The Airline Industry Is A Large Growing Industry

1.1. Introduction

The airline industry is and remains a large and growing industry. It facilitates economic growth, world trade, international investment and is a vital component of the leisure/tourism industry. It represents one of the biggest industry worldwide and is expected to generate net profits of US$ 8.9 billion this year, far up from the previous forecast of US$ 2.5 billion, further to the world economic crisis. (IATA, September 2010). Mauritius has also beneficiated from this industry. Indeed, the country has seen its tourism sector expand considerably through the last 30 years, and has even emerged as one of the best performing tourist destinations in Africa through the last decade. The figures obtained from the Central Statistics Office clearly show it: from 103,000 arrivals in 1977, to 989,913 in 2005, and even more in 2008.

This increase is largely due to growth in the number of airlines serving the country in the last decade: Emirates Airlines, Corsair (Since October 2006, L’Express, 29 Jan 2006), Eurofly (Since January 2007 – L’Express, 05 Jan 2007), Virgin Atlantic Airways (From October 2007 to April 2010, L’Express, 02 January 2010), and lately, since the 02nd November 2010, Edelweiss Air, a swiss airline proposing non-stop flights between Mauritius and Zurich (L’Express, 02 November 2010).

Today, Mauritius has even greater ambitions as regards to tourist arrivals; indeed, the government’s vision is to attain 1 Million tourists this year (L’Express, 23 February 2010). Although the Central Statistics Office report indicate figures slightly under – 915,000 according to their predictions. To reach this figure, Air Mauritius has engaged into negotiations with China in order to offer a direct flight to Shanghai (L’Express, 10 September 2010), while a new airline will soon be operation in the Mauritian skies: Transaero, which will offer direct flights to Moscow (www.transaero.ru). Emirates Airlines, which is present in Mauritius since 2002, has increased its number of flights to Mauritius – although they were already flying daily to the country – to nine weekly flights (Le Gekko Info ltd, 29 April 2009)

With such an expansion, several questions can be asked: what is the opinion of the customers when it comes to the services offered in that industry? Are they satisfied? Is the service quality offered a determinant factor of their level of satisfaction? And what about the Mauritians? How do they perceive the service quality offered by their national carrier? What is the perception of Air Mauritius customers’ as regards to the service quality offered by the airline?

To reply to those questions, it is important to understand the dynamics of the industry from the perspective of the customer who is the final arbiter of how much to spend and with which airline. Therefore, an understanding of the factors that influence customer satisfaction is useful in guiding airline directors and managers to design and deliver the right service. For the purpose of this dissertation, emphasis will be laid on the quality of service offered by the national carrier, Air Mauritius. Passengers having experienced their services’ will be interviewed so as to understand their perception of service quality, and the importance they attribute to it. These will be assessed using the SERVQUAL model (Parasuraman et al,1985,1988,1991,1994.).

1.2. Conceptual Framework

Service quality is generally recognised as a critical success factor in a firm’s objectives to differentiate itself from its competitors. Indeed, research has shown that good service quality leads to customer satisfaction, existing customer retention and attraction of new ones, reduced costs, enhanced corporate image, positive word of mouth recommendation, and ultimately, enhance profitability. (Berry et al, 1989; Reichler and Sasser, 1990; Rust and Zahorik, 1993; Cronin et al, 2000; Kang and James, 2004; Yoon and Suh, 2004.)

Today, competition is becoming more intense constantly. In order to face it, companies need to pay particular attention to their competitors and, more importantly, to their customers. Airlines are also suffering from such competition. It is vital for them to believe customers as being the core concept of their business; as customer satisfaction is what guarantees their future. With the emergence of several ‘Low Cost’ airlines worldwide – which focus mainly on providing cheap air tickets to travellers, the other ones don’t have any other choice but to focus on their service quality and their value added services to overcome the threat of losing customers.

Maintaining a high level of satisfaction is achievable by ensuring a strong coherence between the services provided and the customer’s expectations. Successful service quality strategies are generally characterised by customer segmentation, customised service, guarantees, continuous customer feedback and comprehensive measurement of company performance.

Mauritius, being a popular destination, is also concerned by this competition. After a fall last year, the number of tourist arrivals has increased this year – 591,153 from January to June, representing an increase of 7% compared to the same period in 2009 (CSO, August 2010.) – and based on these figures, the forecast of 915,000 tourist arrivals for the year 2010 is maintained, representing an increase of 5% over the figure of 871,356 in 2009. Although these figures are very positive for the development of the tourism industry; and that the island remains a ‘tropical paradise’ to many; the government’s expectations are high with regards to the possibility of increasing the number of tourist arrivals per year to 1 million in the near future and it is essential for Mauritius to remain competitive.

In this view, it is vital for the national carrier, Air Mauritius, to achieve and maintain a good reputation in terms of service quality. Being the official carrier of the island, Air Mauritius faces severe competition – Several well-established international airlines, whose reputation no longer have to be doubted – British Airways, Air France and Emirates Airlines, amongst others – also serve the island. What has to be borne in mind is that, in the service industry, every interaction between a customer and a service provider is a ‘moment of truth’. Customers tend to compare their expectations about the service to be provided to the perceptions of the service. Customer dissatisfaction thus results from the difference between those expectations and the perceived service. The more perceived service exceeds the expected service, the higher consumer satisfaction will be, and, inversely, the more perceived service falls short of expected service, the higher the customer dissatisfaction.

The concept of customer satisfaction has drawn the interest of academics for more than three decades due to the fact that customers are the primary source of most firms’ revenue. Churchill and Surprenant (1982) define customer satisfaction as an outcome of purchase and use resulting from buyers’ comparison of the rewards and cost of purchase in relation to the anticipated consequences; while Oliver (1997) defines it as “ (…) the customer’s fulfilment response. It is a judgment that a product or service feature, or the product of service itself, provided (or is providing) a pleasurable level of consumption-related fulfilment, including levels of under – or over – fulfilment…”

The purpose of this proposed study is to provide an understanding of how the different perceptions that customers have of service quality affect their evaluation of the latter. Furthermore, another of this study’s aim is to determine whether the level of satisfaction of passengers is directly affected by the service quality offered by the airline – here Air Mauritius. It will also help to determine what could be the ameliorations to bring to the services offered by the national carrier in order to ensure a good level of customer satisfaction.

2. Literature Review.

2.1 Service Quality

Customer Satisfaction is believed to be, by many organizations, a key element to their success. Though it is an agreed fact, measuring its level can be a hard task to achieve. This is why research on customer satisfaction is often closely linked to the measurement of service quality. (Anderson and Sullivan, 1993; Cronin and Taylor, 1992; Bitner and Hubbert, 1994; Taylor and Baker, 1994; Rust and Oliver, 1994; Levesque and McDougall, 1996). Quality is one of the most important purchase decision factors that influence the customers’ buying decisions. Furthermore, it can be of strategic importance as its benefits can contribute to market share and return on investment. (Anderson and Zeithaml, 1984; Philips, Chang and Buzzell, 1983). It has also been observed that service quality has an apparent relationship to costs (Crosby, 1979), customer satisfaction (Bolton and Drew, 1991; Boulding et al, 1993.) and customer retention (Reichheld and Sasser, 1990.). However, different schools of thought exist on to whether customer satisfaction is an antecedent or consequence of service quality.

Indeed, it has been argued that service quality is a global assessment about a service category or a particular organisation. (Parasuraman et al, 1988.). Research illustrated situations where the participants were satisfied with a specific event, but did not feel the organization offered overall service quality. (Parasuraman et al, 1985.). Because most evaluations of customer satisfaction relate

to that of a specific service, customer satisfaction is viewed as it relates to a specific transaction (Howard and Sheth, 1969; Hunt, 1970.) Hence, incidents of satisfaction over time result in perceptions of service quality. (Parasuraman et al, 1988.). Oliver (1981) stated that satisfaction decays into one’s overall attitude. From this perspective, service quality could be viewed as the whole family picture album, while customer satisfaction is just one snapshot. (Andaleeb and Conway, 2006).

Recently, however, Zeithaml and Bitner (2003) have argued that, though the two concepts have things in common, ‘Satisfaction is generally viewed as a broader concept… service quality is a component of satisfaction’. Because customer satisfaction is achieved through various sources, Bitner and Hubbert (1994) propose two ways of viewing satisfaction: service-encounter satisfaction (i.e satisfaction in relation to specific services) and overall satisfaction. (Based on several experiences). In other words, satisfaction level based on each service leads to overall satisfaction with the service.

2.2 Airline Service Quality

According to Clifford et al (1994), in the pre deregulation era, airline service quality was assessed with respect to industry and managerial variables such as flight frequency, load factors, transit times and aircraft type. (See also Jordan, 1970; Douglas and Miller, 1974). However, after the liberalisation of the airline environment in the U.S, the provision of superior service quality was found to be an important source of customer retention and loyalty, which may, in turn, lead to a superior competitive performance. (Parasuraman et al, 1985,1988, 1991, Zeithaml et al, 1996; Dawkins and Recihheld, 1990; Reichheld and Sasser, 1990, Berry and Parasurman, 1994). According to Parasuraman et al (1991), customer loyalty can be achieved by organisations that display consistency, reliability and fairness in the provision of their service. They further argued that organisations that make realistic promises about service delivery are more likely to capitalise on superior service delivery.

Only a few airlines have been able to distinguish themselves over the years in terms of service quality; this is because of rapid changes in the industry both in terms of changing needs of customers, and definitions of what constitutes the industry itself (Rhoades et al, 1998). Singapore Airlines, British Airways and America Airlines are among those few airlines that have successfully positioned themselves globally as offering excellent service quality (Chan, 2000). Delivering constant service quality is a difficult task for both large and small airline companies. To cater for this problem, many airlines have found one solution which could increase their chances to satisfy customers: code sharing. Code sharing is an agreement between two airlines, where an airline operating a flight allocates some of its seats to another airline, allowing it to sell those seats on its code, although it is not actually operating the flight. However, this type of agreement is dependent upon the fact that both airlines offer similar service levels and have similar market positioning for its success.

For example, Air Mauritius and Air France have a code share agreement on the routes operated by Air France and vice versa (Ministry of Tourism, Leisure and External Communications, 2010). A passenger buying a ticket at the Air Mauritius counter to go to Toulouse, France, can find himself in possession of a ticket Mauritius – Paris – Toulouse with Air Mauritius flight numbers and ticket, while the flights to Paris and Toulouse will actually be Air France operated flights. By signing such agreements, both airlines increase their chances to satisfy their customers as they offer more destinations to passengers; increase their seats availability and, also, Air Mauritius frequent flyers will accumulate frequent flyer points/miles, although they are not actually flying by this airline.

Service quality also contributes significantly towards service differentiation, positioning and branding. Singapore Airlines and British Airways have been widely recognised within the airline industry as its strategic benchmark airlines, as well as industry leaders and innovators in terms of branding as being a strategic competitive advantage. (Chan,2000). Companies that find the most effective ways to implement the best service methods and processes have more chances to be winners in the long term in terms of favourable customer perceptions. Such companies outstand their competitors and are able to build a strong foundation for customer loyalty. Service, both poor and outstanding, has a strong emotional impact on the customer, creating intense feelings about the organisation, its staff and its service, and influencing loyalty to it. (Wirtz and Johnston,2003).Several authors have been able to demonstrate that there is a positive link between customer service improvements and customer satisfaction, customer loyalty and profitability. (Buzzell and Gale,1987; Boulding et al, 1993; Rust and Oliver, 1994).

It has been suggested that the three probable fundamental factors that affect passenger demand in the airline industry are incomes, fares and service levels. (Hanlon, 1999). The core focus of the present research is on service quality aspect (Although it is recognised that cost and price do have an influence on service quality). There are a lot of factors that can influence passenger growth, but it is an undeniable fact that service quality plays a critical role in the success of the airline industry. (Bannford and Xystouri,2005). There is also much evidence that suggest that profitability is linked to service delivery (Bates et al, 2003), as well as the general importance of quality in service organisations. (Gustafsson and Nilsson, 2003; Di Mascio, 2007).

According to Headley and Bowen, different aspects could influence the passenger’s perception of service quality, at different times along the consumption process, but generally, the two principal factors are (i) Schedule and (ii) Price (Headley and Bowen, 1997). There are also secondary but important other aspects that can determine the choice of a customer for a particular airline. The principal factors can explain the majority of customer choice of airline services. However, once these basic concerns are met, the larger and more complex set of factors begin to prevail on the customer’s perception regarding the quality and satisfaction as regards to a particular service experience, and, ultimately the choice of a particular airline. Examples of these factors can be: safety, seat comfort, in-flight amenities, attitude of ground and in-flight crew… amongst others.(Headley and Bowen, 1997).

This paper focuses on understanding service quality and customer satisfaction; as well as the ability of airline companies (here Air Mauritius) to satisfy customers’ perceptions of what these can be. The service sector literature has shown much interest in the area of passenger expectations and airline quality (Fodness and Murry, 2007; Chen and Chang, 2005; Gilbert and Wong, 2003).

The originality in the present research is that it is the residents’ perceptions and expectations that are put forward. Previous research has focussed on international tourists’ perceptions as regards to the service offered by Air Mauritius. (Prayag, 2007)

2.3. Measuring Service Quality and its impacts on customer satisfaction

The tool which will be used is the SERVQUAL model (Parasuraman et al,1985,1988,1991,1994.). This 22-item scale, which was developed to measure service quality, is based on specific dimensions: Tangibles, reliability, responsiveness, assurance and empathy. Although this scale was originally applied in five specific service settings (retail banking, credit card services, repair and maintenance of electrical appliances, long-distance telephone services, and title brokerage), it has also been applied to a wide variety of service environments:

The healthcare sector (Carman,1990; Headley and Miller, 1993; Lam, 1997; Kilbourne et al.,2004);

Banking (Mels et al,1997; Lam,2002);

Fast food (Lee and Ulgado, 1997);

Telecommunications (Van der Wal et al., 2002)

Retail chains (Parasuraman et al., 1994)

Information systems (Jiang et al., 2000); and

Library services (Cook and Thompson, 2000).

The SERVQUAL model will this help to reach the following objectives:

To measure what are the expectations and perceptions of service quality

To determine the customer’s assessment of the importance they grant to the five service quality dimensions of the SERVQUAL, and

To determine if any specific dimensions has a greatest influence on the passengers’ overall satisfaction levels and willingness to recommend Air Mauritius to others

In 1994, Bitner and Hubert argued that, although the SERVQUAL items of Parasuraman et al (1988), when measured at the level of the firm’s service, appear to be good predicators of service quality, it is also possible that the 22 items scale of SERVQUAL, when measured as a function of multiple experiences with the firm, may be good predicators of overall service satisfaction.

It is clear that, over the years, service quality has been an issue that has engaged researchers in debate over its conceptualization. In 1988, Parasuraman et al developed the SERVQUAL instrument to measure service quality. This was the start for a lot of research in the field, which continues today. Their assessment analyzed the difference between the customer’s perceptions and expectations; and their evaluation of the service provided.

The SERVQUAL scale.

According the Parasuraman et al. (1988), customer’s perceptions of service quality are influenced by five ‘gaps’:

Gap 1 : difference between customer expectations and management perceptions of customer expectations

Gap 2: difference between management perceptions of consumer expectations and the translation of these perceptions into service quality specifications.

Gap 3: difference between the services actually delivered by frontline service personnel on a day-to-day basis and the specifications set by management.

Gap 4: difference between service delivery and what is promised in external communications to customers.

Finally, Gap 5 is the difference between customer expectations and perceptions. ( That is, perceived service quality, as described above)

Gap 5 is influenced by gap 1-4, which are all within the control of an organization and therefore need to be analysed to identify any changes that should be implemented to reduce or eliminate gap 5. Parasuraman et al argued that such ‘gap analyses’ are critical for the identification of discrepancies between the provider’s perceptions of service quality and to the customer’s perceptions of those dimensions. Engelland et al (2000.) declared that those gap analyses “(…) focus managers’ attention on possible causes for each gap and developing strategies to close each gap”

The SERVQUAL instrument is based on Gap 5. On the basis of information obtained from interviews with consumers, Parasuraman et al (1985) concluded that consumers evaluated service quality by comparing expectations with perceptions on ten dimensions:

Tangibles

Reliability

Responsiveness

Communication

Credibility

Security

Competence

Courtesy

Understanding/knowing customers and

Access

These ten dimensions were then reduced to five generic service quality dimensions, as follows:

Tangibles (measured by four items): the appearance of physical facilities, equipment, and personnel;

Reliability (five items): the ability to perform the promised service dependable and accurately

Responsiveness (four items): the willingness to help customers and provide prompt service

Assurance (four items): the knowledge and courtesy of employees and their ability to inspire trust and confidence; and

Empathy (five items): the level of caring and individualised attention the firm provides to its customers.

These five dimensions are thus assessed by a total of 22 items. Each item is measured on the basis of responses to two statements that measure:

The general expectations of customers concerning a service; and

The perceptions of customers regarding the levels of service actually provided by the company within the service category.

Figure 1.0 shows the SERVQUAL gap model.

Figure 1.0 – The SERVQUAL Gap Model (Parasuraman et al, 1988)

SERVQUAL is ‘a concise multiple-item scale with good reliability and validity that retailers can use to better understand the service expectations and perceptions of consumers and, as a result, improve service’ (Parasuraman et al, 1988.). In 1991, the SERVQUAL instrument was refined. The original model consisted of two sections: a 22 item section measuring customers’ service expectations; and a corresponding 22-item section measuring consumers’ perceptions of a particular company. The revised version consists of a third section, where customers are asked to allocate 100 points to the items representing the five dimensions.

During their review of the model, Parasuraman et al (1991) also reviewed the formulation of some statements by, for example, removing the word “should” from the statement, realising that “ the ‘should’ terminology in this other expectation statements might be contributing to unrealistically high expectation scores” (Parasuraman et al,1991).

The research literature on service quality has identified many models developed by several researchers worldwide. However, the SERVQUAL instrument (Parasuraman et al, 1988), forms the foundation on which all the other works have been built; though, it has been subject to severe criticism as well (See Buttle, 1996). In spite of such reprehension on its efficacy across different service settings, there is a general agreement that the 22 items are reasonable good predicators of service quality as a whole.

For the purpose of this research, the refined SERVQUAL instrument will be applied to the airline industry, where service quality is one crucial element. In the next chapter, details of how it is planned to be used are given.