knowing how much our fuel costs will be is going to be an integral part of our overall costs for tickets.

Literature Review

Flight delays are one of the most expensive costs that an airline company may ever have to deal with. In the year 2010, researchers from the University of California reported that domestic flight delays within the US alone between the year 2007 and 2010 costed an approximate thirty three billion shillings(Guy, 2017). To mitigate this unexpected costs, airline companies increase flight costs I order to have the customers pay for the costs related to flight delay. As a result, the prices offered by the airline companies for their services are generally high in anticipation of the costs brought about by the delay. As a result of the high cost the demand for air transport has drastically reduced. Such expenses imposed on customers are camouflaged as costs of food and drinks, missed connections or flight cancellation. As a result, any strategy that would lead to reduced costs of airline services would have a direct impact on the prices offered by the carries companies, and hence that paid by customers, ultimately increasing the demand for such services. One such strategy would be the proposed waiver on customer bags. Such a waiver would reduce the amount of time spent in loading and offloading luggage in the planes, making it easier and faster fro customers to settle and reducing delays(Guy, 2017). Delays increase expenses due to increased fuel consumption, more demand for foods and drinks and incur further consequences to customers when they are unable to make it to their destination within the planned time.

In another separate research report, it was established that while customers have to carry luggage when traveling to certain places, they can actually cut on the prices they pay by reducing the luggage they carry. Most airline companies charge extra costs for heavier luggage to cater for special handling guidelines and the tax imposed by the authorities. Such a step increases the fee due to be charged to the customers. Increased fee discourages many customers since they have to pay a lot of money for services they could access at lower prices (de Wit & Zuidberg, 2012). However, the research found, if the customers could check their luggage before leaving their places to ensure that they only carry the necessary items, they might end up reducing the amount due. Practically, if a customer can reduce their luggage to below 50 pounds, they may not have to be charged. However, sometimes this might not be possible, while at other times the luggage may just be a few pounds heavier than 50 pounds, making the customers fail to enjoy the benefit associated with reduced luggage weight. When a customer divides their weight into three different bags each below 50 pounds, they still will have to pay for special handling guidelines since the luggage is considered as one. With this in mind, any effort to waiver costs of the first few bags would help in reducing the costs to be paid by customers since they can be allowed to divide their luggage into bags that are lighter than 50 pounds, then enjoy a waiver on a few of those bags.

The volume of flyers based on lower luggage costs is unlikely to increase, mainly because the companies operating such flyer will not enjoy as much profit as those that incur such costs. First and foremost, extra costs are an advantage to the airline companies since the can be able to foot fuel bill without having to spend any money that will reduce their profits. Second, extra charge for luggage helps the airline companies pay the tax accrued to such luggage handling. Therefore, with so much at stake, it is highly unlikely that airliners will embrace a reduction in cost of luggage at the expense of their profit. What this means is that those companies that are brave enough to embrace a reduce luggage fee may end up enjoying the advantage for a long time, thus making more profits than those that charge such extra fees (Barrett, 2004). In addition, the fact that some companies are making more profits by cutting on luggage costs may force some other airliners out of business, with the ultimate effect of lowering the volume of flyers, a factor that will be very advantageous to the flyers that do not charge extra for luggage.

References

Barrett, S. D. (2004). How do the demands for airport services differ between full-service carriers and low-cost carriers?. Journal of Air Transport Management, 10(1), 33-39.

Brueckner, J. K., Lee, D. N., Picard, P. M., & Singer, E. (2015). Product unbundling in the travel industry: The economics of airline bag fees. Journal of Economics and Management Strategy, 24(3), 457-484. doi:10.1111/jems.12106

Garrow, L. A., Hotle, S., & Mumbower, S. (2012). Assessment of product debundling trends in the U.S. airline industry: Customer service and public policy implications. Elsevier Transportation Research Part A, 255-268. doi:10.1016/j.tra.2011.09.009