At the heart of demand for airline travel is the passenger and their needs. From observing Scandinavian Airlines System (SAS)'s operation, Gustafsson et al. (1999) developed a model of hierarchy need fulfilment for airline passengers (Fig. 3.4). The base level is the fundamental needs of passengers, which are safety, getting the luggage to the right place, and punctuality. In order to become more competitive, the second level focuses on activity support, assisting customers through the process and fulfilling their wants and needs. The third level is to tailor the travelling process for each individual and requires understanding customer motivation, why something is important, or why something is a problem affecting customers. In simple terms, budget airlines provide the fundamentals whilst full service carriers provide activity support, and tailoring for their first-class passengers.

Figure 3.4: Hierarchy needs fulfilment of flight passengers

Airline companies utilise market segmentation as a means of providing the right product (services) for different subgroups of customers. Once the relevant characteristics of consumer groups are identified they are treated as a target market. The demand for air travel can be divided into four broad customer segments based upon the purpose of journey:

1. Business travellers (corporate, independent, conference, incentive)

2. Travelling for leisure purposes (holiday-makers or visiting friends and relations)

3. Travelling for personal reasons (student travel to place of study, visiting sick relations, migration)

4. In addition, there is the revenue earned from the transport of mail and freight

Each of the above segments can also be subdivided into