Can Full-service Airlines Use Corporate Social

Responsibility To Grow Their Market Share On

Transatlantic Routes?

Student: James Stott

Student Number: 24900173
Supervisor: Dr Norbert Morawetz
Programme: MSc International Management
Word Count: 8575
Abstract

Full-service airlines such as British Airways and Virgin Atlantic face the prospect of reduced
profitability, considering recent shifts in airline industry dynamics, as well as the growth of
low cost long haul airlines such as Norwegian. On lucrative transatlantic flight routes, the threat
to full-service airlines is strong, especially considering their relative inflexibility due to the
industrys narrow profit margins. Therefore, ways in which full-service airlines can continue
to grow their market share on transatlantic flight routes, without sacrificing their profitability,
are of interest. This report finds that corporate social responsibility offers full-service airlines
an opportunity to achieve this market share growth, without financial disadvantage, whilst also
increasing the value for both customers, and wider society. The findings suggest that full-
service airlines should consider bolstering the promotion of their existing corporate social
responsibility efforts to retain and attract new customers. They should also consider
undertaking new corporate social responsibility activities to stem the flow of customers to low
cost airlines. Furthermore, this report finds that consumers are willing to pay a premium on
their flight ticket price to travel on a flight with an airline that has an increased level of
corporate social responsibility activity. The cash generated by full-service airlines adding a
premium to their flight ticket prices will offset the cost of enhancing the CSR efforts, whilst
also funding product innovation beyond corporate social responsibility. This will enable full
service airlines to grow their transatlantic market share without penalising their narrow profit
margins, as well as increasing their competitiveness in a volatile marketplace. With this
information, full-service airlines should consider augmenting their corporate social
responsibility strategies to grow their market share on transatlantic routes, preserving their
profitability, and ultimately, their longevity.

Acknowledgements

I would like to offer my sincere thanks to my project supervisor, Dr Norbert Morawetz, for his
guidance prior to undertaking this project. I would also like to thank my parents and
grandmother for their unabated support of my decision to undertake further education. Their
love and care has enabled me to complete this degree to the best of my ability, and has blessed
me with the opportunity to begin my career in the best possible position. Thank you for reading
endless reports, essays and projects.

Table of Contents

1 Introduction 1

2 Literature Review 3

2.1 Identifying the Importance of Transatlantic Flight Routes to Full-service Airlines 3

2.2 Identifying the Price Indifference Between Transatlantic Flight Alternatives to 6

the Consumer

2.3 Assessing the Benefits of an Enhanced Corporate Social Responsibility Strategy 8

to the Airline Industry

2.4 Assessing the Current Corporate Social Responsibility Efforts of the Two 9
Largest British Transatlantic Airlines

2.5 Identifying Possible New Corporate Social Responsibility Efforts That Airlines May 13
Pursue to Grow Their Market Share

3 Methodology 17

4 Results 19

4.1 Are consumers aware of the existing CSR efforts by full-service airlines? 19

4.2 Are consumers more likely to book a flight with a particular transatlantic
full-service airline if they have knowledge of the airlines existing CSR activities? 22

4.3 Are consumers more likely to book a flight with a transatlantic full-service 23
airline with new and enhanced CSR efforts by the airline?

4.4 Are consumers prepared to pay a premium to travel on a full-service 24

transatlantic flight with new and improved CSR activities?

5 Discussion 25

6 Conclusions 34

7 References 37

Appendix 1

Definitions

Full-service Airline an airline that typically offers passengers inflight entertainment,

checked baggage, a meal service and other amenities included in the ticket price. Examples
include British Airways, Virgin Atlantic, American Airlines and Delta.

Revenue Passenger Kilometre (RPK) revenue passenger kilometres are a measure of airline
traffic calculated by multiplying the number of revenue-paying passengers aboard an aircraft
by the distance travelled in kilometres.

Low Cost Carrier (LCC) an airline that typically offers passengers lower fares and fewer
comforts compared to full-service airlines. Examples include Easyjet, Ryanair, Norwegian and
Level.

Price Elasticity of Demand a measure that shows the responsiveness of the quantity
demanded of a good or service to a change in its price.

Price Unbundling The act of separating the total cost of a product or service into its main
components.

Triple Bottom Line a colloquial phrase that encompasses the responsibilities that businesses
have to society, the environment and financial stakeholders such as customers and
shareholders.

1. Introduction

The invention of the aircraft - and the global airline industry it spawned - may arguably be
mankinds most impressive leap of advancement. With the introduction of the first commercial
jet airliner, the de Havilland Comet, in 1952, an age of aviation swept the globe, driving
economic and social progress. More recently, between 2004 and 2014, the airline industry grew
from global revenues of $369 billion to $746 billion, demonstrating rapid sustained growth
(PWC, 2015).

Despite the rapid growth of commercial aviation, full-service airlines are coming under
increased financial pressure due to the deregulation of aviation markets, a move towards online
ticket sales and the rapid growth of low cost carriers (LCCs). These shifting industry dynamics
have significantly increased competition to traditional full-service airlines, pushing air fares to
their lowest levels for almost 20 years. On transatlantic flight routes between the United
Kingdom (UK) and the United States (US), air fares have plummeted. Today, there is a price
parity between the four major transatlantic full-service airlines on flagship routes such as
London Heathrow to New York John F Kennedy. Product differentiation beyond price is a
difficult task for full-service airlines considering their very modest profit margins, which,
typically, are around 3% (PWC, 2015). This severely restricts the availability of cash to invest
in product and service improvements. Therefore, product improvements that do not require
heavy cash investment are of interest to the full-service airline to establish a competitive
platform and stem the flow of customers to LCCs. Increasing the visibility of and investing
further in corporate social responsibility (CSR) may offer full-service airlines an enhanced
product and the ability to grow their transatlantic flight route market share in light of the
increased competition and more testing market conditions.

In order to provide an answer to the question, Can full-service airlines use corporate social
responsibility to grow their market share on transatlantic routes?, this report will analyse the
existing airline industry environment and CSR efforts of full-service airlines. Using this
analysis, suggested new CSR efforts that full-service airlines could deploy to minimise the
competitive threat and grow their market share on transatlantic flight routes may be identified.
The efficacy of the suggestions contained within this report will be tested using a survey of
consumers, analysing the attitude of consumers towards better promotion of existing CSR
activities by full-service airlines, as well as their receptiveness to suggested new CSR efforts.

1
A key aim of the survey is to identify whether consumers would pay more for a full-service
airline transatlantic flight with enhanced CSR efforts to offset the associated cost increase,
whilst also generating extra cash for investment in more tangible product improvements.

2
2. Literature Review

2.1. Identifying the Importance of Transatlantic Flight Routes to Full-service Airlines

In 1919, just 16 years after the first successful heavier than air powered flight by the Wright
brothers, the Royal Air Force (RAF) made the first successful nonstop flight across the Atlantic
Ocean, from Newfoundland to County Galway (The Economist, 2010). Aviation pioneers such
as John Alcock and Arthur Brown, aboard their modified RAF Vickers Vimy bomber, paved
the way for an age of aviation, which according to IATA (n.d.), was a key contributor to the
development of many emerging economies. The International Air Transport Association
(IATA) - a world airline trade association states that the aviation industry supports $2.4
trillion of annual economic activity, and is responsible for 35% of world trade by value (IATA,
n.d.). Early growth in the UK commercial aviation industry was driven primarily by empire
building activities, which benefitted greatly from a new-found ability to quickly and efficiently
transport goods and people between major constituents of the British Empire. However, it
wasnt until post-WWII that commercial aviation in its modern form truly took off. According
to The American Institute of Aeronautics and Astronautics (AIAA), the combination of
logistical war flying, air traffic management experience, proven aviation technology and the
entry into service of the jet airliner created nothing short of a social revolution with an aerial
network linking every corner of the globe. (AIAA, n.d.). One aircraft in particular, the Boeing
747, is credited with facilitating the rapid global expansion of commercial aviation. Making its
first flight in 1969 (Boeing, n.d.), the 747 ushered in a new age of aviation by helping airlines
reduce their cost per passenger and allowing for easier intercontinental flight. (Financial
Times, 2016). The ability of the 747 to open up low cost, profitable, long haul transatlantic
flight routes is exemplified in the fact that British Airways is the worlds largest operator of
the Boeing 747-400. (British Airways, n.d.a.).

3
 Airline Operating Revenue Transatlantic Operating Transatlantic Operating
Excluding Domestic Revenue (M) Revenue as a Percentage
Operations (M) of Total Operating
Revenue Excluding
Domestic Operations (%)

Virgin 2781.9 (2015) 1857.3 (2015) 67

Atlantic

American 8973 (2016) 3702 (2016) 41

Airlines

Table 1 A table showing the revenues of Virgin and American broken down by total and
transatlantic operating revenue. Sources: Own calculation using publicly available data from
(Virgin Atlantic, 2016) and (American Airlines, 2017).

The importance of transatlantic flight routes to full-service airlines in the present day is easily
demonstrated through analysis of publicly available airline traffic and revenue data. The 5
major transatlantic full-service airlines British Airways (BA), Virgin Atlantic (Virgin),
American Airlines (American), Delta and United are the main subjects of the analysis. Table 1
shows the importance of transatlantic flight routes to Virgin and American, demonstrated by a
considerable portion of their total revenues that derive from transatlantic flight operations
(Virgin 67% and American 41%).

Although Virgin and American report their revenue by geographical sector, it is not a legal
requirement. Therefore, a slightly different approach is required to analyse the importance of
transatlantic flight routes to the remaining major full-service airlines. The analysis is further
complicated by airline holding companies such as International Airlines Group (IAG) which
owns Aer Lingus, British Airways, Iberia and Vueling. Although IAG does not report revenues
by subsidiary, a legal requirement to publish airline passenger traffic data permits the analysis
of the importance of transatlantic flight routes to the remaining full-service airlines from a
traffic perspective.

4
 Airline Total RPK Excluding Transatlantic RPK Transatlantic RPK as a
Domestic Operations (Millions of KM) Percentage of Total RPK
(Millions of KM) Excluding Domestic Operations
(%)

IAG1 13939 (May 2017) 6509 (May 2017) 47

Delta 11800 (May 2017) 6300 (May 2017) 53

United 12500 (May 2017) 5300 (May 2017) 42

Table 2 A table showing the importance of transatlantic flight routes to full-service

airlines through traffic analysis. Sources: Own calculation using publicly available data from
(IAG, 2017), (Delta, 2017) and (United, 2017).

Studying Table 2, it is clear that transatlantic flight routes constitute a significant portion of the
total traffic of IAG, Delta and United, 47%, 53% and 42% respectively, and therefore are
significant.

Further evidence of the importance of transatlantic flight routes to full-service airlines is found
in publicly available flight handling data from the UKs air traffic management service
provider NATS. In 2013, the growth of transatlantic arrivals and departures handled by NATS
was 0.8%, compared to 5.6% in 2015 (NATS, 2015), demonstrating strong levels of growth in
the transatlantic aviation market. According to NATS, New York is the most travelled to
destination from London Heathrow airport (NATS, n.d.).

1
To ensure an accurate representation of the importance of transatlantic flight routes to full-
service airlines, European traffic that better resembles domestic traffic as opposed to
international long haul traffic has been excluded from the calculations.

5
 2.2. Identifying the Price Indifference Between Transatlantic Flight Alternatives to
the Consumer

According to an IATA report measuring changes in air travel demand with changes in ticket
price, passengers are becoming increasingly price sensitive. The report describes three key
reasons that have driven transatlantic flight prices to record lows and have increased the price
sensitivity of consumers (IATA, 2008):

The growth of the internet, a shift toward online ticket sales and price unbundling have
increased price transparency.
Deregulated aviation markets have increased the levels of competition on flight routes
previously dominated by full-service airlines.
An increasing prevalence of LCCs on routes previously dominated by full-service
airlines, further increasing the levels of competition on flight routes.

An article from the online financial magazine, Money.com, echoes the notion that these
changes in the aviation market have reduced the cost of flying to the consumer, making them
more sensitive to fluctuations in ticket prices between full-service airlines. The article titled
Why flying to Europe has never been cheaper from Money.com states that, the transatlantic
flight market has been utterly upended to the point that airfares to Europe are the cheapest
theyve been since the bleak post-9/11 doldrums, or perhaps ever. (Money.com, 2017). A
commonly used measurement of consumer price sensitivity is price elasticity of demand, which
quantifies how the level of demand for a particular good or service may vary with fluctuations
in its price. According to IATA, the transatlantic flight market exhibits a very high price
elasticity compared to the transpacific and Europe-Asia markets. (IATA, 2008). This means
that consumers travelling on transatlantic flight routes are more susceptible to fluctuations in
ticket price than those traveling on transpacific and Europe-Asia routes. According to the IATA
report, price is likely more important than frequency in this (transatlantic) market than in US
domestic markets. (IATA, 2008). This high price elasticity of demand makes it difficult for
full-service airlines to increase their ticket prices without diminishing their market share as
consumers switch to less costly alternative airlines.

Although factors including increased price transparency, reduced fuel costs and deregulation
have played a major role in pushing flight ticket prices down, it is the growth of LCCs that
poses the biggest threat to the competitiveness of full-service airlines on transatlantic routes.

6
In 2016, low cost long haul carrier Norwegian experienced a 57% increase in their transatlantic
USA bound passengers (Norwegian, 2016). It is the growth of these low cost transatlantic flight
options, coupled with increasing consumer price sensitivity that suggest full-service airlines
such as BA are susceptible to weakened profitability through loss of custom. This warrants
increased focus on ways to attract customers through improved customer value and offerings,
without heavy capital investment at the expense of already tight profit margins.

Airline Return Flight Price ()2

British Airways 551.47

Virgin 551.47

United 551.47

American Airlines 551.47

Table 3 A table showing the price indifference between full-service airlines on the
London Heathrow to Los Angeles flight route with similar arrival and departure times on 4th
September 2017. Source: Own calculation using flight ticket pricing data from ba.com,
virginatlantic.com, united.com and aa.com.

To analyse the impact of the aforementioned factors on transatlantic flight prices, Table 3
shows the return flight price for a high demand westbound transatlantic route for four different
full-service airlines. Studying Table 3, it is clear there is no price difference across full-service
airlines on the same transatlantic flight route between Heathrow and Los Angeles. With this
price indifference, the only way they may compete with one another to grow their market share
is through product innovation beyond price. With all four airlines in Table 3 having similar
product offerings in terms of flight times, free checked baggage, in-flight meal service and on-
board entertainment options, ways in which the airlines can distinguish themselves to increase
their competitiveness and grow their transatlantic market share are of interest.

2
It should be noted that airline joint ventures and code sharing agreements make it difficult to
obtain flight ticket prices across full service airlines that meet exactly the same criteria. Where
possible, flights operated by the airline from whom the price has been obtained have been used
in the calculations. Furthermore, to ensure fairness, the flight ticket prices have been obtained
from the respective airlines website, rather than comparison websites.

7
 2.3. Assessing the Benefits of an Enhanced Corporate Social Responsibility Strategy
to the Airline Industry

According to Knights and Willmott (2012), Corporate Social Responsibility (CSR) may be
defined as, the practices and policies undertaken by organisations to promote the idea that
they have concerns that extend beyond efficiency, performance, productivity and profit to
embrace the public, customers, the environment and other stakeholders. Knights and Willmott
(2012) also describe various types of CSR practices including:

The development and publication of ethical statements, policies or codes of practice.

The publication of track records of good corporate governance.
Making well publicised donations of money, time or resources to charities and other
good causes.

According to Crane and Matten (2007), corporations perceived as being socially responsible
might be rewarded with extra and/or more satisfied customers. Furthermore, Crane and
Matten (2007) regard positive contributions to society as a long term investment in a more
equitable community, which benefits the corporation through an improved and more stable
context in which to conduct business. Considering that PricewaterhouseCoopers describe air
travel as a disappointing, grumble worthy experience (PWC, 2015), the use of CSR from a
long term investment approach to improve the business environment may be of interest to
airlines which conduct business in what currently appears to be an inequitable and unstable
environment, both for airlines, and their customers. It is important to note the elements of
publication and promotion that appear consistently in CSR literature and theory. Without
publication and promotion of an organisations CSR efforts, the aforementioned benefits of
CSR strategies may fail to materialise. This therefore suggests that it may be possible for full-
service airlines to grow their transatlantic market share through more effective promotion and
publication of their existing CSR activities, rather than undertaking new CSR activities. This
theory will be tested for value in the methodology.

The deployment of a CSR strategy with the main purpose of market share growth may appear
to be a profit maximisation strategy disguised as CSR. This may be true, but provided both the
customer and society perceive there to be increased value, it is an entirely justifiable one.
Furthermore, highly resource intensive and polluting industries such as the airline industry

8
arguably have greater social responsibility, and are justified in enhancing their CSR practices
to mitigate the negative effects of their business.

2.4. Assessing the Current Corporate Social Responsibility Efforts of the Two Largest
British Transatlantic Airlines

In order to define and evaluate the current CSR efforts of the two largest British transatlantic
airlines, BA and Virgin, it is necessary to introduce further theory. In 1979, Archie Carroll, a
prominent management academic, described a four-part model of CSR with multiple inter-
related responsibilities in a pyramid shape, as shown in Figure 1.

Figure 1 A graphical depiction of the layers of responsibility described in Carrolls

four-part model of CSR (Meister, 2017).

According to Carroll (1979), Corporate social responsibility encompasses the economic,

legal, ethical and philanthropic expectations placed on organisations by society at a given point
in time. According to Crane and Matten (2007) and Carroll (1991), the economic, legal and
ethical responsibilities of an organisation described by Carroll are both required and expected
by society. Considering this, it could be said that these three levels of CSR are similar to the
hygiene factors described in Herzbergs motivation-hygiene theory. Psychologist Frederick
Herzberg described hygiene factors as components of employment, including a fair salary and
entitlement to holiday, that do not cause satisfaction with their presence, but dissatisfaction

9
with their absence (Herzberg, 1959). With modern employment rights and national minimum
wages, hygiene factors may, today, also be expected and required by society, as is the case with
the economic, legal and ethical components of Carrolls CSR model. Using this comparison, it
could be said that these CSR components also do not cause satisfaction with their presence, but
induce major dissatisfaction with their absence, demonstrating the importance of deploying
well-rounded CSR strategies in the modern business environment. As a result, economic, legal
and ethical CSR efforts by organisations may fail to provide any form of customer satisfaction
or value due to their almost universally expected nature. Therefore, organisations that augment
their existing economic, legal and ethical CSR efforts may not observe increases in perceived
customer value3. Rather, increased CSR efforts under the philanthropic layer of responsibility
which is desired, as opposed to expected by society, will increase perceived customer value.
CSR efforts under the philanthropic umbrella may include charitable donations, the building
of recreational facilities and support for the local community.

To proceed with the evaluation of the current CSR efforts of BA and Virgin, their current
efforts as discussed in their publicly available CSR statements and reports will be categorised
into the four responsibilities as defined by Carroll (1979). Using this breakdown, areas in which
the CSR efforts of BA and Virgin may be improved or made more visible to increase perceived
customer value and grow their transatlantic market share without significant capital investment
may be identified.

3
Shareholders are an exception to this, as a major component of the economic responsibilities
held by an organisation is to deliver value to shareholders. Therefore, increased economic CSR
efforts will deliver greater perceived customer value if shareholders are considered customers
of an organisation.

10
 Responsibility Type Current CSR Effort

Economic None identified.4

Legal BA upholds local and international laws on anti-discrimination.

BA never uses or endorses the use of child, bonded or prison labour.

BA support aviation emissions caps that will be introduced by

governments by 2020.

BA is undertaking a fleet replacement programme to reduce

emissions and comply with aircraft noise management legislation.

Ethical BA participates in carbon trading schemes that offer customers the

opportunity to offset the carbon production attributed to their
purchase.

BA operates a large waste management and recycling programme.

Philanthropic BA operates a charity partnership called Flying Start that raises

money for children.

BA offers work experience to young people.

BA provides travel health advice to customers through their inflight

entertainment.

BA invests in fuel innovation projects that have the potential to

reduce carbon emissions.

Table 4 A table showing the breakdown of the current British Airways CSR efforts that
impact customers by responsibility type. Source: (British Airways, n.d.b.).

4
It is assumed that BA is a properly functioning economic unit conducting good business in
the interest of their shareholders, employees, customers and other stakeholders.

11
 Responsibility Type Current CSR Effort

Economic None identified.5

Legal Virgin ensures compliance with the Modern Slavery Act 2015.

Ethical Virgin operates a catering supplier sustainability recognition scheme.

Virgin participates in carbon trading schemes that offer customers

the opportunity to offset the carbon production attributed to their
purchase.

Virgin is undertaking a fleet replacement to reduce emissions and

comply with aircraft noise management legislation.

Virgin operates a partnership with MNH Sustainable Cabin Services

that re-uses and recycles passenger headsets and amenity kits.

Virgin partnered with Vivienne Westwood to create sustainable,

recyclable crew uniforms.

Philanthropic Virgin invests in fuel innovation projects that have the potential to
reduce carbon emissions.

Virgin operates a charity partnership with childrens charity WE.

Table 5 A table showing the breakdown of the current Virgin CSR efforts that impact
customers by responsibility type. Source: (Virgin Atlantic, 2017).

Tables 4 and 5 show the breakdown of the current CSR efforts by responsibility type for BA
and Virgin respectively.6 Studying Tables 4 and 5, it is clear that the CSR efforts of BA and
Virgin are very similar. Both airlines abide by and support international labour, discrimination
and environmental laws. Both BA and Virgin also contribute to, and manage large childrens
charities, as well as fuel innovation projects that aim to reduce emissions. Virgin appears to
have a greater focus on sustainability than BA, with innovative recycling and waste

5
It is assumed that Virgin is a properly functioning economic unit conducting good business
in the interest of their shareholders, employees, customers and other stakeholders.
6
Many CSR elements discussed in the BA and Virgin reports are difficult to identify as
contributing towards perceived customer value. For example, it is difficult to identify a clear
link between aircraft manufacturer wing innovation and perceived customer value. Therefore,
only CSR elements that clearly impact perceived customer value are discussed in Tables 4 and
5.

12
management schemes and their sustainable uniform project. A distinct lack of philanthropic
CSR efforts compared to economic, legal and ethical responsibilities is evident in both airlines.
This is, perhaps, indicative of the lack of available cash to invest in costlier philanthropic CSR
such as charity and work experience, stemming from the narrow margins in the airline industry.

The CSR efforts by BA and Virgin identified in Tables 4 and 5 are not visibly promoted or
publicised within the channels that customers use to purchase flight tickets such as ticket sale
websites and travel agent offices. Rather, they are hidden within sustainability and CSR reports
listed in obscure locations on the company websites. As mentioned previously, it may be
possible for full-service airlines to grow their transatlantic market share through more effective
promotion and publication of their existing CSR activities, rather than undertaking new CSR
activities. This would be a positive conclusion for full-service airlines as it would permit
market share growth without further investment in CSR activities, preserving their already tight
profit margins. This notion will be tested, and is discussed in the method.

2.5. Identifying Possible New Corporate Social Responsibility Efforts That Airlines
May Pursue to Grow Their Market Share

As mentioned previously, it may be possible for full-service airlines to grow their market share
through better promotion of their existing CSR activities. However, it would be appropriate to
investigate new CSR efforts that airlines may pursue in the case that this strategy proves
ineffective, as tested in the method. It is important to highlight once again the narrow margins
experienced by full-service airlines such as BA and Virgin, which heavily restrict available
cash to invest in new CSR activities. Therefore, only possible new CSR efforts that require
relatively little investment will be investigated. For example, the investment by Virgin in the
establishment of a supply chain sustainability recognition programme would have required less
capital than ensuring all inflight meals served on Virgin flights are organic. Furthermore, only
philanthropic efforts as described in Carrolls CSR model will be identified, as these deliver
the greatest perceived value to the customer as described in section 2.4.

An appropriate place to begin the identification of new CSR efforts that airlines may pursue to
grow their transatlantic market share is the analysis of existing efforts by competing full-
service airlines. Even better, airlines which possess an exceptional reputation and are highly
regarded by customers may offer interesting CSR insights that transatlantic full-service airlines
such as BA and Virgin may emulate. In 2014, Singapore Airlines, a world top 5 airline

13
according to the airline industry awarding body Skytrax, (Skytrax, 2017), introduced a 24/7
dedicated social media team to deal with customer complaints, queries and feedback in near
real time (Singapore Airlines, 2015). Although this move towards real time, round the clock
customer relationship management may not appear to be CSR at the surface, the increased
transparency and in particular, the speed of communication, serves to improve the
aforementioned depressed and negative environment that airline business is currently
conducted in.

Singapore Airlines also made an exemplary CSR effort with their wholesome inflight meal
choices. According to Singapore Airlines, their customers are increasingly health conscious
and we are pleased to offer greater choice and variety to enhance their dining experience when
they travel with us. (Singapore Airlines, 2016). Considering that the worldwide prevalence of
obesity more than doubled between 1980 and 2014 (WHO, 2016), this effort to bring healthy
inflight meal options into the aviation sector is highly innovative of Singapore Airlines,
improving the outlook for society as a whole, across the industrial spectrum. Etihad, also a
world top ten airline, introduced healthier inflight meal choices for their customers with organic
meals for first class passengers (The National, 2012).

If an airline were to introduce healthier, organic inflight meal options, this would be classed as
a philanthropic CSR effort under Carrolls model of CSR. Philanthropic CSR efforts are
desirable by society, but not required unlike the economic, legal and ethical components. The
desirability of healthier, more sustainable and organic meal choices by the consumer is
demonstrated through the fact that organic food sales in UK supermarkets grew by 6.1% in
2016 (Soil Association, 2017). Whats more, according to the Soil Association, organic food
sales into the food service market, which includes pre-prepared catering such as that found on-
board flights, grew by 19.1% in 2016 (Soil Association, 2017). This demonstrates strong
organic demand not just inside the home, but also outside. With global health and wellness
sales forecast to top $1 billion by the end of 2017 (Euromonitor, 2012), the deployment of
healthier, more sustainable and organic inflight meal options as part of an airlines CSR
strategy may prove particularly popular considering the current consumer desirability of health
and wellbeing. Although Virgin ventured some way down this route with their catering supplier
sustainability scheme, airlines must go further to guarantee healthier inflight choices for all
their customers if they wish to reap maximum benefit from this philanthropic CSR effort. A

14
fully organic, sustainably sourced inflight menu for all passengers would be an ideal new CSR
effort that full-service airlines may deploy on transatlantic routes.

Continuing on the theme of health, the personal wellbeing and mindfulness sectors are
experiencing phenomenal growth. Mindfulness, according to Mindful magazine, is the basic
human ability to be fully present, aware of where we are and what were doing, and not overly
reactive or overwhelmed by whats going on around us. (Mindful magazine, 2014). In 2017,
mindfulness was valued at $3.72 trillion (Financial Times, 2017a). The hectic, fast-paced,
information filled life that we live today has led many to try and find solace through the practice
of mindfulness. One way in which consumers commonly practice mindfulness is by doing
yoga. The growth of yoga follows a similar trend to that of personal wellbeing and organic
food sales. According to Ipsos Public Affairs (2016), $16.8 billion was spent on yoga in
America, which represents an increase of $6.1 billion since 2012. Considering the similarly
fast-paced, hectic nature of commercial aviation today, perhaps the obvious desirability by
consumers for improved personal wellbeing would translate well into the aviation industry.
Full-service transatlantic airlines could offer pre-flight yoga sessions to passengers prior to
boarding. This would be beneficial not just to passengers, but the industry as a whole, as flying
is frequently touted as a stressful, tense experience for all parties involved.

Airlines across the world are carrying out replacements of their aged, fuel-hungry aircraft with
lean-burning, efficient next generation aircraft such as the Boeing 787 Dreamliner and Airbus
A350. Although airlines frequently make passengers aware of some of the personal benefits of
their aircraft fleet replacements such as reduced cabin altitudes and larger windows, airlines
rarely quantify or contextualise the environmental benefits to the consumer. For example,
airlines often refer to the improved fuel efficiency of their new aircraft, but do not quantify or
contextualise it in a way that offers meaning or value to the customer. This is understandable,
as a vast number of variables impact aircraft fuel efficiency, and making comparisons between
competing airlines is next to impossible. However, airlines such as BA that are undertaking a
phased fleet renewal, where new and old aircraft fly the same routes, may take a different
approach in using fuel efficiency statistics as part of their CSR strategies. BA currently flies
both the Airbus A380 and the Boeing 747-400 on their route between London Heathrow and
Miami. According to British Aiways (n.d.b.), the A380 emits 16% less emissions per seat than
the 747-400. Using this statistic, it can be stated with confidence to the customer by BA that
by choosing this particular flight (on an A380), you are contributing 16% less emissions than

15
if you were to choose that flight (on a 747). This may be a particularly useful and cost effective
CSR strategy for full-service airlines to adopt as it effectively turns a legal and ethical
responsibility into a philanthropic one, by quantifying the benefit to the consumer and phrasing
it in a way that adds value, with negligible cost to the airline. However, this CSR strategy
would only last as long as the phased fleet replacement. Once modern, fuel efficient aircraft
are commonplace, it will not be possible to make these comparisons between different aircraft
flying the same route within an airline until the next phased fleet replacement occurs.

16
3. Methodology

To provide an answer to the overarching project question, Can full-service airlines use
corporate social responsibility to grow their market share on transatlantic routes?, it is useful
to define four further research questions:

1. Are consumers aware of existing CSR efforts by full-service airlines? It may be

possible for full-service airlines to grow their market share on transatlantic routes by
better promotion of their existing CSR efforts. This would preserve their narrow profit
margins as further capital investment in new CSR activities would be unnecessary7. An
idea of the awareness of consumers of the existing CSR efforts by full-service airlines
may be obtained by answering this question. However, answers to this question will
not indicate the value to the full-service airline of enhancing promotion of their existing
CSR activities; the value may be ascertained by answering question 2.
2. Are consumers more likely to book a flight with a particular transatlantic full-service
airline if they have knowledge of the airlines existing CSR activities? Enhancing the
visibility of existing CSR efforts is only of value to the full-service airline if it
convinces fare-paying passengers to choose their flight over competing flights, thus
growing their market share. Answers to this question will identify whether there is value
for full-service airlines in better promotion of their existing CSR activities.
3. Are consumers more likely to book a flight with a transatlantic full-service airline if
they undertake new CSR activities? Answers to this question will ascertain whether
investment in new CSR activities by full-service airlines will stimulate growth in the
airlines transatlantic market share.
4. Are consumers prepared to pay a premium to travel on a transatlantic flight with a full-
service airline that is undertaking new CSR activities?. Answers to this question
ascertain whether customers perceive the increase in value to be worth paying a ticket
price premium. The costs of implementing new CSR activities to grow market share
may be offset by charging a ticket price premium. Whats more, if full-service airlines
can charge a premium for new CSR activities, it may generate further cash to invest in

7
It may become necessary provided a full-service airline projects that capital investment in
new CSR activities would yield a greater return on investment than better promotion of their
existing CSR efforts. Obtaining an answer to Question 4 above will provide limited information
on whether capital investment in new CSR activities will increase the market share of full-
service airlines more than better promotion of their existing CSR activities.

17
 product innovation beyond CSR, potentially further increasing their transatlantic
market share. Answers to this question will also indicate how much of a ticket price
premium consumers are prepared to pay.

Answers to these four questions will allow an answer to the overarching research project
question to be developed. As the answers are heavily dependent on the perception of value and
receptivity to CSR of consumers, a survey directed towards UK consumers is deemed an
appropriate method of primary data collection. The survey should be delivered to a wide range
of ages to identify patterns in consumer response based on age. For simplification, the survey
will examine the response of consumers to the existing CSR efforts of the two largest British
transatlantic airlines, BA and Virgin. Firstly, to ascertain an answer to questions 1 and 2,
consumers will be asked about their knowledge of the existing CSR activities of BA and Virgin,
and whether their knowledge would make them more likely to fly with BA or Virgin. Next, to
answer question 3, consumers will be asked to choose between a flight with 3 different fictional
airlines. The airlines will represent the existing CSR efforts of BA (Westbound Air), Virgin
(Atlantic Air), and an airline undertaking new CSR activities as guided by the findings and
suggestions of section 2.5 of the literature review (Westwave Air). For the purposes of testing,
the new CSR activities to be implemented by Westwave Air are as follows:

Complimentary sustainably sourced organic inflight food and drinks

Pre-flight anti-stress yoga session
16% saving in emissions compared to some competing flights
24/7 customer care team

Finally, to produce an answer to question 4 consumers will be asked whether they would pay
a ticket price premium, and how large a premium, to fly on the Westwave Air flight8.

The survey is in Appendix 1.

8
The average price of a return flight between London Heathrow and Los Angeles as calculated
from Table 3 (519) is used as a benchmark to identify the perceived financial value to
consumers of new CSR activities in full-service airlines.

18
4. Results

The survey, conducted over a period of 12 days, accumulated 156 responses from a wide-
ranging age demographic. 60% of survey respondents were female and 40% were male. This
chapter is broken into the four extended research questions identified in chapter 3, accompanied
by the survey question and result that answers the extended research question. Each figure in
this chapter is taken directly from the survey result report generated by the survey software.

4.1. Are consumers aware of the existing CSR efforts by full-service airlines?

Have you flown with either of the following airlines on a transatlantic flight between the UK
and the USA?

Figure 2 A graph displaying the percentage of respondents that have or have not flown
on a transatlantic flight between the UK and the USA with BA or Virgin. (42% with BA, 29%
with Virgin and 29% neither).

19
British Airways engages in a number of CSR activities. Which of the following BA CSR
activities have you heard about?

Figure 3 A graph displaying the percentage of respondents that have or have not heard
of a particular BA CSR activity. (55% have not heard of any, 19% have heard of the inflight
entertainment travel health and wellbeing advice, and 15% have heard of the BA Flying Start
charity).

20
Virgin Atlantic also engages in a number of CSR activities. Which of the following Virgin
CSR activities have you heard about?

Figure 4 A graph displaying the percentage of respondents that have or have not heard
of a particular Virgin CSR activity. (65% have not heard of any and 14% have heard of the
recycled inflight headphones and amenity kits).

21
 4.2. Are consumers more likely to book a flight with a particular transatlantic full-
service airline if they have knowledge of the airlines existing CSR activities?

Does your existing or newly acquired knowledge of BA CSR activities make you any more
likely to choose a BA transatlantic flight?

Figure 5 A graph displaying the percentage of respondents that would or would not be
more likely to choose a BA transatlantic flight with their knowledge of BA CSR activities.
(72% said they would not).

22
Does your existing or newly acquired knowledge of Virgin CSR activities make you any more
likely to choose a Virgin transatlantic flight?

Figure 6 A graph displaying the percentage of respondents that would or would not be
more likely to choose a Virgin transatlantic flight with their knowledge of Virgin CSR
activities. (69% said they would not).

4.3. Are consumers more likely to book a flight with a transatlantic full-service
airline with new and enhanced CSR efforts by the airline?

Which flight would you book?

Figure 7 A graph displaying the percentage of respondents that would choose to fly with
Westwave Air on a transatlantic flight. (54% would choose Westwave Air).

23
 4.4. Are consumers prepared to pay a premium to travel on a full-service
transatlantic flight with new and improved CSR activities?

Considering the average price of a return flight from London Heathrow to Los Angeles with
British Airways, Virgin Atlantic, United Airlines and American Airlines is 519, would you be
prepared to pay more than 519 to travel on the Westwave Air flight?

Figure 8 A graph displaying the percentage of respondents that would or would not pay
more, and how much more, to fly on the Westwave Air flight. (67% said they would).

24
5. Discussion

This chapter presents an in-depth analysis of the survey results to produce a clear answer to the
extended research questions, as well as the overarching project question. Filtering the survey
results by respondent age will highlight age-based response patterns, which will guide the
suggestions for full-service airlines found in this chapter.

Beginning with Figure 2, a large body of respondents have flown on a transatlantic flight
between the UK and USA with a major British full-service airline. The fact that 71% of
respondents have done so is indicative of the strength of the transatlantic flight market
identified in the literature review.

Figure 3 shows most respondents (55%) have not heard of any of the main BA CSR activities.
This is evidence that BAs existing promotion of their CSR portfolio may be failing to reach
many consumers. According to the results, both the inflight entertainment travel health and
wellbeing advice, and the Flying Start charity were the two most recognised BA CSR activities.
An explanation for this is that these CSR activities are promoted directly to BA customers on
board their aircraft, as opposed to other activities which are promoted only in BAs CSR and
sustainability reports. To better analyse the effect of BAs CSR promotion to both existing and
potential customers, the survey responses may be filtered by those who have or have not flown
on a transatlantic flight between the UK and USA with BA. Ultimately, this will show the
effectiveness of BAs CSR promotion inside and outside their aircraft.

25
Figure 9 A graph displaying the percentage of existing BA customer respondents that
have or have not heard of the main BA CSR activities. (41% have not heard of any, 29% have
heard of the inflight entertainment travel health and wellbeing advice and 22% have heard of
the BA Flying Start charity).

26


Figure 10 A graph displaying the percentage of potential BA customer respondents that

have or have not heard of the main BA CSR activities. (73% have not heard of any of the main
BA CSR activities).

Comparing Figures 9 and 10, existing BA customers are much more likely to have heard of
BAs existing CSR efforts compared to potential BA customers. This is understandable
considering the aforementioned promotion to customers of some CSR activities on-board BA
aircraft. However, a large body of existing BA customers (41%) still have not heard of any.
BA should consider increasing the promotion of their existing CSR activities on-board aircraft
to strengthen the brand loyalty of their existing customers. Although this will not aid in growing
their transatlantic market share, it may act to stem the flow of existing BA customers to LCCs.

The disparity between the knowledge of BAs CSR activities by existing and potential BA
customers is clear. BA should also consider increasing the promotion of their existing CSR
activities outside their aircraft to potential customers, to grow their transatlantic market share.
However, this CSR strategy will only be valuable to BA if the increased promotion makes
potential and existing customers more likely to book a transatlantic flight with BA. Studying
Figure 5, 72% of respondents said that increased knowledge of BAs existing CSR activities
would not make them more likely to choose a BA transatlantic flight. If BA were to pursue this
CSR strategy, they would need to analyse whether the potential increase in custom from the

27
remaining 28% of respondents would offset the costs of increased CSR promotion.
Interestingly, when the survey responses are filtered by respondent age, the reaction of
respondents to increased promotion of existing CSR activities changes.

Figure 11 A graph displaying the percentage of respondents aged 18 24 that would or

would not be more likely to choose a BA transatlantic flight with their knowledge of existing
BA CSR activities. (45% said they would).

Figure 12 A graph displaying the percentage of respondents aged 50 and over that would
or would not be more likely to choose a BA transatlantic flight with their knowledge of existing
BA CSR activities. (20% said they would).

Comparing Figures 11 and 12, respondents aged 18 24 were much more likely to choose a
BA transatlantic flight with their knowledge of existing BA CSR activities than respondents
aged 50 and over. Perhaps this is indicative of increased concern for the Earth and society by
younger generations, which correlates with the growth of interest in personal wellbeing and

28
sustainability identified in the literature review. With this information, it can be said that
younger generations are more likely to react positively to enhanced promotion of existing CSR
activities compared to older generations9. Therefore, should BA increase the promotion of their
existing CSR activities, they must utilise different promotional channels for the various age
groups in their targeting strategy. For example, younger generations are more proficient users
of social media, so BA should target them with enhanced CSR promotion through social medial
channels. Furthermore, considering that younger generations appear more likely to book a BA
transatlantic flight with their knowledge of BAs existing CSR activities, they should be
targeted first to maximise BAs return on their CSR marketing investment.

The same patterns in survey responses are found when analysing the results for Virgin. Most
respondents have not heard of any of Virgins main CSR activities, and many respondents
would not be more likely to choose a Virgin transatlantic flight with knowledge of their existing
CSR activities. However, again, younger respondents were more likely than older respondents
to choose a Virgin flight based on knowledge of their existing CSR activities. Therefore, Virgin
should follow the same suggestions made to BA increase promotion of their existing CSR
activities to both existing and potential customers outside of Virgin aircraft, whilst ensuring
that close attention is paid to promoting CSR efforts to younger generations through
appropriate marketing channels.

Having identified that increasing the promotion of existing CSR efforts may be of value to full-
service airlines, the notion that full-service airlines may grow their transatlantic market share
with new CSR efforts must be analysed. Studying Figure 7, most respondents (54%) said they
would choose to fly transatlantic on a Westwave Air flight with new CSR activities, as opposed
to Westbound or Atlantic Air, which represent the current offering of BA and Virgin
respectively. Although most respondents said they would choose the flight with new CSR
activities, the majority is surprisingly small at 54%.

9
Due to a relative lack of respondents aged between 24 and 50, it is difficult to say with total
confidence that an increase in age reduces positive receptivity to the promotion of existing CSR
efforts.

29


Figure 13 A graph displaying the percentage of respondents aged 18 - 24 that would

choose the enhanced CSR flight with Westwave Air. (48% would choose Westwave Air).

Figure 14 A graph displaying the percentage of respondents aged 50 and over that would
choose the enhanced CSR flight with Westwave Air. (59% would choose Westwave Air).

The results become even more surprising when they are filtered by respondent age. Comparing
Figures 13 and 14, the survey results show that respondents aged 50 and over are more likely
to choose a flight with new CSR activities compared to respondents aged 18 24. Referring to
Figures 11 and 12, which showed younger generations were more likely than older generations
to book a flight based on the existing CSR effort of the airline, a similar result would be
expected in Figures 13 and 14. However, the opposite occurred. Younger generations appear
less likely than older generations to book a transatlantic flight on an airline with enhanced CSR
activities. Regardless of this fact, across all ages, the respondents appeared to favour the
Westwave Air flight with enhanced CSR offerings as shown in Figure 7. This result confirms

30
that consumers are more likely to choose a transatlantic flight with a full-service airline offering
enhanced CSR over existing competing airlines. Therefore, BA and Virgin should consider
introducing new philanthropic CSR activities to grow their transatlantic market share. This
becomes a point for greater consideration when it is established whether consumers are likely
to pay a premium on top of the average flight ticket price to fly on a transatlantic flight with
enhanced CSR.

Studying Figure 8, an overwhelming majority (67%) of respondents said they were prepared
to pay more to fly on the Westwave Air flight. This is a surprising result, considering the current
economic climate in the UK, with lower wage growth and rising inflation causing a reduction
in consumer spending (Financial Times, 2017b).

Figure 15 A graph displaying the percentage of respondents aged 18 - 24 that would or

would not pay more, and how much more, to fly on the Westwave Air flight with enhanced
CSR. (70% said they would).

31


Figure 16 A graph displaying the percentage of respondents aged over 50 that would or
would not pay more, and how much more, to fly on the Westwave Air flight with enhanced
CSR. (55% said they would).

Once more, filtering the results by respondent age, some interesting patterns emerge.
Comparing Figures 15 and 16, respondents aged 18 24 were more likely to pay a premium to
fly on a transatlantic flight with enhanced CSR than respondents aged over 50. Whats more,
respondents aged 18 24 would pay a larger premium on the flight ticket price compared to
respondents aged 50 and over. Most respondents aged 18 24 would pay up to 5% more on
the flight ticket price, compared to most respondents aged 50 and over who would pay up to
2% more. This is interesting, because typically, older generations have more available cash to
spend than younger generations. However, considering the frugality of over 50s compared to
younger generations shown in Figures 15 and 16, this correlates with the findings in Figures
11 and 12, which showed that over 50s respond less positively to the enhanced promotion of
CSR activities by full-service airlines. Regardless, the fact remains that an overwhelming

32
majority of respondents would pay a premium on flight ticket prices to fly on a transatlantic
flight with enhanced philanthropic CSR activities. Therefore, full-service airlines may be able
to grow their transatlantic market share, whilst offsetting the costs of enhancing their CSR
activities to preserve their narrow profit margins by adding a premium to their flight ticket
prices. Furthermore, this premium may raise extra cash for full-service airlines to invest in
product innovation beyond CSR. With this information, BA and Virgin should consider
implementing new philanthropic CSR activities on their transatlantic flight routes,
accompanied by a ticket price premium to grow their market share and raise their product
competitiveness to higher levels.

33
6. Conclusions

This report set out to answer the question, Can full-service airlines use corporate social
responsibility to grow their market share on transatlantic routes?. To contextualise and justify
the research required to answer the question, an in-depth literature review was conducted.

Firstly, the importance of transatlantic flight routes to full-service airlines was determined
through a revenue and passenger traffic analysis. It was found that these flight routes generate
a significant portion of revenue and passenger footfall for transatlantic full-service airlines.
Next, the competition in the transatlantic flight market was demonstrated by a flight ticket price
parity between the five major transatlantic full-service airlines on a high volume transatlantic
flight route. This competitiveness has been caused by a variety of factors, including
deregulation, the growth of online ticket sales and an increasing prevalence of LCCs on flight
routes traditionally dominated by full-service airlines. It was highlighted that this competitive
environment threatens to diminish the market share of full-service airlines, to the detriment of
their profitability, and ultimately, survivability. The benefits to airlines of implementing a CSR
strategy was then examined. The benefits included retaining existing, and procuring new
customers through increased customer value and satisfaction, as well as improving the
environment in which airline business is conducted. Importantly, it was suggested that full-
service airlines may protect and grow their transatlantic market share through better promotion
of their existing CSR activities, preserving their narrow profit margin. The existing CSR efforts
of the two largest British transatlantic full-service airlines were then analysed, to identify a
benchmark from which further research was conducted, and suggestions made. It was found
that philanthropic CSR activities, which are most likely to increase perceived customer value,
were comparatively scarce in the CSR strategies of BA and Virgin. Finally, new CSR efforts
that full-service airlines may deploy on transatlantic flight routes were identified. Analysis of
the existing CSR activities of highly regarded full-service airlines, in conjunction with current
consumer trends, showed that activities focussed around sustainability, personal health, and the
environment, would offer the greatest customer value.

To develop a concrete answer to the overarching project question, a survey directed towards
UK consumers was conducted. The survey was formed around four extended research
questions, developed from the findings of the literature review.

34
The survey aimed to establish:

The awareness of consumers of the existing CSR activities of full-service airlines.

Whether consumers are more likely to choose a particular full-service airline with
knowledge of their CSR activities.
Whether consumers are more likely to choose a particular full-service airline if they
undertake new CSR activities.
Whether consumers are prepared to pay a premium on the flight ticket price to travel
with a full-service airline offering new CSR activities.

The survey results established that it would be possible for full-service airlines to use corporate
social responsibility to grow their market share on transatlantic routes.

Firstly, it was found that promotion of BA and Virgins existing CSR efforts is failing to reach
a majority of consumers. Furthermore, most consumers would be unlikely to choose a
particular full-service airline with knowledge of their CSR activities. Despite this, a small
number said they would. BA and Virgin should assess whether increasing the promotion of
their existing CSR efforts, both inside and outside their aircraft, would generate a healthy return
on their marketing investment through market share growth. They should also consider the use
of appropriate marketing channels to maximise their return on investment across the various
consumer age groups.

Next, it was established that most consumers would choose to fly with an airline with enhanced
philanthropic CSR activities, over existing competing airlines. Furthermore, it was found that
most consumers would pay a premium on their flight ticket price to fly with the enhanced CSR
airline. This would offset the cost of enhancing the CSR strategies, whilst also potentially
generating more cash to invest in product innovation beyond CSR. BA and Virgin should
consider developing new and improved CSR strategies to stem the flow of customers to
competitors, and grow their market share. However, close attention should be paid to the
delivery of promotional messages to the various consumer age groups, to maximise the return
on investment and effectively grow their market share.

Clearly, it is in the interests of full-service airlines to better promote and augment their CSR
strategies. Increased promotion of their existing CSR activities is a low cost interim solution
to help stem the flow of customers to LCCs. A longer-term solution for full-service airlines to

35
grow their transatlantic market share is the implementation of carefully considered new CSR
activities. Paying increased attention to sustainability, environmental protection and customer
satisfaction will only serve to improve the triple bottom line of full-service airlines.

36
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Appendix 1

Appendix 1

Appendix 1

Appendix 1

Appendix 1

Appendix 1

Appendix 1

Appendix 1

Appendix 1