Predicting Travelers’ Willingness to Pay for Ancillary Services in the Digital Era: Focusing on the Mongolian Market

Abstract

The airline industry has witnessed intense competition, with low-cost carriers (LCC) gaining market power through innovative services and marketing strategies. To survive, both LCC and full-service carriers (FSC) developed unbundled ancillary services, allowing customers to pay only for the services they need and helping carriers maintain low fares and generate additional revenue. However, the acceptability of ancillary services with fees varies across cultures and customer behaviors. In developing countries like Mongolia, understanding customer preference values is crucial for implementing ancillary services effectively. Therefore, the current study develops and tests empirical models to explore willingness to pay for ancillary airline services. Research findings highlight that ancillary services are still a strong revenue source, as prior research demonstrates in the U.S. and European markets, but their implementation in developing markets requires retaining essential full-service components while selectively unbundling optional services.