Executive summary- The airline industry is at its crossroads. Surviving legacy carriers are responding with aggressive pricing policies to remain competitive whilst simultaneously focusing on the reduction of operational costs by transforming their airline models towards more efficient processes to break-even. To a certain extent internal restructuring and product un-bundling implied the deterioration of airline frills and superior product attributes. This has consequently influenced the airline product as services increasingly become perceived undifferentiated and ever more similar in the eyes of the customer. All together indications suggest that market actors are driving air transport in the direction of commoditization, implying a shift in purchase behaviour as customers are increasingly observed to search for best price rather then best value for money. Such changes will eventually favour the lowest cost providers in the industry these in turn being in an advantageous position to adopt cost based pricing approaches, therefore placing a greater threat to legacy carriers with higher cost structures. As services offered by each brand continue to lose uniqueness, addressing legacy and low-cost models separately can in the near future become less relevant and what remains would be a service provider satisfying the basic need for air transportation. In search for a strategy that will assist legacy carriers survive within a single environment where low cost alternatives are widely accessible, this dissertation attempts to identify factors that do influence customer purchase behaviour for air transport. Primary data is collected through an on-line questionnaire analyzing the Malta originating travel market and applied within a long-term value based model making it possible to analyse travelers in groups, these clustered by monetary value and travel frequency. Findings indicate that market preferences for air transportation are not homogenous and dissimilarities do exist between groups as a number of travellers are found to be willing to pay a price premium for superior services. By developing segment specific strategies legacy carriers can build a customer centric approach, thus being better equipped to survive the commodity trap through loyalty building, making it possible to attract and retain high value customers. Simultaneously, the services offered by legacy carriers and low cost providers are differentiated further, facilitating long term profits and growth. I request your assistance in completing one particular section of my “Review of Existing Literature” chapter for this dissertation. This section must include a critical evaluation of existing literature. The appropriate theories and models must be identified. The section is titled “Challenges of Effective Market Segmentation”. Apart from a critical evaluation, theories and models, the literature review must consequently include an answer to the research questions, these being: 1. What are the challenges for effectively segmenting the air travel market? 2. How is effective market segmentation challenging? 3. What have other industries do to achieve effective market segmentation? 4. Can the air travel market be segmented effectively?