Abstract
This article describes the application of a dynamic choice model of consumer preferences. It supported Jetstar, a subsidiary of Australia’s leading airline, QANTAS, to effectively and profitably compete in the low-cost carrier marketplace. The evolution of the Jetstar strategy is traced from its initial position through to its efforts to attain price competitiveness and service parity. The model helped service design and pricing initiatives to shift the perceived performance of Jetstar relative to its competitors. It further indicated how the airline could move market preferences towards areas in which it had competitive advantage. The Jetstar market share went from 14.0 % to 18.1 % during the first five quarterly waves of the research, while profits went from US $ 79 million 2006 / 07, before the study was commissioned, to US $ 124 million in 2008 / 09. Today, Jetstar remains the only successful low-cost offshoot of a full service airline in terms of shareholder returns