DIMENSIONS OF CUSTOMER SERVICE QUALITY - AN EMPIRICAL STUDY OF DOMESTIC AIRLINE INDUSTRY IN INDIA ABSTRACT OF THE THESIS SUBMITTED FOR THE AWARD OF THE DEGREE OF Ph. D. (BUSINESS ADMINISTRATION) BY . VIPPAN RAJ DUTTT Under the Supervision of Dr. Mohammed Naved Khan' ; Dr. S C Bansal Senior Lecturer ' , » Associate Professor Department of Business Administration Indian Institute of Management Faculty of Mgt. Studies & Research Lucknow Aligarh Muslim University, Allgarh (India) (India) (Internal Advisor) (External Advisor) DEPARTMENT OF BUSINESS ADMINISTRATION FACULTY OF MANAGEMENT STUDIES & RESEARCH ALIGARH MUSLIM UNIVERSITY ALIGARH (INDIA) 2008 ABSTRACT Introduction Civil Aviation represents one of the biggest industries worldwide with global airline revenues exceeding US$ 485 billion in 2007 (lATA, 2008b). The industry has moved towards liberalisation in the ownership of national carriers, capacity sharing, price controls and market access, leading to greater competition among airlines. In the de-regulated environment, the customer has many choices, if the first airline does not measure up-to the desired standards of service. Focus on service quality is the need of the hour if the airlines aspire to improve market share and further enhance financial perforniance in domestic and international markets. The airline industry has been a pioneer in the innovative use of Information Technology (IT) (Ghobrial & Trusilov, 2005). E-commerce and IT are changing the nature of the airline business. The dramatic growth of web and self-service technologies facilitate simplified passenger travel involving e-ticketing, automated check-in, common-user self-service kiosks and other passenger, services (Shon, Chen & Chang, 2003). Growth in the air traffic in recent years is due to the spread of low cost service. The Full Service Carriers (FSCs) are facing strong competition from Low Cost Carriers (LCCs). Successful LCCs undermine the economics of FSCs by capturing a growing market share and forcing the latter to drop their fares (Doganis, 2006). The value proposition for passengers is changing. Travelers expect convenience and connectivity. Simplifying the business and focusing on value is critical. This is leading the way in the air transports industry's evolution towards a low cost industry and will enhance the passengers' travel experience. Civil Aviation Industry in India Air transport has a significant role to play in a vast country like India with major industrial and commercial centres located far apart. The domestic civil aviation activities in India can be broadly classified into three categories - regulatory-cum- developmental, infrastructural and air transport services (Planning Commission, 2001). The Ministry of Civil Aviation (MoCA) and its bodies, namely, Directorate General of Civil Aviation (DGCA) and Bureau of Civil Aviation Security (BCAS) look after regulatory and developmental aspect of civil aviation in India. Airport Authority of India (AAI) is responsible for providing infrastructural facilities. Air transport services are provided by scheduled airlines in public and private sector. In the public sector, Indian Airlines and Alliance Air provide passenger transport and cargo handling services in the country. In the private sector, there are eight scheduled airlines (passenger), namely, Jet Airways, Air Sahara (now JetLite), Deccan Aviaition, Spice Jet, Go Airways, Kingfisher Airlines, Paramount Airways and Indigo operating on the domestic sector providing passengers with a wide choice. Presently, Indian Airlines, Jet Airways and Kingfisher are fiill service carriers, whereas JetLite (erstwhile Air Sahara), Deccan, Spicejet, Paramount, IndiGo and Go Air fall in the category of low cost carriers. Table 1 gives the profile of domestic airlines operating in India. The civil aviation sector in the country has witnessed a boom largely due to the open sky policy of increased liberalization in both domestic and intemational "sectors. Domestic airlines carried a total of 43.2 million passengers during 2007 compared to 32.7 million in the preceding year, resulting in growth of about 33 per cent (Sinha, 2008). Moreover, the scheduled domestic air services are now available at about 82 airports as against 75 in 2006 (MoCA, 2007a). Phenomenal growth in the airline sector in India throws up exciting opportunities and, at the same time, poses its own challenges. According to lATA, Indian carriers could post US$ 1.5 billion in losses in 2008 (Bisignani, 2008b). The global crisis resulting from high oil prices and declining traffic is hitting India hard. Consolidation and restructuring are the way to go for Indian carriers to beat losses and stay afloat. Review of Literature Much of the research in services marketing centers on understanding services and service quality from customer's point of view (Brown & Bitner, 2006). The conceptualization of service quality, its relationship to satisfaction and measurement methods has been the central theme of literature on the subject. 4' _ Si .- o 4 0-3 Ci ft *^i i.r- !?0 3 O o 3.. , a V S •s ^c: i^ c S p O. ;^ N s: s < Ul 1 c S .* ^ o o c 2 — p •> < QJ? "> <5 _c X •/: (A <0 a S a* o H 2 •a c o [2 a. • I z'. ^, !: = V 3 = ^1 S' a. 3 IS •4«: o ** "I o ^ ri W 5 ^. M o tx 01) _^ _ 3 •c -< = a •St S a 4, <^ ©•2 |i OL' Parasuraman, Zeithaml & Berry (1988) provided the notion of 'gaps' between the expectations of service and subsequent perceptions of what is delivered. These gaps are located throughout the organization between frontline staff, customers and managers. The identification often dimensions of service quality by these researchers, and later refined to five - Reliability, Assurance, Tangibles, Empathy and Responsiveness (RATER) - has dominated the literature in the field of service quality. Much of the research in this area, since introduction of SERVQUAL in 1988, has been concerned with validating or challenging the construct. The development of SERVQUAL by Parasuraman et al. (1988) as a generaiisable measure of service quality was a seminal contribution that has been adapted and widely used across service industries - Airline (Sultan & Simpson, 2000), Banking (Aga & Safakli, 2007), Education (Arambewela & Hall, 2006), Health (Mostafa, 2005), Hotel (Juwaheer, 2004), Information System & E-Commerce (vanRiel & Semeijn, 2003), Internal Marketing ((Frost & Kumar, 2000), Public Services (Donnelly, Kerr, Rimmer & Shiu, 2006), Retail (Zhao, Bai & Hui, 2002), Tourism & Hospitality (Home, Peter & Pikkemaat, 2005), and Transportation (Cavana, Corbett & Lo, 2007) -around the world. Conceptual models in service quality enable management to identify quality problems and thus help in planning for the launch of a quality improvement program thereby improving the efficiency, profitability and overall performance. The study examines eight different service quality models reported in the literature: 1. The Disconfirmation Model of Service Quality 2. Nordic Service Quality Model 3. Kano' s Model of Customer Satisfaction 4. The Gaps Model of Service Quality 5. Performance Only Model of Service Quality 6. Six-Sigma Model of Service Quality 7. Internal Service Quality Model 8. Customer Equity Framework Researchers have examined the service quality of airline industry post deregulation in US, Europe and Asia. These papers focus primarily on measuring the performance of airlines using SERVQUAL instrument and relevance of SERVQUAL and SERVPERF scales to airline industry. Researchers have also triBSfe employed Structural Equation Modelling (SEM) to investigate the effects of individual dimensions of airline service quality (Park, Robertson & Wu, 2005, 2006). Research has been carried out to study impact of IT in enhancing customer experience (Baker, 2007). Usage of technology in the area of reservation, baggage handling, customer relationship, frequent flyer is covered extensively. New technology interface like internet, RFID, self service have added value to the passenger services (Wyld, Jones and Totten, 2005; Karp, 2007). Impact of LCC worldwide on the efficiency, competition and industry structure has been covered in detail in literature reviewed (Doganis, 2006; Hunter, 2006). Of late, LCCs are moving away from original low cost model to differentiate from competition and provide higher value to the passenger (Sobie, 2007). In India, the aviation sector, from research point of view is largely unexplored. There are not many studies on domestic civil aviation in India. Though some studies have been conducted in recent years, including those by the researcher (Naresh Chandra Committee Report, 2003; Sarkar & Baisya, 2005; Khart, Dutt & Bansal, 2007a, 2007c; Bansal, Khan & Dutt, 2008a), the impact of liberalisation in domestic aviation sector needs to be further explored. Need for the Study This study is an in-depth empirical investigation that seeks to establish a method to predict service quality in domestic airline industry in India. The motivation for this work was provided by a lack of any useful instrument to predict and evaluate service quality with specific reference to airline industry in India. It also attempts to measure the gap between expectations and perceptions of the passengers so that strategies can be implemented to improve the quality of service and increase airlines profitability and market share. Some of the key questions facing airline marketers are (i) identification of attributes that influence customers' choice in airlines, (ii) methodology adopted by the customers to rate the airlines