Question

Case Study 2 PacificOcean Airways Tony Jack, research analyst for PacificOcean Airways, was asked by the director of research to make recommendations regarding the best approach for monitoring the quality of service provided by the airline. PacificOcean Airways is a national air carrier that has a comprehensive route structure consisting of long-haul, coast-to-coast routes and direct, nonstop routes between short-haul metropolitan areas. Current competitors include Midway and Alaska Airlines. PacificOcean Airlines is poised to surpass the billion-dollar revenue level required to be designated as a major airline. This change in status brings a new set of competitors. To prepare for this move up in competitive status, Jack was asked to review the options available for monitoring the quality of PacificOcean Airways service and the service of its competitors. Such monitoring would involve better understanding the nature of service quality and the ways in which quality can be tracked for airlines After some investigation, Jack discovered two basic approaches to measuring quality of airline service that can produce similar ranking results. His report must outline the important aspects to consider in measuring quality as well as the critical points of difference and similarity between the two approaches to measuring quality Some Background on Quality In today's competitive airline industry, it's crucial that an airline do all it can do to attract and retain customers. One of the best ways to do this is by offering quality service to consumers Perceptions of service quality vary from person to person, but an enduring element of service quality is the consistent achievement of customer satisfaction. For customers to perceive an airline as offering quality service, they must be satisfied, and that usually means receiving a service outcome that is equal to or greater than what they expected. An airline consumer usually is concerned most with issues of schedule, destination, and price when choosing an airline. Given that most airlines have competition in cach of thesc areas, other factors that relate to quality become important to the customer when making a choice between airlines. Both subjcctive aspects of quality (that is, food, plcasant cmployces, and so forth) and objective aspects (that is, on-time performance, safety, lost baggage, and so forth) have real mcaning to consumers. Thesc sccondary factors may not be as critical as schedule, destination, and price, but they do affect quality judgments of the customer There are many possible combinations of subjective and objective aspects that could influence a customer's perception of quality at different times. Fortunately, since 1988, consumers of airline services have had access to objective information from the Department of Transportation regarding service performance in some basic categories. Unfortunately, the average consumer is most likely unaware of or uninterested in these data on performance; instead, consumers rely on personal experience and subjective opinion to judge quality of service. Periodic surveys of subjective consumer opinion regarding airline service experience are available through several Page 1 of5 sources. These efforts rely on contact with a sample of consumers who may or may not have informed opinions regarding the quality of airline service for all airlines being compared A Consumer Survey Approach In his research, Jack discovered a recent study conducted to identify favorite airlines of frequent fliers. This study is typical of the survey-based, infrequent (usually only annually), subjective efforts conducted to assess airline quality. A New York firm, Research & Forecasts, Inc published results of a consumer survey of frequent fliers that used several criteria to rate domestic and international airlines. Criteria included comfort, service, reliability, food quality cost, delays, routes served, safety, and frequent-flier plans. The questionnaire was sent to 25,000 frequent fliers. The 4,462 people who responded were characterized as predominantly male (59 percent) professional managers (66 percent) whose average age was 45 and who traveled an average of at least 43 nights a year for both business and pleasure. This group indicated that the most important factors in choosing an airline were route structure (46 percent), 2) price (42 percent), 3) reliability (41 percent), 4) service (33 percent), 5) safety (33 percent), 6) frequent flier plans (33 percent), and 7) food (12 percent). When asked to rate twenty different airlines, respondents provided the rankings in the following Table 1 Table 1 Ranking of Major Airlines: Consumer Survey Approach 1. American 2. United 3. Delta 4. TWA 5. SwissAir 6. Singapore 7. British Airways 8. Continental 9. Air France 10. Pan Am 11. Lufthanasa 12. USAin 13. KLM 14. America West 15. JAI 16. Alaska 17. Qantas 18. Midway 19. Southwest 20. SAS Page 2 of5 A Weighted Average Approach Jack also discovered a newer, more objective approach to measuring airline quality in a study recently published by the National Institute for Aviation Research at the Wichita State University in Wichita, Kansas. The Airline Quality Rating (AQR) is a weighted average of 19 factors that have relevance when judging the quality of airline services (see Table 2). The AQR is based on data that are readily obtainable (most of the data are updated monthly) from published sources for each major airline operating in the United States. Regularly published data on such factors as consumer complaints, on-time performance, accidents, number of aircraft, and financial performance are available from the Department of Transportation, the National Transportation Safety Board, Moody's Bond Record, industry trade publications, and annual reports of individual airlines Table 2 Factors Included in the Airline Quality Rating (AQR) Factor . Average age of fleet 2. Number of aircraft 3. On-time performance 4. Load factor 5. Pilot deviations 6. Number of accidents 7. Frequent-flier awards 8. Flight problemsb 9. Denied boardingsh 1o. Mishandled baggageb 11. Faresb 12. Customer serviceb 13. Refunds 14. Ticketing/boardingb 15. Advertising 16. Creditb 17. Otherb 18. Financial stability 19. Average seat-mile cost Weight 25.85 14-54 18.63 26.98 28.03 28.38 27.35 28.05 28.03 27.92 27.60 27.20 27.32 -6.82 25.94 27.34 26.52 24.49 W1 + W2 + W3 ++W19 a. The 19-item rating has a reliability coefficient (Cronbach's Alpha) of o.8. b. Data for these factors come from consumer complaints registered with the t of Page 3 of5 To establish the 19 weighted factors, an opinion survey was conducted with a group of 65 experts in the aviation field. These experts included representatives of most major airlines, air travel experts, Federal Aviation Administration (FAA) representatives, academic researchers, airline manufacturing and support firms, and individual consumers. Each expert was asked to rate the importance that each individual factor might have to a consumer of airline services using a scale of 0 (no importance) to 10 (great importance). The average importance ratings for each of the 19 factors were then used as the weights for those factors in the AQR. Table 2 shows the factors included in the Airline Quality Rating, the weight associated with each factor, and whether the factor has a positive or negative impact on quality from the consumer's perspective Using the Airline Quality Rating formula and recent data, produce AQR scores and rankings for the 10 major U.S. airlines shown in Table 3 Table 3 Airline Rankings Rank Airline American Southwest Delta United USAir Pan Am Northwest Continental America West TWA AQR Score 10.328 10.254 10.209 10.119 10.054 10.003 20.063 20.346 20.377 20.439 9 10 What Course to Chart? Jack has discovered what appear to be two different approaches to measuring quality of airlines One relies on direct consumer opinion and is mostly subjective in its approach to quality and the elements considered. The other relies on performance data that are available through public sources and appear to be more objective Both approaches incorporate pertinent elements that could be used by consumers to judge the quality of an airline. Jack's recommendation must consider the comprehensiveness and usefulness of these approaches for PacificOcean Airways as it moves into a more competitive environment. What course of action should he recommend? Page 4 of5

Questions

1. How comparable are the two different methods? In what ways are they similar? In what ways are they different?

2. What are the positive and negative aspects of each approach that Jack should consider before recommending a course of action for PacificOcean Airways?

3. What aspects of service quality does each approach address well and not so well?

4. Considering the two methods outlined, what types of validity would you consider to boe demonstrated by the two approaches to measuring quality? Defend your position

5. Which of the methods should Jack recommend? Why?

Page 5 of 5

Answer 1

SOLUTION :-

# 1

The two methods that have been discussed in the give case are:

Consumer Survey Approach
Weighted Average Approach
Both the methods have their own relevance in measuring service quality. Here the prime objective is to find out the factors influencing the customer’s perceptions regarding airline services that lead to customer satisfaction. Along with this the airline should compete with big league of other airlines.

A consumer survey approach is usually considered when the nature of the problem identified is descriptive or causal. In this case a structured questionnaire is prepared and then sent to the respondents or the customers and they are asked to rate the factors mentioned in the questionnaire. The factors mentioned are usually picked from previous surveys and some other factors subjective to customer’s perception towards airline service quality are also added.

A weighted average approach is usually implemented in the similar way by preparing a structured questionnaire. This is more suitable for a study which is exploratory in nature. The factors or the scale items used in this questionnaire are primarily validated beforehand and only those set of factors are used to assess the customer’s perception towards the airline service quality. The validity and the reliability is once again assessed using the Cronbach’s reliability coefficient and discriminant validity tests.

The two methods are similar in the methods of data collection but they differ in the development of the research instrument and the analysis of the collected data.

# 2

Consumer survey approach is suitable for causal or descriptive studies where we try to find out a cause and effect relationship between the variables or describe an existing phenomena or trend. Weighted average approach which is a part of factor analysis is primarily used for exploratory study where the objective is to explore the factors that influence a variable or any criteria.

In this case the prime objective is to first understand the factors that actually influence the customer’s perceptions towards airline service quality. So that Jack could consider those factors and work on them to provide the best of experience to the customers of Pacific Ocean Airways. Also based on those results Jack can recommend the airline management team can devise strategies to build the airline’s core competency and hence offer a competitive advantage over other airlines. To achieve this Jack has to know the exact pain points of the customers so that he can directly cater to those and help Pacific Ocean airways to be considered in the league of the major airlines. Both the methods can be used to collect this data to understand what exactly a customer is expecting while assessing the airline service quality. But to develop core competency it is all the more important to understand which aspect of the experience actually gives satisfaction to the customers. For this, consumer survey method might not be sufficient as it doesn’t give an objective result rather it gives generalized opinion of the respondents.

# 3

Service quality dimensions according to Parasuraman’s SERVQUAL scale are as follows:

Tangibility
Reliability
Responsiveness
Assurance
Empathy
Services are also heterogeneous and perishable which makes it difficult to measure the quality. Hence it is very important to implement a method that is highly objective in measuring the customer’s perception towards quality in airlines industry. A specific scale for measuring airline service quality was developed in Cyprus called AIRQUAL but that was not validated till Mishal Alotaibi validated the scale in 2015 in aviation industry of Saudi Arabia.

All these scales that were developed are the validated scales. In view of this it is very important that one should opt for a objective approach to measure the customer’s perception towards service quality or what quality factors lead to customer satisfaction.

Elements like responsiveness, assurance, skills, security can be measured by the subjective methods like consumer survey approach. But as we move higher in the intangibility pyramid, factors like attitudes, reliability, adroitness, empathy, security, tangibility can be assessed only with the help of an objective method like weighted average approach.

# 4

The validity aspect of the consumer survey approach in this case is comparatively lower than the weighted average approach. The reason being the factors considered in the former approach are subjective to consumer opinions and have not been validated by the experts either. On the other hand in weighted average approach the validity is established in many ways. First the face and content validity are established by considering the opinions of the experts from the airline industry as mentioned in the case. Secondly during the data analysis part in weighted average approach, convergent validity and discriminant validity are calculated using statistical tools and techniques that add up to the authenticity of the validity established.

#5

Jack should recommend Weighted Average Approach as this is more objective than the Consumer Survey Method. The factor or the dimensions are pre-validated by the experts of aviation industry and again there is analytical validation which doubly supports the authenticity. Secondly reliability is also established as Cronbach’s Alpha is above 0.7 which shows high reliability. Consumer opinions are definitely important to understand the customers and offer them the best of quality service which in turn provides maximum customer satisfaction. But only based on those opinions it would not be possible to make airline compete with the other airlines in the big league. Keeping that in mind Jack should recommend the Weighted Average Approach that helps to gain an overview of the airline service quality dimensions at a holistic level.