AIRLINE SERVICE QUALITY PERFORMANCE: A COMPARISON OF AIR CHINA AND HAINAN AIRLINES A Project Presented to the Faculty of California State Polytechnic University, Pomona In Partial Fulfillment Of the Requirements for the Degree Master of Science In Hospitality Management By Jing Zhu 2016 SIGNATURE PAGE PROJECT: AIRLINE SERVICE QUALITY PERFORMANCE: A COMPARISON OF AIR CHINA AND HAINAN AIRLINES AUTHOR: Jing Zhu DATE SUBMITTED: Fall 2016 Collins College of Hospitality Management Dr. Wan Yang Project Committee Chair Professor of Hospitality Management Dr. Zhenxing (Eddie) Mao Professor of Hospitality Management Dr. Linchi Kwok Professor of Hospitality Management ii ACKNOWLEDGEMENTS The author is deeply indebted to the project committee chair, Wan Yang, whose help, guidance and comments helped the author to complete this work. The author would also like to express her appreciation to all her friends and family for their help, support, and encouragement. iii ABSTRACT This paper aims to measure the level of service quality issues and investigate the difference between two air carriers in China in terms of overall airline service quality performance, customers’ satisfaction, and selected attributes. The study is based on a literature review and an initial analysis of a survey designed to identify individuals’ views of passengers who have flown on Air China (CA), and/or Hainan Airlines (HU) within the past 12 months. By knowing the most valuable attribute to international travelers, the carriers will be able to determine the specific attributes to deliver quality of service accurately and properly. Therefore, this study will cast light on what passengers expect from airlines in terms of service quality and provide feedback to service providers. Key words: Airlines, Service quality, Air China, Hainan Airlines, SERVQUAL, IPA grid iv TABLE OF CONTENTS Signature Page ..................................................................................................................... ii Acknowledgements ............................................................................................................ iii Abstract ............................................................................................................................ ivv List Of Tables ..................................................................................................................... v List Of Figures ................................................................................................................. vvi Chapter One: Introduction .................................................................................................. 1 Chapter Two: Literature Review ........................................................................................ 5 Chapter Three: Methodology ............................................................................................ 11 References ......................................................................................................................... 28 Appendix A ....................................................................................................................... 31 Section One: Service Attributes ............................................................................ 31 Section Two: Demographic Information .............................................................. 32 . v LIST OF TABLES Table 1. JACEDE Sources ................................................................................................. .4 Table 2. Profile of the Pespondents .................................................................................. 13 Table 3. Reliability Statistics ............................................................................................ 14 Table 4. Performance of Service Quality Dimension ....................................................... 15 Table 5. T-test Results for the Reliability Dimension ...................................................... 16 Table 6. Air China’s Mean vs. Ranking ........................................................................... 20 Table 7. Hainan Airline’s Mean vs. Ranking ................................................................... 24 vi LIST OF FIGURES Figure 1. IPA Grid ............................................................................................................ 10 Figure 2. Air China’s IPA Grid......................................................................................... 18 Figure 3. Hainan Airlines’ IPA Grid................................................................................. 22 vii CHAPTER ONE Introduction Worldwide, there are an increasing number of air passengers with higher expectations and demands, who want to “fly beyond the expectations” has led to the interest in the enhancement and measurement of service quality in the aviation industry. Air China and Hainan Airlines are chosen in this paper to evaluate their levels of service performance. As China’s first and only 5-star airline, Hainan Airlines has been certified by Skytrax with the highest airline rating for its high-quality service. Since 2009, the company has built a great reputation for being a notch above its local rivals in China. In direct contrast, Air China, ranked as a 3-star airline by Skystrax, provides relatively poor service for being China’s national flag airline company. Not surprisingly, Hainan Airlines is quickly emerging as a new challenger by offering a high-quality flight service, while Air China is experiencing its consecutive market loss in recent years because of the unfavorable service quality. One way in which Air China could regain its market share is by raising its service performance to a higher standard. Thus, the current study aims to compare the service quality difference between the two carriers; and then highlight the need to attend to customers’ perceptions of service quality for Air China and suggest improvements. The findings of this research might be generalized to other airline companies that need to improve their service quality. The drawing of evidence and findings provide a reliable basis for considering possible alternative ways for further research and development. In summary, this research aims to 1) explore the performance difference between two airline companies; and 2) perform IPA analysis for both companies to provide useful managerial recommendations. 1 Study Background According to the Civil Aviation Administration of China (CAAC), there are currently 42 air transport companies operating in mainland China. The four largest airlines in terms of fleet size are China Southern Airlines, Air China, China Eastern Airlines, and Hainan Airlines, which account for nearly 80 percent of all market penetration. Air China is a publicly owned company that is managed by the Chinese central government, while Hainan Airlines is the largest privatie air carrier with a local government background. Previously, Air China was successful in playing the role of China’s aviation authority, managing and controlling the airspace under the civic aviation regulation. In 1987, Air China signed an agreement to separate its operating sector from CAAC, which led directly to the rapid development of local commercial airlines such as Hainan Airlines and Xiamen Airlines. An Introduction to Air China and Hainan Airlines Air China, established in 1988 with main bases at Beijing Capital International Airport, Shanghai Pudong International Airport, and Guangzhou Baiyun International Airport, operates 284 routes with 6,000 weekly services with a mixed fleet of Boeing and Airbus aircrafts, including 72 international routes, 15 regional routes and 197 domestic routes, covering 29 countries and 145 cities. Air China is China’s second largest carrier and is the only airline that can hang the country’s national flag on body of its aircrafts. In addition, the company is responsible for special plane services for China’s leaders. To date, although its products and service standards have been improving, Air China is a Skytrax certified 3-star airline. However, despite its service rating, Air China is 2 experiencing a loss in their market share because of a lack of proper assessment of the demand. Founded in 1993, Hainan Airlines is the fourth largest airline company in the country. The carrier operates in Hainan Island where the tourism industry is growing fast, facing a high level of competition from other airline companies. The airline has a wide domestic network in mainland China, serving more than 500 routes and linking more than 100 cities with a fleet of over 150 aircrafts, including a wide body of Boeing 787 Dreamliners and Airbus A340 jetliners. Although Hainan Airlines may not be the largest, they have been rewarded seven years in a row for its elite level of service, high quality products, and Asian hospitality. A Comparison of the Two Airlines For the past ten years, delivering top quality service has been a stand out feature for Hainan Airlines, which has almost overtaken Air China in terms of the number of destinations across the Pacific. In fact, Hainan Airlines began its service to North America in 2008 and has recently accelerated rapid growth in expanding destinations. Table 1 describes the data analyzed and presents the results of the difference between Air China and Hainan Airlines. JACEDE sources (2011) found that the following difference in ranking was significant: The average age of Hainan Airlines’ airplanes was 5.1 years, which was approximately 1.4 years