Depends on several factors, price is an indicator of quality used by customers, one of which isthe availability of information to them (Zeithaml, et al., 2009). When quality is hard to detector price varies great deal within a class of services, these conditions is typify situation faceconsumers when purchasing services, customers tend to use price as an indicator of quality.Customers react to products or services and their prices has implicate by their quality.Customers often consider purchasing the item only when the products meet minimal qualitystandards and rarely purchase with the highest quality. Many observer assume that quality isdirectly associated with price. That is, higher price serves as an indicator of higher quality. If such a relationship exists, it would seem to complicate the ability to determine value.Customer often see price as an indicator to service quality, so that price has an impactto the degree of quality (Zeithaml & Bitner, 1996). To airline industry, pricing strategy is usedto maximized profit by targeting different market segment; vacationers, business travellersand group operators. Segmenting customer lead to price differentiation in an airline industry(De Pew & Stripling, 2003). Low cost airlines serve basic accomodation and operates singleaircraft types which is totally different strategy adopted by full service airlines. Those factorsindicates that low cost airlines pricing strategy lead to relatively low fare.
Hypothesis
Review of the literature on airline industry