Servqual in India Airline

1 RESEARCH RESEARCH PAPER CUSTOM CUSTOM ER PERCEPT PE RCEPT I ONS ONS, EXPECT EXPE CTAT ATII ONS ONS AND GAPS I N SERV SERVII CE QUAL QUAL IT Y : AN EMPI RICAL STUDY TUDY OF CIVI L AV I ATI ON I NDUSTRY USTRY I N INDIA

BY DR. M OHAMM ED NAVED NAVED K HAN Seni Senior Le L ecturer cturer Departm Departmen entt of Busines Business s Adm Administra nistrati tion on Faculty of Management Studies & Research Aligarh Muslim University A ligarh-20 rh-202 2002 (UP) I NDI A e-mail: mohdnavedkha ohdnavedkhan@gm n@gmai aill.com .com Ph: 0091571 2701184(R) Mobil obile : +91941180 919411800860 0860

VI PPAN RAJ DUTT Doctoral Research Scholar (C (Corr orrespond spondiing auth author or)) Faculty aculty of Manag anagem ement ent Studies Studies and and Research rch Aligarh Muslim University, AMU. Manag anager er (System (System/ Mai M ainte ntena nance) nce) NACIL (I) C orr orr esponde spondence nce Addr Addre ess: ss: Dutt Niwas, 809 Sector 17 A Gurgaon 122001 122001 Haryana Haryana – 1220 122001 01 I NDIA DI A e-mail : [email protected] Ph. (R) 0091 124 2397809 Mobil obile : +91981820 919818207809 7809 &

Dr. S C BA NSAL NSAL A ssoci ssocia ate Profe Professor ssor Indian Inst Instiitute of Mana anagem gement ent L ucknow ucknow – 226 226 013 013 (Ind (I ndiia) e-mail: [email protected] Ph. 0091 522 2736637 2736637

2 CUSTOM CUSTOM ER PERCEPT PE RCEPT I ONS ONS, EXPECT EXPE CTAT ATII ONS ONS AND GAPS I N SERV SERVII CE QUAL QUAL IT Y : AN EMPI RICAL STUDY TUDY OF CIVI L AV I ATI ON I NDUSTRY USTRY I N INDIA

ABSTRACT

Civil aviation is a catalyst for economic development and trade in an increasingly globalized world where people and goods are moving farther, faster and cheaper than ever. The Indian Indian civi civill aviati aviation on se sector too is is pr presentl sently y witnessing a boom boom with with a host host of  priva pri vate te air airlines taking taking to the the ski skies. Le Leading pl playe ayers in in the the I ndi ndian aviati aviation on industry industry include clude Air Air I ndi ndia, Ind I ndiian Airl Airliines, J et Airway Airways, Sahara Sahara Air Airlines, Ki Kingfi ngfis sher, Spicej picejet, Param aramount, ount, Ind I ndiigo and and Go Air Ai r. Whi While the growth rate of the civil civil avi aviation ation se sector has slowe slowed down down in the the mature inte international national mar marke kets, ts, it it is is incr incre easing asing at a bri brisk pace in India. India.  This  This gro grow wth is fuelled lled by by th the libe liberaliz raliza ation ion of of the ind industry, ry, inc increa rease in inv investments, emergence of low cost carriers (LCCs), positive impetus by regulatory authorities and improvement in the standards of living in the region. With the entry of LC LCCs, the domestic air ai rline indus ndustr try y in in Ind Indiia is is pr presently exp expe eriencing ncing its second phase of liberalization. The winds of competition have changed the rules of the game. As airfares drop, an increasing number of middle-income travelers are preferring to trave travel by air air. In I n fact, domestic stic air air trave travel has grown grown at the rate of aroun around d 38 38 per per cent cent in in the the period J an – J uly 200 2007. 7.  The  The pres ressure to prov rovide ide better cu customer se servic rvice es has never be been grea reater. Con Consequently, ly, the primary purpose of this study was to compare the quality of service on domestic fli fl ights ghts of var variious I ndian air airlines. nes. The ser service vice components considere considered for the study study were expectations and perceptions. The research questions and the derived hypotheses were

2 CUSTOM CUSTOM ER PERCEPT PE RCEPT I ONS ONS, EXPECT EXPE CTAT ATII ONS ONS AND GAPS I N SERV SERVII CE QUAL QUAL IT Y : AN EMPI RICAL STUDY TUDY OF CIVI L AV I ATI ON I NDUSTRY USTRY I N INDIA

ABSTRACT

Civil aviation is a catalyst for economic development and trade in an increasingly globalized world where people and goods are moving farther, faster and cheaper than ever. The Indian Indian civi civill aviati aviation on se sector too is is pr presentl sently y witnessing a boom boom with with a host host of  priva pri vate te air airlines taking taking to the the ski skies. Le Leading pl playe ayers in in the the I ndi ndian aviati aviation on industry industry include clude Air Air I ndi ndia, Ind I ndiian Airl Airliines, J et Airway Airways, Sahara Sahara Air Airlines, Ki Kingfi ngfis sher, Spicej picejet, Param aramount, ount, Ind I ndiigo and and Go Air Ai r. Whi While the growth rate of the civil civil avi aviation ation se sector has slowe slowed down down in the the mature inte international national mar marke kets, ts, it it is is incr incre easing asing at a bri brisk pace in India. India.  This  This gro grow wth is fuelled lled by by th the libe liberaliz raliza ation ion of of the ind industry, ry, inc increa rease in inv investments, emergence of low cost carriers (LCCs), positive impetus by regulatory authorities and improvement in the standards of living in the region. With the entry of LC LCCs, the domestic air ai rline indus ndustr try y in in Ind Indiia is is pr presently exp expe eriencing ncing its second phase of liberalization. The winds of competition have changed the rules of the game. As airfares drop, an increasing number of middle-income travelers are preferring to trave travel by air air. In I n fact, domestic stic air air trave travel has grown grown at the rate of aroun around d 38 38 per per cent cent in in the the period J an – J uly 200 2007. 7.  The  The pres ressure to prov rovide ide better cu customer se servic rvice es has never be been grea reater. Con Consequently, ly, the primary purpose of this study was to compare the quality of service on domestic fli fl ights ghts of var variious I ndian air airlines. nes. The ser service vice components considere considered for the study study were expectations and perceptions. The research questions and the derived hypotheses were

3 examined compari paring expectati expectations ons and per perceptions ceptions and the gap betwee between them. An An analysis of demographics like age, gender and level of income for the airlines surveyed was also carried out.  The  The validit lidity y of th the “cla “clas ssica ical” five five-dim -dimension ions of SERV ERVQUAL UAL co could not be res resolve lved for service quality in case of domestic airlines. The reliability estimates for SERVQUAL as a unidimensional instrument were found to be higher. The main findings of the study indicated that there were significant differences between expectations and perceptions of  service quality on domestic flights. Dimensions of Tangibility (Legacy Support Service, Addi Addition tional al LCC Supp Support ort Ser Service and and F light) ght) and and Rel Reliabi ability were significan signifi cantt drive drivers of  of  customer service. Passengers expect airlines to ensure safe journey, support in mitigating probl problem ems due to cri critical tical incide ncidents nts and of course course meet tim time commitments. ents. The The study has an applied bias as the findings of the study can help the airlines, government and regulating agencies in evaluating the level of existing services being offered by the players as also in deciding on the portfolio of services to be made mandatory in the interest of passengers.

 J EL clas lassific ifica ation ion : M31 M31, L93 L93, N75 Key words: Customer Satisfaction, Airline, Customer Service, SERVQUAL, India, Civil Aviation

4 CUSTOM CUSTOM ER PERCEPT PE RCEPT I ONS ONS, EXPECT EXPE CTAT ATII ONS ONS AND GAPS I N SERV SERVII CE QUAL QUAL IT Y : AN EMPI RICAL STUDY TUDY OF CIVI L AV I ATI ON I NDUSTRY USTRY I N INDIA

INTRODUCTION

Civil aviation industry has been swept by a wave of liberalisation throughout the world (Cha (Chan n 2000, 2000, Inte I nterVISTAS-ga VISTAS-ga 2006). The aviation industry has moved towards liberalisation in the ownership of national carriers, capacity sharing, price controls and market access, leading to greater competition among airlines. Open sky policy is being foll ollowed owed in in incre increa asing num number of countri countrie es. Ai A irli rl ine alliances are be being forged for enhanced networking of destinations and code sharing among airlines is becoming common. With facilities for easy entry, exit and freedom over fare structure, domestic private private operators are competi peting ng with with nati nationa onal carr carriiers. Ai Airports, apart apart from from providi providing ng range of facilities to airlines, are evolving into multifaceted hubs containing hotels, conference centres, duty free shops, and shopping malls. A ir trave travell, drive dri ven n by li liberaliza rali zati tion on and and gl globalizati zation, remains the the fastest-growing st-growing market. Ove Over 2.1 bil billion pa passengers depa departed on sche scheduled duled journe journeys ys in in 2006 2006 (IA (I A TA 2007). 2007). Strong Strong economies saw international passenger demand grow by 5.9%. Driving these developments are further market liberalization and the availability of more fuel efficient and longer-range aircraft that are better able to serve thinner routes. Focus on service quality is the need of the hour if the airlines aspire to improve market share and further enhance financial performance in domestic and international markets. A necessary corollary is that domestic airlines need to have valid and reliable measures to better understand the variables likely to have a bearing on the service quality offered by

5 their organization, e.g. expectations and perceptions of airline passengers vis-à-vis service quality.  The  The article icle provide ides int introduction ion to th theoretica ical fou foundation ions for for measurement of of se service ice quality in the context of airline industry. This is followed by a brief profile of civil avia aviation tion indu industry stry in i n India. I ndia. Rese esearch objectives objectives,, hypothe hypotheses ses and and method ethodol ology ogy are discussed followed by results from the data analysis. The study has an applied bias as it also discusse discusses practi practica call impli plicati cations ons for airli rl ine marketing ma managers in i n Ind I ndiia.

SERVI CE QUALI TY MEA SUREMENT: THEORITI CAL FOUN FOUNDATI ONS ONS

Much of the research research in in servi rvices marketing arketing cente centers rs on understa understandi nding ng servi services ces and and servi rvice quality from customer’s point of view (Brown et al. 2006). The use of service quality as a compe competi titi tive ve edge edge has has been been extensi extensivel vely y addresse addressed d in in marketing arketing li literature terature (Shosta (Shostack ck 1977; 1977; L ovelock ovelock 1983; 1983; Gronroos Gronroos 1978, 1978, 2006; 2006; Pa Parasuram rasuraman, an, Zeitha Zeitham ml & Berry rry 1985, 1985, 1988, 1988, 1991, 1991, 1994 1994A A, 1994B; 1994B; Bitner, Booms & Tetrea treault ult 1990 1990;; Rus Rust, t, Zahori Zahorik k & K eining ningha ham 1995 1995;; Rust ust & Chung hung 200 2006; 6; Ka K aspe sper, Helsd Helsdiinge ngen, & Gabbot Gabbottt 2006 2006). ). Howeve owever, r, service rvi ce qua quality is is an elusive and abstract construct that is difficult to measure (Cronin et al. 2000).  The  The disc isconfirm firmation ion model of of se service ice quality lity provide ides a customer refer ferenced method for for asse assessing ssing service rvi ce quality. In I n thi this model odel quality is is im impli plied if the custom customers’ expecta xpectati tions ons of the service experience beforehand are exceeded by the service when it is delivered. Disconfirmation has had a huge impact upon service quality and has been subject to a series of refinements. Grönroos (1978) identified that services are not one big amorphous event but comprise of different components – technical quality and functional quality – which which inte interact to to dete determ rmiine overall overall qua quality. SER SE RV QUA QUA L (Pa (Parasura rasuram man et et al al. 1985 1985;; 1988 1988)) based service quality approach in academic literature, takes into account disconfirmation

6 and different service attributes and links them together with management activity through a gap framework. Six-Sigma model of service quality was developed by Motorola in 1980’s, and is an organizational change model driven by customer demand. Customer equity framework (Rust et al. 2000; 2004; 2006) provides an information-based, customer-driven, competitor-cognizant, and financially accountable strategic approach to maximizing the firm’s long-term profitability. Customer equity projections are built from a new model of  Customer Life-Time Value (CLV)—which permits the modeling of competitive effects and brand switching patterns. Service-dominant-logic (SDL) model (Vargo and Lusch 2004; Lusch et al 2006) – work in progress status - represents an inversion from goods dominant logic, that places activities driven by specialized knowledge and skills, rather than units of output, at the center of exchange processes. While according to Kano’s model (Y ueh-Ling et al 2007), quality elements can be classified into three categories, namely Must-be, Onedimensional and Attractive needs, depending on their ability to create customer satisfaction or dissatisfaction.

 The Gaps Model Of Service Quality

(Parasuraman et al. 1985) developed a model which depicts how various gaps in the service process may affect the customer’s assessment of the quality of the service. The foundation of the model (see Figure 1) is a set of four gaps which are the major contributors to the service quality gap which customers may perceive: Gap 1 (Consumer Expectation – Management Perception Gap): In formulating its

service delivery policy, management does not correctly perceive or interpret consumer expectation.

7 Gap 2 (M anagement Perception – Service Quality Specification Gap): Management

does not correctly translate the service policy into rules and guidelines for employees. Gap 3 (Service Quality specification – service delivery Gap): Employees do not

correctly translate rules and guidelines into action. Gap 4 (Service Delivery – External Communications Gap): External communications

– promises made to customers – do not match the actual service delivery.

 These four gaps emerge from an executive perspective on a service organization’s design, marketing and delivery of services. These gaps are located throughout the organization between frontline staff, customers and managers. They, in turn, contribute to another gap, i.e. gap 5, which is the discrepancy between customers’ expected services and the perceived service actually delivered. This gap is a function of the other four gaps: i.e. Gap 5 =f (gaps 1, 2, 3, 4). It is this gap that Parasuraman et al. (1985) sought to measure using the SERVQUAL instrument. The instrument has been further developed and promoted through a series of  publications (Parasuraman et al. 1988; 1991, 1994a, 1994b; Zeithaml et al. 2003). Much of the research in this area since then has been concerned with validating or challenging the construct (Cronin et al 1992; Babakus et al 1992a, 1992b; Teas 1993; Smith 1995; Buttle 1996; Genestre & Herbig 1996; Asubonteng McCleary & Swan 1996; Nel, Pitt & Berthon 1997; Llosa, Chandon & Orsingher 1998; Hussey 1999; Brady, Cronin & Brand 2002; Myerscough 2002; Nyeck et al. 2002) and suitability of SERVQUAL vs SERVPERF scale (Cronin et al 1994; Elliot 1994; J ain & Gupta 2004). Chang & Lim (2002) carried out comparative study of relevance of SERVQUAL and SERVPERF scales to airline industry. In their opinion, SERVQUAL model is more appropriate for airline service industry than SERVPERF.

8 Figure 1: Conceptual Model of Service Quality Word of  Mouth

Personal Needs

Past Experience

Expected Service Gap 5 Perceived Service Consumer Marketer Service Delivery

Gap 4

External Communication to Consumers

Gap 3 Gap 1

 Translation of  Perceptions into Service Gap 2 Management Perceptions of  Consumer Expectations

Source: Zeithaml, V.A., Berry, L.L., Parasuraman, A. (1988), Communication and Control Processes in the Delivery of Service Quality, J ournal of Marketing, 52, p. 36

9  The development of SERVQUAL by Parasuraman et al. (1988) as a generalisable measure of service quality was a seminal contribution that has been adapted and widely used across industries around the world (Dabholkar et al. 1996). The instrument empirically relies on the difference in scores between expectations and perceived performance. It consists of 22 items divided along the 5 dimensions, with a seven-point scale accompanying each statement to test the strength of relations. These 22 items are used to represent five dimensions viz. reliability, responsiveness, tangibles, assurance and empathy(RATER). Mathematically, the same may be expressed as: k

SQi = ∑ (Pij − Eij )  j =1

where, SQi = Perceived service quality of individual ‘i’ k=Number of service attributes / items P=Service quality perception of individual ‘i’ for service attribute ‘j’ E=Service quality expectation of individual ‘i’ for service attribute ‘j’

A variant of SERVQUAL scale, SERVPERF scale contains perceived performance component only. A higher perceived performance implies higher service quality. In an equation form, it can be expressed as follows: k

SQi = ∑ Pij  j =1

where, SQi = Perceived service quality of individual ‘i’ k=Number of service attributes / items P=Service quality perception of individual ‘i’ for service attribute ‘j’

10

 The identification of five dimensions of service quality has dominated the literature in the field of service quality. There are now over 5500 research articles on this model (K asper et al. 2006). According to EBSCO database (30 Sept’07), SERVQUAL as a keyword is appearing in 102 publications. Major published studies include Banking (Arasli, Katircioglu & Mehtap-Smadi 2005; Bexley 2005; Baumann et al. 2007; Aga & Safakli 2007), Education (Arambewela & Hall 2006), Health (Lam 1997; K ilbourne et al. 2004; Pakdil & Harwood 2005), Hotel (Antony, & Ghosh 2004; J uwaheer 2004), Information System & E-Commerce (vanDyke, Kappelman & Prybutok 1997; Cook 2000; J iang, Klein & Carr 2002), Internal Marketing (Frost & Kumar 2000, 2001; Straughan 2002), Public Services (Orwig, Pearson & Cochran 1997; Donnelly & Shiu 1999; Wisniewski 2001; Brysland & Curry 2001), Retail (Finn &Lamb 1991; Dabholkar, Thorpe, & Rentz 1996; Zhao, Changhong & Hui 2002) and Tourism & Hospitality (Saleh & Ryan 1991; Kouthouris & Alexandris 2005; Home, Peter & Pikkemaat 2005), Transportation (Crosby & LeMay 1998; Mehta& Durvasula 1998; Durvasula & Lysonski 1999) .

SERVI CE QUAL IT Y IN THE CONTEXT OF AIRL I NE I NDUSTRY

Continued liberalisation and ‘open skies’, the impact of global alliances, new low-cost, no-frills carriers, on-line ticket selling, and privatisation of state-owned airlines are some of the crucial developments that have been impacting on airline business at a time of  continually falling average fares and yields. Increasing competition from low cost, low fare carriers is one of the fundamental challenges being faced by the traditional full service carriers (Chen, Gupta & Rom 1994; Cerasani 2002; Gillen & Morrison 2002; Sayanak 2003; Franke1 & Hamilton 2004; Cary 2004; O’Connell 2005; and Pant 2006) and it has also led to reduction in average quality of service provided to the customer

11 (Trapani & Olson 1981; Bhatt 1997; Chan 2000; Butler 2001; Servitopoulos 2002; Mazzeo 2003; Morrison 2004; Manuela 2007).  The airline industry is inherently unstable (Doganis 2006) and highly competitive, where all airlines have comparable fares and matching frequent flyer programs. In such a scenario, service quality is a significant driver of passenger satisfaction, loyalty and choice of airline (Sultan et al 2000; Chang et al 2002, Gilbert et al 2003; Rust et al 2006). Figure 2 outlines airline service delivery mechanism. Airlines need to have valid and reliable measures for a better understanding of the variables likely to impact the perception of service quality being offered by them. They need to measure not only customer perceptions but also expectations of airline passengers. If significant variations are found in the perceptions of airline passengers’ vis-à-vis service quality on the different flights, changes in the marketing mix need to be implemented to improve the perception of quality. But, in general, passenger hardships have increased after Sept 11 attacks (Leone & Liu 2003; Gkritza, Niemeier & Mannering 2006). Several papers have been written during the past few years examining the service quality of airline industry. These papers focus primarily on measuring the performance of airlines using SERVQUAL instrument (Gourdin & Kloppenborg 1991; Ostrowski, O'Brien & Gordon 1993; Y oung, Cunningham, & Moonkyu 1994; Bejou & Palmer 1998; Gustafsson, Ekdahl & Edvardsson 1999; Sultan & Simpson 2000; Chang et al 2002;  Tsaur, Chang & Yena 2002; Gilbert & Wong 2003; Alter 2003; Kozak, Karatepe & Avci 2003; Boland, Morrison & O’Neill 2003; Natalisa & Subroto 2003; Scheraga 2004; Truitt & Haynes 1994; Heracleous, Wirtz, & Johnston 2004; Bel 2005; Ling et al 2005; Gursoy, Chen. & Kim 2005; Knibb 2005; Rhoades & Waguespack 2005; Anitsal & Paige 2006; Hunter 2006; Pham 2006; Pham & Simpson 2006; Park, Robertson & Wu 2005, 2006;

12 Sima, Kohb & Shetty 2006; Venkatesh & Nargundkar 2006; Chitnis 2007; Pakdil & Aydin 2007; Chitnis 2007; Lioua& Tzeng 2007). In US, Airline quality ratings (AQR) that also take in to account 12 customer complaint categories are being published annually since 1991 (Headley and Bowen 1997, Bowen & Headley 2007). Gardner (2004) carried out a dimensional analysis of airline quality based on on-time arrivals, denied boardings, mishandled baggage and customer complaints, which is in conflict with the results of AQR 2004.  The travel industry has been a pioneer in the innovative use of Information Technology (IT) (Feldman 2001; Gareiss 2001; Gareiss 2003; K elemen 2003; Botha 2004; Ghobrial & Trusilov 2005). The airline industry is embracing cutting edge technology to gain competitive edge (J iang & Doukas 2003; Baker 2007). O’Toole (2004) predicts that air travel could become world’s first web-enabled industry as online sales, e-tickets and range of new technologies gain ground with increasing speed. The dramatic growth of  web and self-service technologies permit customers and airlines to bypass the complexity and cost of old legacy systems (McIvor, O’Reilly & Ponsonby 2003; Shon, Chen & Chang 2003). Researchers have employed Structural Equation Modelling (SEM) to investigate the effects of individual dimensions of airline service quality (Cezard 1999; K alamas, Laroche & Cezard 2002); Park et al 2005, 2006; Ling, Lin & Lu 2005; Cassab & MacLachlan 2006). Chang & Yeh (2001) suggested a multiattribute decision making model to measure and compare overall competitiveness of airlines on five dimensions and their associated objective performance measures. Danaher (1997) employed a method based on conjoint analysis to determine the relative importance of service attributes measured in airline customer satisfaction surveys.

13 Figure 2 : Customer Service Delivery in Airline I ndustry Pax makes PASSENGER (Pax) Flight Reservation Bkg Office / Internet

 Ticketin

Check-in at Airport (Pax, Baggage)

Preboardin Security Check

Boarding and Seating

Inflight Service

INTERACTION

 Ticket Office – Payment & Collection of Ticke

Check-In Counter – Issue Boarding Pass & Tag Baggage Security – Check-in Baggage Security Check

Security – Passenger & Hand Baggage Check

 Transportation of Pax to Aircraft Cabin Crew – Greet, assistance to seat & store bags

Cabin Crew – Safety Demo, Meals, Adhoc Request

IT – CheckIn Database Commercial – Check-in Baggage Reconciliation & Loading

Engineeri ng – A/c Check & Flight Clearance Refuelling Catering – Loading of Meals Cabin

Arrival, Baggage Retrieval

LINE OF

FRONT LINE

LINE OF INTERNAL INTERACTION SUPPORT

Reservation Desk – Check Availability, Quote Fare & Reserve Seat

Internet based Reservation &  Ticketing

IT – Reservation Database, Frequent Flyer Database Catering – Meal Request

Finance – Accounts IT –  Ticketing Database

Preparation of Trim Sheet, Aircraft fueling & preparation for Take-off 

Commer cial Flight Monitor ing

Arrival Helpdesk – Special need passengers,  Transfer case, Pax Feedback

Baggage – Unload Baggage and load it on airport carousel

14 CIVI L AVIATI ON IN INDIA

 The Indian air transport sector is among the most vibrant and fastest growing in the world. As per IATA forecasts, with GDP growth of 7.2% for 2005 to 2009, air traffic growth can be expected to be in the 15% range (Bisignani 2005). With less than 1% of its population currently traveling by air, India's growth potential is enormous. Within a period of 15 years, the number of Indian carriers has grown from 2 players to more than 10 today. More than 24.85 million passengers traveled between January and July 2007 as against 18.03 million in the same period last year (Awasthi 2007). Figure 3 details the growth of domestic passenger traffic in last 10 years.

14 CIVI L AVIATI ON IN INDIA

 The Indian air transport sector is among the most vibrant and fastest growing in the world. As per IATA forecasts, with GDP growth of 7.2% for 2005 to 2009, air traffic growth can be expected to be in the 15% range (Bisignani 2005). With less than 1% of its population currently traveling by air, India's growth potential is enormous. Within a period of 15 years, the number of Indian carriers has grown from 2 players to more than 10 today. More than 24.85 million passengers traveled between January and July 2007 as against 18.03 million in the same period last year (Awasthi 2007). Figure 3 details the growth of domestic passenger traffic in last 10 years.

Figure 3: Growth of Domestic Passenger Traffic in last 10 Y ears

Domestic Passenger Traffic for last 10 Years 30

  s   n 25   o    i    l    l    i    M20   n    i   c    i    f    f 15   a   r    T   r   e 10   g   n   e   s   s   a 5    P 0 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

 Year NA TIONA L CA RRIERS

PRIVA TE CA RRIERS

Source: Directorate General of Civil Aviations (DGCA) 2007

TOTA L

15 In India, Air Deccan, which started operations in August 2003, was the first airline to adopt the low-cost business model. But low fares translate into sustainable gains when backed by safety and on-time performance (Gopinath 2007). Five new carriers—Air Deccan, SpiceJet, GoAir, IndiGo and Paramount Airways—have already started operations and many more such as Indus Air, AirOne, East-West and Magic Air are on the horizon. Presently, Indian Airlines, Jet Airways, Sahara and Kingfisher are the Full Service Carriers (FSC), whereas Air Deccan, Spicejet, Paramount, IndiGo and Go Air fall in the category of Low Cost Carriers (LCC). Table 1 gives the profile of domestic airlines operating in India.  The National Council for Applied Economic Research (NCAER) Report (2000) identified the factors restraining the Civil Aviation sector from fully contributing to the growth and progress of the country. Naresh Chandra Committee Report, (2003) delineated the problems being faced by airline industry in India and proposed a roadmap for its rapid growth and improvement in services to the passengers. According to Bhandari (2002) regulatory – policy framework has prevented this sector from being transformed into a mass transport system. He suggested minimal intervention of the government to unlock its potential. The International Air Transport Association (IATA) has identified five challenges for the successful development of air transport in India (1) enhancing safety, (2) urgent infrastructure improvement, (3) reasonable taxation, (4) commercial freedom and (5) Simplifying the Business through effective use of technology (Concil 2005).

16

 Table 1: Profile of Various Players in the Civil Aviation Sector in India FSCPUBLIC Indian Airlines

Start Date Web Site

IC Aug, 1953 www.indian airlines.in In-house

 Technology Partner 71 / 6 Current Fleet # (Classic / Small) 62/18 Destinations @ (Domestic/ International) 250 Daily Flights 21.5 Domestic Market #Share (2006) 6.903 Passengers Carried in Millions (2006) 63,193.5 Operating Revenue in Millions (2005-06) 62,873.2 Operating Expenses in Millions (2005-06) 320.3 Operating Result in Millions (2005-06) 63.8 Passenger L oad Factor (2005-06) 43 Fleet on Order Government Owner / Business of India Group

FSC – PRIVATE

L CC

 J et

Sahara

K ing fisher

Air Deccan

Spice  J et

Para mount

Go Air

IndiGo

9W May, 1993 www.jetair ways.com Sabre

S2 Dec, 1993 www. Airsahara.net Gabriel

IT May 2005 www.fly kingfisher.com Sabre

DN Aug 2003 www. airdeccan.net Radixx

OS May 2005 www. spicejet.com Navitaire

I7 Oct 2005 www.paramount airways.com Amadeus

G8 Nov 2005 www. goair.in BIS

57 / 8

17 / 7

21 / 10

21 / 22

13 / 0

0/ 5

4/ 0

6E Aug 2006 www.indigo airlines.com Inter Globe  Technologies 11 / 0

44/8

34

31

65

15

8

11

15

340 31.2

147 8.8

180 8.7

350 18.3

86 6.9

53 0.7

56 2.8

78 1.3

10.028

2.816

2.793

5.875

2.216

0.225

0.905

0.412

56,960.6

20,617.2

4,250.1

13,518.1

3,418.6

144.2

384.0

Not Available

51,573.0

21,212.1

6,587.8

16,741.4

3,903.9

321.9

968.0

Not Available

5,387.6

-594.9

-2,337.7

-3,223.3

-485.3

-177.7

-584.0

Not Available

73.7

70.8

59.3

74.7

82.9

44.1

45.1

Not Available

40 Naresh Goyal

Sahara India Pariwar

84 Kingfisher UB Group

90 Air Deccan / Capt. Gopinath

20 10 Royal Holding / Paramount Kansagra Family Group

20 Wadia Group

Source : Prepared by researchers with inputs from official websites of DGCA and domestic airlines (as on 19th Aug 2007)

17 Baisya (2004), while identifying the key attributes that influence customer choice in airline selection, also presented a comparative analysis of the performance of domestic airlines on the attributes. Khan, Dutt & Bansal (2007), in a preliminary study, investigated the service quality provided by different domestic airlines. Bansal, Khan & Dutt (2006a) employed the concept of customer lifetime value in measuring marketing ROI for domestic airlines in India. K han, Dutt & Bansal (2006c) also discussed at length the deployment of IT by the airline industry in India for providing upgraded services to the passengers thereby leading to enhanced customer satisfaction and improvement in overall efficiencies. In yet another research, K han & Dutt (2006b) traced developments in

95 InterGlobe Enterprises

17 Baisya (2004), while identifying the key attributes that influence customer choice in airline selection, also presented a comparative analysis of the performance of domestic airlines on the attributes. Khan, Dutt & Bansal (2007), in a preliminary study, investigated the service quality provided by different domestic airlines. Bansal, Khan & Dutt (2006a) employed the concept of customer lifetime value in measuring marketing ROI for domestic airlines in India. K han, Dutt & Bansal (2006c) also discussed at length the deployment of IT by the airline industry in India for providing upgraded services to the passengers thereby leading to enhanced customer satisfaction and improvement in overall efficiencies. In yet another research, K han & Dutt (2006b) traced developments in the aviation sector in India with special reference to LCCs and their role in the emerging borderless world.

RESEARCH OBJ ECTI VES AND HY POTHESES

Review of literature conducted as a prelude to the present study revealed that majority of  the available studies on customer services are confined to US and Europe. Studies, particularly, in the context of Indian airline industry, are few and far between. Although, airlines have introduced various measures to improve their service profile in the eyes of the customer, yet there is a need to continually assess the dimensions of  service that customers look forward to in an airline. LCCs are relatively a new phenomenon in India, and service quality expectations from these carriers have till date not been covered by any researcher in detail. The present study attempts to bridge this gap. Thus, the primary objective of the study was to examine

18 the customer’s perceptions and expectations of service quality in domestic airline industry with special reference to LCCs. Specifically the study attempts to measure the:1) Dimension of services valued by the passengers, 2) Satisfaction levels of customers on various dimensions of services, 3) Compare the quality of services on domestic flights of selected airlines in India, 4) Compare service expectations; perceptions and the gaps between them using the SERVQUAL scale, and 5) Investigate the extent of applicability of the SERVQUAL instrument to airline industry in India.

Based on the above objectives, the following relationships were hypothesized: H01: There is no difference in the gap between customers’ perceived and expected service quality vis-à-vis ‘Tangibility - Legacy Support Services’ among different categories of airlines. H02: There is no difference in the gap between customers’ perceived and expected service quality vis-à-vis ‘Tangibility – Additional LCC Support Services’ among different categories of airlines. H03: There is no difference in the gap between customers’ perceived and expected service quality vis-à-vis ‘Tangibility – Flight’ among different categories of airlines. H04: There is no difference in the gap between customers’ perceived and expected service quality vis-à-vis Reliability among different categories of airlines. H05: There is no difference in the gap between customers’ perceived and expected service quality vis-à-vis Empathyamong different categories of airlines.

19 H06: There is no difference in the gap between customers’ perceived and expected service quality vis-à-vis Responsivenessamong different categories of airlines. H07: There is no difference in the gap between customers’ perceived and expected service quality vis-à-vis Assuranceamong different categories of airlines. H08: There is no difference between customers’ expected service quality among different categories of airlines. H09: There is no difference between customers’ perceived service quality among different categories of airlines. H10: There is no difference in the gap between customers’ perceived and expected service quality among different categories of airlines. It is expected that the findings of the study will help the airlines, government and regulating agencies in evaluating the level of existing services being offered by the players as also in deciding on the portfolio of services to be made mandatory in the interest of passengers. Thus, analysis of various dimensions of service could help evolve a model of service parameters that airlines could adopt.

20 RESEARCH METHODOLOGY

 The tool used primarily in the present research was SERVQUAL (Parasuraman et al., 1988, 1991). SERVQUAL is a survey instrument that purports to measure the quality of  service rendered by an organisation along five dimensions: reliability, assurance, tangibles, empathy and responsiveness (RATER). The instrument is viewed as a basic “skeleton” that requires modification to fit airline industry (Sultan et al., 2000; Gilbert et al., 2003; Park et al., 2006).  The gap analysis as per SERVQUAL instrument has been carried out first time across the domestic airline industry in India. SERVPERF analysis has also been simultaneously carried out to provide further insight. Combination of SERVQUAL and SERVPERF instrument makes this study unique in Indian context.  The study was carried out across three categories of airlines: •

Full Service Carriers – Public Sector, which includes Indian Airlines and Alliance Air

•

Full Service Carriers – Private Sector, which includes Jet Airways, Air Sahara and Kingfisher Airlines

•

Low Cost Carriers, which includes Air Deccan, Spicejet, Paramount, IndiGo and Go Air

Questionnaire Design and Measurements

 The questionnaire is primarily based on 22 items of SERVQUAL model. In depth interviews were held with airline staff, airline passengers and academics connected with the aviation industry to develop the questionnaire. In addition, the service quality measures were checked against other independent sources of literature related to service

21 quality. These resulted in the identification of 7 service quality dimensions and 31 measurement items suitable for the airline industry. Tangibility dimension was modified to reflect unique characteristics of airline service industry. The instrument used in the present study for measuring airline service quality encompasses 31 items grouped under seven dimensions is given in Table 2. All the items were measured on a 7 point Likerttype scale. The survey instrument contained questions pertaining to expectation and perception rating for each driver. In addition, the research instrument also had questions related to demographics. Service quality feedback was obtained from passengers and domestic airline staff. Gaps 1 – 4 were measured using quality service audit questionnaire (Messinger 2003) that was filled by staff of the airlines.

Pilot Study

 The main study was preceded by a pilot study in order to check for appropriateness of the items used in the study. A convenience sample of passengers who had recently traveled by air was used. The pilot study was carried out in two stages. Stage I: In all 65 questionnaires were distributed to passengers to check for clarity of the measurement items. Passengers were asked to complete the questionnaire and also give overall comments about the questionnaire. A total of 45 passengers responded. Based on the feedback, the questionnaire was revised. Stage II: The revised survey questionnaire was tested a second time using 75 passengers who had used domestic airline service during the last 12 months. In total, 66 individuals responded. The revised survey questionnaire was then used on the final sample.

22  Table 2: Instrument for Measuring Airline Service Quality

Service Quality Parameters  Tangibility – L egacy Support Services 1 2 3

Visually Appealing Physical Facilities Vast Sales and Support Network Vast Network of Destinations

Abbreviation VAPF VSSN VND

 Tangibility – Additional L CC Support Services 4 5

Economical Airfare and Discount Schemes Web-site and Call Center usage

EADS WCCU

 Tangibility – Flight 6 7 8 9 10 11 12

Modern Aircraft with up-to-date Facilities Neat Well Dressed and Visually Appealing Staff Seat in Flight of Choice Hassle freeCheck-in and Boarding Efficient BaggageHandling Mechanism Excellent Quality In-Flight Services Multiple Meal Options of High Quality

MAUF VAS SFC HCB EBHM EQIS MMO

Reliability 13 14 15 16 17

Special Need Customers Problems due to Critical Incidents Meet Time Commitment Keep Error FreeRecords Perform Service right thefirst time

SNC PCI MTC EFR PSRF

Responsiveness 18 19 20 21 22

Prompt Service to Customers Always Willing to Help Customers Staff Behavior should Instill Confidence Keep Customer informed about time of Service Staff never too busy to respond to customer's request

PSC AWHC SBIC CITS SNB

Assurance 23 24 25 26

Safe Planes and Facilities During Journey Consistently Courteous Staff Knowledge to Answer Customers' Queries Individual Attention to Customer

SPF CCS KACQ IAC

Empathy 27 28 29 30 31

Staff gives Personal Attention to Customer Customer's Best Interest at Heart Understand Specific Needs of Customers Convenient Flight Schedules Overall Satisfaction with the Airline

PAC CBIH USNC CFS OSA

23 Data and Sampling

Illustrative data was mainly obtained from real airline passengers at domestic terminals at Indira Gandhi International Airport, Delhi (IGIA); Sardar Vallabhbhai Patel International Airport at Ahmedabad; Chatrapati Shivaji International Airport at Mumbai and Bangalore Airport. It should be noted that the airports covered are the busiest in their respective sectors and thus expected to provide an unbiased representative sample. In all, 1081 passengers were randomly approached during the months of March 2006 – Feb 2007. Of these, 477 agreed to participate in the study. During editing phase of the questionnaires, it was observed that 57 responses were incomplete in various respects and thus had to be discarded. This resulted in a total of 420 responses. It included 171 FSC – Public, 169 FSC – Private and 80 LCC passengers. Of these, New Delhi accounted for around 40%, Mumbai 30%, Bangalore 20% and Ahmedabad 10%. Most of the respondents were Indian. Table 3 gives thedemographic profile of the respondents.

24  Table 3: Demographic Profile - Passenger Dimension

Male Female Age Group Less than 21 21 to 40 41 to 60 Above 60 Graduation or Below Highest Qualification Post Graduation Professional Occupation Self Employed Employed (PrivateSector) Employed (Govt/ Public Sector Others Less than 0.5 Million Annual I ncome 0.5 – 1.0 Million Bracket 1.0 – 2.0 Million Above 2.0 Million Less than 1 Y ear Since how long Flying 1 - 5 Y ears 5 – 10 Y ears More than 10 Y ears Domestic 1– 5 Flights in last 6 – 10 1 Year 10 – 20 Above 20 Frequent No Flyer  Y es Member  Travel to No I nternational Y es Sector  Total Gender

Primary Airline Total FSC – FSC – L CC Public Private

148 23 1 101 66 3 32 67 72 16 60 76

143 26 2 125 40 2 35 70 64 15 105 33

70 10 5 61 14 0 27 25 28 13 53 7

361 59 8 287 120 5 94 162 164 44 218 116

19 104 48 14 5 6 62 32 71 102 38 17 14 115 56

16 75 64 17 13 6 84 32 47 92 34 26 17 109 60

7 51 22 5 2 7 49 11 13 51 22 5 2 62 18

42 230 134 36 20 19 195 75 131 245 94 48 33 286 134

73 98

73 96

54 26

200 220

171

169

80

420

25 A non-probability sampling design was used to collect the data from staff who were approached individually during their rest periods for the feedback. Of the 218 questionnaires distributed, 72 were returned. A total of 15 questionnaires were rejected as they were incomplete in various respects. This resulted in 57 usable responses. Table 4 gives the demographic profile of the respondents.

 Table 4 Demographic Characteristics – Airline Staff  Dimension

Primary Airline  Total FSC FSC Public PRIVATE LCC Male 16 15 11 42 Gender Female 4 7 4 15 Age Group Less than 30 2 15 13 30 30 to 40 8 4 1 13 41 to 50 4 3 1 8 Above 50 6 0 0 6 Highest Graduation or Below 6 11 12 29 Qualification Post Graduation 3 6 3 12 Professional 11 5 0 16 Duration in Less Than 1 Y ear 0 7 4 11 Present 1 to 5 Y ears 2 9 11 22 Airline 5 to 10 Y ears 1 6 0 7 More than 10 Y ears 17 0 0 17 Functional Passenger Services 7 9 14 30 Area In Flight Services 5 10 0 15 Support Services 8 3 1 12 L evel in the  Junior Management 4 15 10 29 Organization Middle Management 13 7 5 25  Top Management 3 0 0 3 Less than 5 8 10 7 25 Staff  Reporting to 5 to 10 5 8 3 16  Y ou 11 to 50 4 1 2 7 More than 50 3 3 3 9 20 22 15 57  Total

26  The responses were analyzed using SPSS, LISREL and MS-Excel 2000 spreadsheet program. Appropriate statistical tools like EFA, CFA, cross tabulation and one-way ANOVA have been applied on the data collected for the study.

FI NDINGS AND DI SCUSSI ON – CUSTOM ER SERVI CE

 The validity and reliability analyses of SERVQUAL were conducted as part of the study to determine the extent of the applicability of the dimensions of SERVQUAL to this study.

Validity Analysis

Face validity, a subjective criterion reflecting the extent to which scale items are meaningful and appear to represent the construct being measured, has been explicitly assessed a priori in most studies (Babakus et al 1992; Carman, 1990; Parasuraman et al., 1988). In the instant case too, extensive discussions were held with airline executives, passengers and academicians who reviewed the questionnaire and confirmed that modified SERVQUAL - with minor wording changes in few items - had face validity. After evaluation of the questions they judged that all questions were appropriate to be used in measuring passengers’ attitudes about service quality of domestic airlines in India. Factor analysis was conducted on perceived performance scores (P) and gap between perceived and expected service quality scores (G), using principal component analysis with varimax rotation (Table 5). Items for perception and gap loaded on five factors each.

27  The validity of the “classical” five-dimensions SERVQUAL is still an unresolved issue when applied to studying airline service quality. The items related to expectations and perceptions might be too general for such a study. Also, the fact that passengers are required to respond to both expectations and perceptions of service quality at the same time could affect the instrument’s validity and reliability.

28  Table 5: Factor Analysis on Perception (P) and Gap (G) Service Quality Parameters 1

2

Visually Appealing Physical Facilities Vast Sales and Support Network Vast Network of Destinations Economical Airfare and Discount Schemes Web-site and Call Center usage Modern Aircraft with up-to-date Facilities Neat Well Dressed and Visually Appealing Staff  Seat in Flight of Choice P, G Hassle free Check-in and Boarding P, G Efficient Baggage Handling Mechanism P, G Excellent Quality In-Flight Services P, G Multiple Meal Options of High Quality P, G Special Need Customers P, G Problems due to Critical Incidents P, G Perform Service right the first time P, G Meet Time Commitment P, G Keep Error FreeRecords P, G Keep Customer informed about time of Service P, G Prompt Service to Customers P, G Always Willing to Help Customers P, G Staff never too busy to respond to customer's request P, G Staff Behavior should Instill Confidence P, G Safe Planes and Facilities During J ourney P, G Consistently Courteous Staff  P, G Knowledgeto Answer Customers' Queries P, G Individual Attention to Customer P, G Staff gives Personal Attention to Customer P, G Customer's Best Interest at Heart P, G Understand Specific Needs of Customers P, G Convenient Flight Schedules G Extraction Method : Principal Component Analysis. Rotation Method : Varimax with Kaiser Normalization. Rotation iterations for both Perception and Gap.

3

4

P, G P, G P, G P, G P, G P, G P, G

P

converged in 6

29 Reliability Measures

 To assess reliability, Cronbach’s alpha was used. Cronbach’s alpha is the average of all possible split-half coefficients resulting from different ways of splitting the scale items and a value of 0.6 or less generally indicates unsatisfactory consistency reliability (Malhotra 2005). Reliability analysis was conducted for perception and gap on each category of airline and reliability values were calculated for each dimension of  SERVQUAL. The reliability value for SERVQUAL as a uni-dimensional instrument was high in all cases. The Cronbach’s alphavalues for each measure are presented in Table 6.  Table 6 Reliability of SERVQUAL Dimensions Cronbach's AL PHA PERCEPTION Overall ( 30 Items ) 0.964  Tangible – Legacy Support Services ( 3 Items ) 0.695  Tangible – New Support Services ( 2 Items ) 0.685  Tangible – Flight ( 7 Items ) 0.873 Reliability ( 4 Items ) 0.878 Responsiveness ( 5 Items ) 0.921 Assurance ( 4 Items ) 0.891 Empathy ( 4 Items ) 0.832

GAP 0.955 0.660 0.660 0.845 0.863 0.896 0.864 0.799

Confirmatory factor analysis was conducted using LISREL 8.5 to validate the relationship between observed and the latent variables. The results of CFA suggested that the seven dimension conceptualization fitted the data for Indian domestic passengers (Table 7).

30  Table 7: Confirmatory Factor Analysis Summary Goodness of Fit Statistics PERCEPTION Degrees of Freedom 384 MinimumFit Function Chi-Square 1246.665 (P =0.0) Root Mean Square Error of Approximation (RMSEA) 0.0760 Normed Fit Index (NFI) 0.972 Non-Normed Fit Index (NNFI) 0.978 Comparative Fit Index (CFI) Root Mean Square Residual (RMR) Standardized RMR Goodness of Fit Index (GFI) Adjusted Goodness of Fit Index (AGFI)

GAP 384 1127.628 (P =0.0) 0.0694 0.968 0.976

0.981 0.110 0.0552 0.827 0.791

0.979 0.131 0.0527 0.844 0.811

PERFORMANCE OF AIRL INES ON VARI OUS SERVI CE PARAMETERS

 The performance of the airlines on various service parameters was analyzed and the same is presented below: a)  Tangibility – L egacy Support Services

FSC – Public has the biggest network of destinations. It also has vast sales & support network. FSC – Private have visually appealing physical facilities. Gap was highest in case of LCC for network of destinations. Airline staff exhibited higher perception of customer’s expectation across all the airlines. Passengers expected LCCs to fly to more destinations. b)  Tangibility – Additional L CC Support Services

LCCs were rated high on economical airfares and use of website/call center. Passengers expected more discount and economical airfares in case of full service carriers. c)  Tangibility – Flight Passengers had high perception regarding the quality of in-flight service of private airlines. Gap regarding aircraft quality and facilities available was high in case of FSC –

31 Public as the aircrafts are quite old, especially those used by Alliance Air. Passengers were not satisfied with the quality of food provided during the flight. I nterestingly, the gap was also high for LCC vis-à-vis in flight meal options, even though the LCC guidelines are quite clear regarding non-supply of meals to the passengers. Passengers were clearly not satisfied with baggage handling procedure of L CCs. FSC - Private and LCC staff was perceived to be neat and good looking. FSC – Private customers expected more from the airlines. They wanted better quality service during check-in and baggage handling. They desired seat of choice and better quality meals during the flight. FSC – Public passengers expected more with respect to in-flight services. d) Reliability

Gap was high in case of reliability of service for LCCs. Respondents were not satisfied with their service in case of special needs, problems due to critical incidents 1 and their inability in meeting time commitments. The service of FSC – Public was also perceived to be poor during the critical incidents. The general perception was that FSC – Private keep error free records and performed service right the first time. During critical incidents, FSC – Private customers expect airline to provide better service. FSC – Public passengers have higher expectation from the airline to meet time commitment. Private airline’s (both FSC and LCC) passengers expect airlines to keep error free records.

1

Negative customer encounters, which do not proceed normally but create friction, irritation and dissatisfaction. According to Edvardsson (1992) the major critical incidents in the view of business passengers are delays, cancelled flights, delayed or damaged luggage and overbooking.

32 e) Empathy

Gap between passenger’s expectation and perception was high for LCC on all the parameters, namely, staff giving personal attention to customer, airline having customer's best interest at heart; staff attending to specific needs of customers, and convenient flight schedules. It is worth mentioning that LCCs started operations in India during the last few years and their fleet size is not big. To extract maximum revenue, they tend to fly aircraft for longer durations leading to inconvenient flight schedules and inconvenience to passenger in case of any snag in aircraft. Overall, all airlines scored low on empathy. FSC – Private passengers expect airline staff to have customer’s best interest at heart. Passengers expect FSC to provide more convenient flight schedules. f) Responsiveness

LCCs were unable to provide prompt service to customers perhaps due to low staff to passenger ratio owing to rapid expansion in their operations. At Delhi airport, the number of counters available to them are few (and small) leading to congestion and delay in service to customers. Most of the LCC passengers are first time flyers and consequently they have high anxiety regarding when service will be performed. L CCs have not been able to keep pace with their expectations. The perception was that FSC – Private provides prompt service to customers and that their staff was always willing to help customers, and they keep the customer informed about the time of service. Overall, FSC – Private scored high on responsiveness. Passengers expect FSC – Private staff to meet their requirements and provide prompt service.

33 g) Assurance

Findings suggest that LCC staff were poorly trained to answer customers’ queries. In fact, most of the passenger handling staff is freshly recruited and at times they find it impossible to handle all the passenger queries. They also do no have adequate staff to provide individual attention to customers. The first time flier, who probably is paying beyond his means, expects higher level of personal attention, which, unfortunately for him, is not a part of package. FSC – Private scored high on assurance. FSC – Public and LCC staff was expected to provide more individual attention to the customer. Customer’s also expected FSC – Private staff to have more knowledge to answer their queries.

Overall, airline’s have higher perception of customer’s expectation. However, customer expect FSC – Private to provide even higher level of service in case of tangibility – additional LCC support services, tangibility – flight, reliability and responsiveness. A summary of the above findings is presented in Table 8 given below:

34

 Table 8: Airlines’ Performance on Service Parameters Service Quality Dimension  Tangibility – Pax L egacy Support Staff  Services Gap  Tangibility – Pax Additional L CC Staff  Support Services Gap  Tangibility – Pax Flight Staff  Gap Reliability Pax Staff  Gap Empathy Pax Staff  Gap Responsiveness Pax Staff  Gap Assurance Pax Staff  Gap Overall

Pax Staff  Gap

FSC – Public E P G 6.064 5.213 -0.851 6.483 5.717 -0.766 -0.419 -0.504 -0.085 6.368 4.714 -1.654 6.525 6.15 -0.375 -0.157 -1.436 -1.279 6.17 4.62 -1.55 6.39 5.04 -1.35 -0.22 -0.42 -0.2 6.31 4.66 -1.65 6.47 5.33 -1.14 -0.16 -0.67 -0.51 6.15 4.65 -1.5 6.36 5.21 -1.15 -0.21 -0.56 -0.35 6.27 4.63 -1.64 6.53 5.06 -1.47 -0.26 -0.43 -0.17 6.18 4.81 -1.37 6.39 5.03 -1.36 -0.21 -0.22 -0.01

6.21 6.44 -0.23

4.72 5.26 -0.54

-1.49 -1.19 -0.3

FSC – Private E P G 5.97 5.209 -0.761 6.288 5.5 -0.788 -0.318 -0.291 0.027 6.432 5.039 -1.393 6.386 5.296 -1.09 0.046 -0.257 -0.303 6.22 5.11 -1.11 6.08 5.55 -0.54 0.14 -0.44 -0.57 6.43 5.07 -1.35 6.36 5.51 -0.85 0.07 -0.44 -0.5 6.24 5.01 -1.23 6.26 5.51 -0.75 -0.02 -0.5 -0.48 6.34 5.15 -1.2 6.28 5.64 -0.65 0.06 -0.49 -0.55 6.28 5.26 -1.02 6.38 5.67 -0.7 -0.1 -0.41 -0.32

6.27 6.27 0.00

5.12 5.55 -0.43

-1.15 -0.72 -0.43

E 6.008 6.422 -0.414 6.563 6.633 -0.070 6.03 6.45 -0.42 6.29 6.43 -0.14 6.16 6.45 -0.29 6.23 6.39 -0.16 6.16 6.33 -0.17

L CC P 4.546 5.756 -1.210 5.494 6.633 -1.139 4.37 5.33 -0.96 4.57 5.65 -1.08 4.55 5.75 -1.2 4.59 5.53 -0.94 4.67 5.53 -0.86

G -1.462 -0.666 -0.796 -1.069 0 -1.069 -1.65 -1.11 -0.54 -1.71 -0.77 -0.94 -1.61 -0.7 -0.91 -1.64 -0.85 -0.79 -1.49 -0.8 -0.69

E 6.016 6.392 -0.376 6.431 6.5 -0.069 6.16 6.29 -0.13 6.35 6.42 -0.07 6.19 6.35 -0.16 6.29 6.4 -0.11 6.21 6.37 -0.16

Overall P 5.084 5.643 -0.559 4.993 5.947 -0.954 4.77 5.31 -0.54 4.81 5.49 -0.68 4.78 5.47 -0.69 4.83 5.41 -0.58 4.96 5.41 -0.45

G -0.932 -0.749 -0.183 -1.438 -0.553 -0.885 -1.39 -0.98 -0.41 -1.54 -0.93 -0.61 -1.41 -0.88 -0.53 -1.46 -0.99 -0.47 -1.25 -0.96 -0.29

6.17 6.43 -0.26

4.6 5.63 -1.03

-1.57 -0.8 -0.77

6.23 6.37 -0.14

4.86 5.47 -0.61

-1.37 -0.9 -0.47

L egend: Expectation: E; Perception: P; Gap: G; Pax: Passenger

35 Reasons for Gaps Gap 1 (Consumer Expectation – Management Perception Gap). 5 items

LCCs do not undertake market research or utilize its findings. The regular interaction with customers is also low in their case. FSC – Public, because of its size and legacy procedures, is not able to disseminate information to all levels. The staff agreed that levels of management inhibits communication with the customers. Gap 2 (Management Perception – Service Quality Specification Gap). 17 items

FSC – Public scores lowest on most of the parameters as there are no clear goals for customer service, no mechanism to measure performance against these goals and there is

35 Reasons for Gaps Gap 1 (Consumer Expectation – Management Perception Gap). 5 items

LCCs do not undertake market research or utilize its findings. The regular interaction with customers is also low in their case. FSC – Public, because of its size and legacy procedures, is not able to disseminate information to all levels. The staff agreed that levels of management inhibits communication with the customers. Gap 2 (Management Perception – Service Quality Specification Gap). 17 items

FSC – Public scores lowest on most of the parameters as there are no clear goals for customer service, no mechanism to measure performance against these goals and there is no reward to improve service quality. For LCC’s, sales goals are more important than customer service. Gap 3 (Service Quality specification – service delivery Gap). 16 items

Here also FSC – Public score low on most of the parameters. The staff is neither empowered to deliver service, nor do they have the decision making freedom. There is also no reward for better customer. Staff feels that they spend more time resolving problems that they have little control over. Gap 4 (Service Delivery – External Communications Gap). 5 items

FSC – Public customer service staff do not have input in planning and execution of  advertising, nor are they aware of external communication to customers. Their staff feels that external communication does not accurately reflect what customers receive in the service encounter.

36 RESUL TS OF HY POTHESES TESTI NG

One-way ANOVA test for independent samples were conducted at significance level of  0.05 to test the null hypotheses. To gain deeper insight, the same was checked for different sub groups too i.e. Tangible Support Services, Tangible Flight, Reliability, Empathy, Responsiveness and Assurance. It was observed that there is no difference between customers’ expected service quality among different categories of airlines. However, passengers were found to have significantly higher perception of service quality for FSC – Private as compared to FSC – Public and LCC’s. Findings also indicate difference in the gap between customers’ perceived and expected service quality among different categories of airlines for all dimensions. Table 9 presents the results of ANOVA test.

37  Table 9: Results of One Way ANOVA Hypotheses N H01 Gap between customers’ perceived and expected service quality (Tangibility – Legacy Support Service) – AirlineCategory H02 Gap between customers’ perceived and expected service quality (Tangibility – Additional LCC Support Service) – Airline Category H03 Gap between customers’ perceived and expected service quality (Tangibility - Flight) – A irline Category H04 Gap between customers’ perceived and expected service quality (Reliability) – Airline Category H05 Gap between customers’ perceived and expected service quality (Empathy) – Airline Category H06 Gap between customers’ perceived and expected service quality (Responsiveness) – Airline Category H07 Gap between customers’ perceived and expected service quality (Assurance) – AirlineCategory H08 Customers’ expected service quality - AirlineCategory H09 Customers’ perceived service quality – AirlineCategory H10 Gap between customers’ perceived and expected service quality – Airline Category

Homogeneity of  Variances Std. Std. L evene Sig. Dev. Error Statistic

Descriptives Mean

ANOVA F

Sig.

Interpre tation

420 -0.932 1.171 0.057 0.741 0.477 10.897 0.000 Rejected

420 -1.438 1.294 0.631 3.420 0.034 5.897 0.003 Rejected

420 -1.393 1.199 0.059 3.380 0.035 8.329 0.000 Rejected

420 -1.545 1.262 0.062 3.182 0.043 3.330 0.037 Rejected

420 -1.410 1.201 0.059 2.942 0.054 3.567 0.029 Rejected

420 -1.460 1.315 0.064 5.915 0.003 5.860 0.003 Rejected

420 -1.252 1.298 0.063 4.231 0.015 4.920 0.008 Rejected

420 6.230 0.677 0.033 0.464 0.629 0.690 0.502

Not Rejected

420 4.860 1.000 0.049 2.426 0.090 10.548 0.000 Rejected 420 -1.370 1.038 0.051 4.194 0.016 6.561 0.002 Rejected

Hypotheses H04 and H05 significant at p=0.05 while others were significant at p=0.01.

38 MANAGERIAL IM PLI CATIONS

 This paper provides some practical implications for airline marketing managers. The analysis shows that the dimensions of Tangibility (Legacy Support Service, Additional LCC Support Service and Flight) were significant drivers of customer service. Airline marketers should realize that improvements in these three factors would enhance passengers’ repurchase intention and their recommendation to other passengers via a favorable airline image. In addition, airline marketers should develop strategies to improve service quality such as meeting passengers’ desired service levels, improving the quality of in-flight meal, solving service problems effectively and immediately, making convenient schedules for passengers, preventing service problems from occurring and so on. These strategies will enhance airline image and result in retaining existing passengers and enticing passengers from other airlines. Reliability is one of the most important requirements of airline operations (Sultan et al 2000). Even a minor slip in reliability leads to the formation of a negative airline image.  Therefore, domestic airlines should strive to keep a good safety record and on time performance in order to attract potential passengers.  The study provides justification to the belief that differences exist in consumer perceptions and expectations based on airline categories. Although it is understood that practitioners had used the SERVQUAL model in various countries, it represents the first use of the model across airline categories in India. The study provides empirical evidence for the expectations and perceptions differences that may be expected in service quality and may significantly impact airlines. Airline passengers have different expectations for airline service quality based on airline category, as well as perceiving the service quality

39  Table 10 : Top Three Service Parameters* for Different Customer Profile  Total

FSC - Public Airline Category FSC - Private LCC Gender Age Group

Male Female Less than 21 21 to 40 41 to 60 Above 60

Expectations

Annual Income Bracket

Self Employed Employed (Private Sector) Employed (Govt/ Public Sector Others Less than 0.5 Million 0.5 – 1.0 Million 1.0 – 2.0 Million Above 2.0 Million

Since how Less than 1 Year long 1 - 5 Years Flying 5 – 10 Years

VND, VSSN, SPF PCI, MAUF, MTC VAS, SPF, CCS EADS, PCI, MTC 169 PCI, SPF, SNC 80 WCCU, EADS, SPF WCCU, EADS, VAS MMO, PCI, EBHM 361 SPF, SNC, PCI 59 EADS, PCI, HCB

Above 20 Class of   Travel

Economy Business

Frequent No Flyer  Y es Member  Travel to No Internatio  Y es nal Sector Parameters Overall

Overall Dimensions

SPF, VSSN, VAS VAS, VND, CCS

8 SPF, WCCU, CFS

WCCU, VAS, SNC VSSN, SPF, VND 287 SNC, EADS, SPF SPF, VAS, CCS 120 SPF, PCI, EBHM 5 EADS, VAS, EBHM WCCU, VND, MAUF

PCI, MTC, SNC MTC, PCI, EADS PCI, MMO, MTC PCI, MTC, SNC PCI, AWHC, EBHM PSRF, CITS, SNB

WCCU, VA S, HCB VSSN, SPF, VAS SPF, VND, VAS

PCI, MTC, SNC PCI, MTC, AWHC MTC, PCI, EBHM

218 SPF, EADS, PCI

WCCU, VAS, SPF SPF, VA S, VSSN

MTC, MMO, EBHM PCI, MTC, EADS

116 SNC, SPF, EBHM

VND, VSSN, SPF

PCI, SNC, EBHM

44 MAUF, SNC, PCI

42 EADS, EBHM, PCI VND, CCS, SPF 230 EADS, SNC, PCI

VAS, SPF, CCS SPF, VND, VSSN 134 PCI, EBHM, SPF 36 SPF, MAUF, EBHM VSSN, EFR, SPF CFS, VND, VAS 20 SPF, SNC, PCI 19 CFS, KACQ, SPF 195 PCI, EADS, SNC 75 SPF, SNC, EADS

More than 10 Years 131 EBHM, SPF, HCB Domestic 1 – 5 Flights in 6 – 10 last 1 Year 10 – 20

Gap

171 SPF, SNC, PCI

Graduation or Below 94 SNC, SPF, PCI Highest Qualifica- Post Graduation 162 EADS, SPF, PCI tion Professional 164 SPF, PCI, EBHM Occupation

Perceptions

245 EADS, SPF, PCI 94 SNC, PCI, HCB 48 SNC, MAUF, SPF 33 SNC, MAUF, SPF

PCI, MTC, EADS PCI, SNC, MTC MTC, PCI, CBIH PCI, EBHM, MTC MTC, SNC, AWHC

VAS, EFR, SBIC VAS, SPF, WCCU SPF, VSSN, VAS SPF, VND, VSSN

MMO, MTC, KACQ PCI, MTC, MMO PCI, AWHC, MTC PCI, MTC, EADS

VAS, SPF, CCS VND, VSSN, SPF SPF, VAPF, VAS SPF, VSSN, VND

MTC, PCI, SNC PCI, HCB, MTC PCI, MTC, EBHM PCI, MTC, MAUF

SPF, SNC, PCI SPF, VAS, VSSN MTC, CCS, MAUF VSSN, CFS, SPF 286 SPF, PCI, EADS

PCI, MTC, SNC SBIC, MTC, EFR

VA S, SPF, VSSN 134 SNC, EBHM, HCB SPF, EFR, VAS

PCI, MTC, SNC EBHM, PCI, MTC

200 EADS, PCI, SPF 220 EBHM, SPF, SNC

VAS, WCCU, SPF VND, VSSN, SPF

PCI, MTC, MMO PCI, MTC, EBHM

420 SPF, PCI, EADS

SPF, VAS, VSSN

PCI, MTC, EBHM

7 T-AL SS, REL ,  T-L SS, T-AL SS, REL , RESP, RESP ASS  T-AL SS * Refer table 2 for parameter description

40 of airlines to vary in terms of SERVQUAL model features and overall service quality.  Table 10 gives top three service parameters for different customer profile.  The findings exemplify that merely excellent perceived service quality is insufficient to develop long-term service loyalty without investigating the mediating effect of customer satisfaction. Passengers expect airline to ensure safe journey, support to mitigate problems due to critical incidents and meet time commitments. Thus, service managers should ensure that the performance on all components of delivered service is perceived as excellent by customers and also sustain high levels of satisfaction. In order to meet this objective, service staff must be well trained for keeping good relationship with customers and for addressing customers’ enquires. As suggested from the measure of perceived service quality, besides the quality of interactions between service staff and customers, physical outcomes are also important and need to be well managed. L IMI TATI ONS AND FUTURE RESEARCH DIRECTI ONS

 The major limitations of this study are as follows: a)  This study was limited to airlines services in a specific domestic market, i.e. India. b)  The study was conducted on a limited number of flights. c) Collecting respondents’ data on expectations and perceptions of service quality at the same time could have compromised the reliability of the data.  The nature of this research precluded airlines renowned for service quality internationally and which do not compete on the designated routes, e.g. Singapore Airlines, Cathay Pacific, and Emirates. As future growth for airlines competing internationally is forecast to rise in Asia in general and India in particular, studies of service quality issues encompassing such airlines and the influence of regional cultures need to be explored.

41 CONCLUSIONS

In India, the domestic airline industry has entered into 2nd phase of liberalization with the entry of LCCs. There is a growing competition amongst airlines to provide better quality services to passenger at economical air-fares. Technology is also being extensively used to improve customer satisfaction. Analysis of data revealed that items for perception and gap loaded on four factors each.  The validity of the “classical” five-dimensions of SERVQUAL could not be resolved for service quality in case of domestic airlines. The reliability value for SERVQUAL as a unidimensional instrument was high. In the context of customer service vis-à-vis Full Service Carrier – Public Sector, Full Service Carrier – Private Sector and Low Cost Carriers, expectations were significantly high for tangibility – additional LCC support service, reliability and responsiveness. Service quality perceptions were low for tangibility – flight and empathy, especially in case of Low Cost Carriers. Gap between perceptions and expectations were observed to be highest for L ow Cost Carriers. Overall, reliability of service was an areaof concern for passengers across all categories of airlines.  There was no difference between customers’ expected service quality among different categories of airlines. However, there was difference between customers’ perceived service quality. As a result, gap was also observed between customers’ perceived and expected service quality among different categories of airlines. Dimensions of Tangibility (Legacy Support Service, Additional LCC Support Service and Flight) and Reliability were significant drivers of customer service. Passengers

42 expected airlines to ensure safe journey, offer support to mitigate problems due to critical incidents and particularly meet time commitments.

 J EL classification: M31, L93, N75 K ey words: Customer Satisfaction, Airline, Customer Service, SERVQUAL, India, Civil

Aviation,

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