An investigation of service quality, customer satisfaction and loyalty in China’s airline market

مقاله سال ۲۰۱۶

China has been the second largest aviation market in the world in terms of the volumes of passengers and air cargo moved in its domestic market since 2007. In 2014 the whole industry handled 392 million passengers and 5.9 million tonnes of air cargo, a 10.7% and 5.9% increase from the previous year, respectively (Civil Aviation Administration of China, 2015). China’s airline market is a growing market underpinned by a huge population and rapid economic growth. IATA (2014) forecasts that China will overtake US as the largest air passenger market by around 2030 as measured by traffic to, from and within a country.

However, until the late 1990s most Chinese airlines, which emerged from the monolithic Chinese government-owned carrier CAAC,1 had failed to establish brand images and develop favourable reputations among consumers. With more and more foreign airlines flying to China in the 1990s, Chinese consumers had begun to question why the state-owned Chinese airlines could not provide services similar to their foreign counterparts, especially in the events of flight delays and cancellations. As a result, Chinese airlines were forced to make strides in many service aspects since the late 1990s. For example, the introduction of telephone and internet booking services, issuing of guidelines on handling flight delays and cancellation, and the monitoring and regular review of queue times at the check-in counter and boarding gate. Air China was the firstChinese carrier that introduced the frequent flyer program (FFP) in 1994 in order to retain customers and differentiate their services from competitors, followed by China Eastern and China Southern in 1998. Other airlines quickly followed suit and almost all the airlines had their FFPs in place in the early 2000s. Despite these efforts, it has been found in a survey conducted in 2006 that Chinese travellers were not significantly influenced by airline brands when making a travel decision (Zhang, 2012).

There have been a series of airline mergers and consolidations since the early 2000s, resulting in four dominant airline groups in China’s domestic market, namely, Air China, China Southern Airlines, China Eastern Airlines, and Hannan Airlines. Together they maintained a market share of about 90% in the following decade in terms of the goods and people carried. Chow (2014) claimed that the competitive environment of China’s airline industry has changed significantly since the mid-2000s. The domestic airlines compete against each other not only by offering competitive prices, but also service quality aiming to improve customer satisfaction and increase customer loyalty. In fact, high quality customer service has become another significant differentiating factor between an airline and its competitors, especially in a deregulated operating environment. Although much literature has been devoted to air transport service quality and passenger satisfaction, little is known about what makes a passenger loyal (Dolnicar et al., 2011). An excellent work by Vlachos and Lin (2014) examined the determinants of business traveller loyalty towards full-service airlines in China. They found that reputation, in-flight service, FFP, and aircraft type had significant impacts on airline loyalty. However, the factors driving leisure traveller loyalty were not examined by this study. In addition, Vlachos and Lin (2014) argued that there is no consensus in terms of the definition customer loyalty and passenger loyalty in their study was measured with three separate variables: overall satisfaction, recommendation intention, and repurchase intension. Nevertheless, many studies have treated the two as different variables. Although the vast majority the literature suggests a direct, positive relationship between customer satisfaction and customer loyalty (Wang, 2014; Hussain et al., 2015), a key finding in Dolnicar et al. (2011) is that an attempt to improve customers’ satisfaction has not proven to have a big impact on loyalty. Chen (2012) noted that past empirical evidence has shown the existence of difference in the strength of the relation between customer satisfaction and loyalty. This research aims to examine the impacts of service quality, airline brand, and passenger demographics on customer satisfaction. We will also explore the relationship between customer satisfaction and customer loyalty as well as the roles of service quality and demographic variables in explaining customer loyalty in China’s airline industry, a topic that has been rarely studied in previous literature as far as we can understand. This study makes two main contributions. First, it adds to the very limited research on China’s airline services, customer satisfaction and loyalty, and provides empirical evidence for the relationship between customer satisfaction and customer loyalty in the Chinese context. Lai et al. (2009) pointed out that cultural factors influence the ways in which customers become loyal and thus it is important to assess loyalty formation in different cultures. Second, the findings of this research will not only provide airline management with useful information on how to develop non-price competition strategies to retain customers, but also reveal the highly valued service items appreciated by passengers, which will help airlines in deciding how to allocate their scarce resources. The next section will review relevant literature and briefly describe the profiles of Air China, China Southern, China Eastern and Hainan Airlines whose service quality will be examined in this study. Section 3 will discuss the data collection and methodology. Section 4 presents the results and findings. Section 5 concludes this article.