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MSQ 19,3

Service quality, satisfaction, and behavioural intentions A study of low-cost airline carriers in Thailand

350

Gour C. Saha Pearl School of Business, Gurgaon, India, and

Theingi School of Management, Assumption University, Bangkok, Thailand Abstract Purpose – The purpose of this paper is to examine the relationships among the constructs of service quality, satisfaction, and behavioural intentions in passengers of three low-cost carriers (LCCs) offering airline services in Thailand. Design/methodology/approach – A large sample of 1,212 passengers who had travelled on LCCs in Thailand in the preceding 12 months is surveyed to test four hypothesised relationships among the constructs of service quality, satisfaction, and behavioural intentions using structural equation modelling (SEM). Findings – The study finds that the order of importance of the dimensions of service quality tested here is: flight schedules; flight attendants; tangibles; and ground staff. Passenger satisfaction with these service-quality dimensions is found to be very important in explaining behavioural intentions. Satisfied passengers are mostly influenced by the schedule. Such customers engage in positive word-of-mouth communication and have high repurchase intentions. Dissatisfied passengers prefer to change airlines, rather than provide feedback to the LCCs. Research limitations/implications – The study has not definitively established causality among the constructs of service quality, satisfaction, and behavioural intentions. Moreover, satisfaction is based only on service quality. Future research should examine the causality and other possible satisfaction factors. Practical implications – Managers of LCCs who have not traditionally placed a high priority on quality should be aware of the importance of service quality and passenger satisfaction in determining the behavioural intentions of passengers of LCCs. Originality/value – The study provides an example of the use of a revised set of SERVPERF service-quality dimensions. The study also posits passenger satisfaction and behavioural intentions in a single model in the context of LCCs in Thailand. Keywords Customer services quality, Customer satisfaction, Behaviour, Thailand, Airlines Paper type Research paper

1. Introduction The behavioural intentions of customers are recognised in the literature as an important predictor of the profitability of service firms (Reichheld and Sasser, 1990; Anderson et al., 1994; Slater and Narver, 1995). Both the costs and the revenue of firms Managing Service Quality Vol. 19 No. 3, 2009 pp. 350-372 q Emerald Group Publishing Limited 0960-4529 DOI 10.1108/09604520910955348

The authors express their thanks to Dr Noppadon Kannika, Director, and Ms Pornpan Jorraktrakul, researcher, of ABAC Poll Research for assistance with data collection, and Dr Ashutosh Bhupatkar, Professor of Pearl School of Business, for his insightful advice on the study.

are affected by repeat purchases, positive word-of-mouth recommendation, and customer feedback. Moreover, there is strong evidence that service quality has either a direct influence on the behavioural intentions of customers and/or an indirect influence on such intentions, mediated through customer satisfaction (Zeithaml et al., 1996; Cronin et al., 2000). Given these established relationships, it is imperative that service firms measure and monitor service quality and satisfaction with a view to influencing the behavioural intentions of their customers. Many empirical studies have investigated the relationships among the constructs of service quality, customer satisfaction, and behavioural intentions in a variety of industries and cultures. These include studies of the lodging industry in the USA (Olorunniwo et al., 2006), audit industry in Malaysia (Ismail et al., 2006), banking industry in Taiwan (Lee and Hwan, 2005), recreation industry in the USA (Tian-Cole et al., 2002; Lee et al., 2004), health-care industry in South Africa (Boshoff and Gray, 2004), and airline industry in Korea (Park et al., 2004). One limitation of these studies is that the various aspects of behavioural intentions were not examined separately with multiple constructs, which precluded a thorough examination of the impact of service quality on this multi-faceted construct in various cultures. For example, although the role of such behavioural intentions as word-of-mouth recommendation or feedback might seem to be important in all cultures, the degree of importance of these behaviours might be amplified in certain collectivist societies (Hofstede, 1980). The present study of airline services in Thailand addresses this limitation by including three constructs of behavioural intentions (word-of-mouth, intention to repurchase, and feedback), together with service quality and satisfaction, in a single model. The study chose to examine the relationships among these constructs in the context of low-cost carriers (LCCs) in South-East Asia because service quality and customer satisfaction have become increasingly important in the airline industry in this region (and especially in Thailand) in recent years. LCCs emerged in the airline industry in the region following deregulation in the early 2000s. Emulating the successful models of the United States and Europe, these LCCs offered “no-frills” service at low prices. Initially, some LCCs in the region performed extremely well. However, Thailand’s three LCCs (Thai Air Asia, One-Two-Go, and Nok Air) have presented a bleak picture since their emergence in the market. Although a variety of factors (such as increases in fuel prices, an adverse tourism environment, and fierce price-cutting competition) all played a part, Hanaoka and Chiamsiri (2006) have noted that high passenger-defection rates experienced by these airlines can be attributed, at least in part, to their failure to pursue a customer-focused strategy. In these challenging circumstances, a study of the behavioural intentions of Thai airline customers is obviously pertinent and important. As previously noted, the profitability of service firms (such as the Thai LCCs) is significantly influenced by behavioural intentions (Reichheld and Sasser, 1990; Anderson et al., 1994; Slater and Narver, 1995), and there are close relationships among service quality, behavioural intentions, and satisfaction (Zeithaml et al., 1996; Cronin et al., 2000). The present study therefore undertakes a comprehensive analytical study of these important constructs in the context of the Thai LCC airline market. The remainder of this paper is organised as follows. Following this introduction, the next section of the paper presents a review of the relevant literature, followed by the presentation of a conceptual model and hypothesised relationships among the constructs of the model. An empirical study is then presented in which these hypothesised relationships are tested in the context of LCCs in Thailand. The paper

A study of lowcost airline carriers 351

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concludes with a summary of the main findings, the managerial implications, the implications of the study, and suggestions for future research. 2. Literature review 2.1 Airline service quality Research into airline service quality has increased rapidly since its relationship with passenger satisfaction and profitability has been established (Heskett et al., 1994). Much of the literature suggests that airline passengers perceive service quality as a multi-dimensional construct, which is in accordance with the conception of service quality proposed by Parasuraman et al. (1988) in their well-known service-quality measuring instrument called SERVQUAL. This instrument, which measures service quality in terms of five dimensions (reliability, assurance, tangibles, empathy, responsiveness) is based on the premise that customers’ assessments of overall service quality are determined by the “gap” between their expectations of service and their perceptions of actual service performance. The SERVQUAL instrument has been used by several researchers to measure airline service quality (Fick and Ritchie, 1991; Sultan and Simpson, 2000). Other multi-dimensional constructs of airline service quality include that of Zagat, an aviation research firm, which rates airline service on the basis of five criteria: (1) overall performance; (2) comfort; (3) service; (4) food; and (5) web site (Rhoades, 2006). The US Department of Transportation (DOT) also utilises a multidimensional conception of service quality in its regular reports on airline service quality, which provide data on the following operational measures: . flight delays; . mishandled baggage; . oversold flights; and . consumer complaints. Rhoades and Waguespack (2005) compared the service quality of US airlines before and after the terrorist attacks of 11 September 2001 and found that service quality was at its optimum in 2002 as decreased utilisation of seats facilitated on-time performance, reduced overbooking, and fewer customer complaints. Tiernan et al. (2008) offered a wider perspective on service-quality measures on the basis of data from the Association of European Airlines (AEA) when they found that important factors in determining positive customer perceptions of the industry included on-time flight arrivals and an absence of cancellations and baggage problems. In the case of the Thai LCCs that are the subject of the present study, there was initial uncertainty among practitioners as to whether the perceptions of a lower cost structure would alter accepted measures of service quality or whether the conventional measures continued to apply to the LCCs. It has subsequently become apparent to the LCCs that their lower fares to passengers are perceived to be due to cost reductions through efficiency in their operations, rather than to diminished service standards. As

a result, compliance with service-quality standards continues to be important for the LCCs. Indeed, a comparative study of LCCs and FSCs found that service failures (such as flight cancellations, diversions, delays, strikes, and negative staff attitudes) resulted in more complaints for the LCCs than for the FSCs (Bamford and Xystouri, 2005). 2.2 Perceived service quality and customer satisfaction The constructs of perceived service quality and customer satisfaction have traditionally been equated. Howat et al. (1996), for example, measured satisfaction by using indicators based on the five dimensions of perceived service quality suggested by Parasuraman et al. (1988). According to the expectancy-disconfirmation paradigm that formed the basis of the SERVQUAL model, service quality was defined as the “gap” between expectation and perception (Parasuraman et al., 1988), and customer satisfaction was understood in terms of meeting or exceeding these expectations (Oliver, 1980). In contrast to the traditional tendency to equate the two constructs, the notion that perceived service quality and customer satisfaction are distinctive constructs has subsequently achieved some degree of consensus among researchers. According to this view, perceived service quality is evaluated by the actual performance of the service in terms of particular service attributes in the specific context, whereas customer satisfaction is assessed by the customers’ overall experience of the service (of which service quality is only one aspect) (Oliver, 1993). Customer satisfaction thus depends on a variety of factors, including perceived service quality, customers’ mood, emotions, social interactions, and other experience-specific subjective factors (Rust and Oliver, 1994). Crompton and Love (1995) asserted that the two constructs are likely to be positively correlated, but unlikely to be linear. For example, high service quality in an airline (as evaluated by timeliness of the flight schedule or individualised attention by the flight attendants) might not necessarily produce high satisfaction if there are negative emotions associated with the experience of the flight. Although researchers now generally agree regarding the distinctiveness and definitions of perceived service quality and satisfaction, their causal relationship is yet to be resolved. There are two lines of arguments in this regard. Some researchers (Bitner, 1990; Bolton and Drew, 1991) have suggested that customer satisfaction is an antecedent of perceived service quality. These authors argue that satisfaction mediates a set of logical attributions (explanations) regarding the expectations of service and customers’ evaluations of service. For example, an acceptable explanation for a delayed flight might create satisfaction for passengers and not result in an evaluation of bad service quality for the airline. In contrast to the view that customer satisfaction is an antecedent of perceived service quality, other researchers (Oliver, 1997; Cronin and Taylor, 1992; Parasuraman et al., 1988) have contended that the constructs are reciprocal. According to this view, service quality is a cognitive assessment of services in each occurrence, whereas satisfaction is the accumulated effect on the customers’ evaluation of the services. In support of this view, Brady and Robertson (2001) confirmed the antecedent role of service quality with respect to customer satisfaction in a cross-national study of the fast-food industry in the USA and a Latin American country. 2.3 Customer satisfaction and behavioural intentions Behavioural intention has been defined as the customers’ subjective probability of performing a certain behavioural act (Fishbein and Ajzen, 1975). In this regard, three


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behaviours in particular have been associated with profitability and the market share of a firm; these customer behaviours are: (1) word-of-mouth; (2) repurchase intention; and (3) feedback to the service provider. Word-of-mouth refers to a flow of information about products, services, or companies from one customer to another. As such, word-of-mouth represents a trusted external source of information by which customers can evaluate a product or service. The empirical research that has investigated the relationship between customer satisfaction and word-of-mouth has not produced consistent findings. Some researchers have found a direct positive relationship – with satisfied customers engaging in more word-of-mouth (Holmes and Lett, 1977; Swan and Oliver, 1989; Brown et al., 2005; Babin et al., 2005). Others have found a negative relationship – with dissatisfied customers engaging in more word-of-mouth (Bearden and Teel, 1983; Westbrook, 1987; Hart et al., 1990). Other studies have not found any significant direct relationship between the two constructs (Engel et al., 1969; Bettencourt, 1997). Wirtz and Chew (2002) attempted to explain these conflicting findings in terms of an asymmetric U-shaped pattern, according to which extremely satisfied customers and extremely dissatisfied customers generate more word-of-mouth, whereas moderately satisfied customers generate less word-of-mouth. In contrast to these mixed findings about the details of the relationship, there is general agreement about the valence (positive or negative) of the word-of-mouth: satisfied customers generate positive word-of-mouth (Bitner, 1990), whereas dissatisfied customers generate negative word-of-mouth (Richins, 1983). Although some studies have concluded that satisfaction is a necessary but not sufficient condition for positive word-of-mouth, it is agreed that positive feedback is always driven by satisfaction. However, both the level and the valence of word-of-mouth are dependent on a range of other factors, including culture, incentives, emotion, and perception of the fairness of the encounter. With regard to the second behaviour noted above, many researchers have found a positive association between satisfaction and repurchase intention (Bitner et al., 1990; Jones and Suh, 2000; Cronin and Taylor, 1992). However, other empirical studies have not confirmed such a direct relationship (Sivadas and Baker-Prewitt, 2000). In attempting to explain these conflicting findings, Rust and Zahorik (1993) suggested that a satisfied customer might switch to an alternative supplier with a view to increasing the present satisfaction level whereas a dissatisfied customer might remain with the existing supplier because no better alternatives are available. The third behaviour noted above – customer feedback – refers to the transmission of negative information (complaints) or positive information (compliments) to providers about the services used. Such information can be useful for providers in identifying areas in which adjustments of performance are required. Very few researchers have examined the relationship between feedback and satisfaction. In most studies, the samples of feedback-providing customers have been small. Nevertheless, So¨derlund (1998) did conclude that dissatisfied customers are significantly more likely to provide negative feedback than are satisfied customers to provide positive feedback. It is presumed that customers who provide negative feedback are seeking to achieve some form of compensation for unmet quality of services; in contrast, the provision of positive feedback is often perceived by customers as not being rewarded.

2.3 Perceived service quality and behavioural intentions Both Parasuraman et al. (1988) and Zeithaml et al. (1996) have reported that a positive relationship exists between perceived service quality and behavioural intentions. In particular, positive word-of-mouth has been clearly associated with superior service quality. Bitner (1990) also found that perceived service quality influences behavioural intentions in terms of word-of-mouth and repurchase intention. Similarly, Dabholkar et al. (1996) reported a positive association between perceptions of service quality and the likelihood of recommending a product or service.


3. Conceptual framework and research hypotheses On the basis of the literature review presented above, a conceptual model for the present research is presented in Figure 1. This model depicts certain hypothesised relationships among the constructs of service quality, customer satisfaction, and behavioural intention. 3.1 Hypothesis regarding service quality and satisfaction Although the causal relationship between service quality and satisfaction is debated in the literature, it is likely in the context of the newly established Thai LCCs that satisfaction is influenced by perceived service quality. Passengers of airlines gather a great deal of their experience through direct experience (Powpaka, 1996). Tangible dimensions and service-delivery practices are pivotal in this experience because airlines are characterised by limited passenger interactions and customisation (Schmenner, 1986). The following hypothesis is therefore proposed: H1. Perceived service quality positively influences passengers’ satisfaction.

Figure 1. Research model

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3.2 Hypothesis regarding satisfaction and word-of-mouth Although both satisfied and dissatisfied customers might engage in word-of-mouth activities, the literature suggests that customers who are satisfied provide more frequent and more positive word-of-mouth. The following hypothesis is therefore proposed: H2. Passenger satisfaction positively influences positive word-of-mouth. 3.3 Hypothesis regarding satisfaction and repurchase intention Satisfied customers are generally more loyal in terms of repurchase behaviour unless switching costs are very high or better opportunities are available elsewhere. Anton (1996, p. 47) demonstrated that “customers switch suppliers because they are not satisfied with the company’s perceived value, relative to the competition”. The following hypothesis is therefore proposed: H3. Passenger satisfaction positively influences repurchase intention. 3.4 Hypothesis regarding satisfaction and feedback Customers tend to provide negative feedback when they are dissatisfied with the service. However, if customers recognise that the service provider has made an effort to improve the poor services or if they attribute the poor service to an external cause, dissatisfaction and negative feedback are less likely to occur. In the case of airline services, passengers are often unable to identify the causes of poor services; for example, they might not be able ascertain whether flight delays are due to bad weather or to maintenance failure on the part of the airline. Consequently, customers might use expectation or satisfaction as a proxy for the level of quality that they should receive. On the basis of the above discussion, the following hypothesis is therefore proposed: H4. Passenger satisfaction negatively influences level of feedback. 4. Empirical study 4.1 Background to the study This empirical study examines the above hypotheses in the context of low-cost carriers (LCCs) operating in the airline passenger market in Thailand. These LCCs offer low fares in exchange for a “no-frills” service that eliminates many of the value-added services (such as free meals and in-flight entertainment) that are routinely offered by full-service carriers (FSCs). There are nine LCCs in South-East Asia, including three (Thai Air Asia, One-Two-Go, and Nok Air operating from Thailand on a point-to-point basis (Damuri and Anas, 2005). Unlike the large markets in Europe and North America, the South-East Asian market lacks a steady supply of well-off passengers (Fullbrook, 2003), and there is significant competition from government-protected “flag carriers”. However, the relative lack of land-transport infrastructure in South-East Asia offers opportunities to the LCCs. The LCCs in South-East Asia have similar pricing and cost structures to European and North American LCCs (Goh, 2005) – including high utilisation of fleets (consisting of one aircraft type), fast turn-around times, point-to-point services from a hub, and low fares (and “no-frills” service) (Mathews, 2004). However, for various reasons, few LCCs in South-East Asia use secondary airports in the pattern of European and North American LCCs (Damuri and Anas, 2005). Innovative marketing strategies (such as

direct selling, call centres, e-ticketing, e-payments, and bank and supermarket networks) are used by most of the LCCs in South-East Asia. Table I provides details of the three LCCs operating in Thailand. It is apparent that the three LCCs operate on the same general “no-frills” model described above, although there are some differences at the margins – such as reduced prices for bookings made in advance, business class seats for an additional charge, sizes of aircraft, and snacks on flights. Rivalry among the three LCCs is intense, with each airline offering to match any fare offered by another. High fuel prices in recent times have caused all three airlines to curtail their operations in various ways (Kositchotethana, 2008; Sritama, 2008). As previously noted, some LCCs in the South-East Asia region have performed extremely well. For example, the Malaysian LCC Air Asia has recorded a huge increase in patronage and consistent improvement in its financial performance (AirAsia Berhad, 2005). LCCs in Indonesia and the Philippines have also demonstrated successful performance as they attracted passengers from deficient rail and sea transportation services (Damuri and Anas, 2005). However, as noted above, Thailand’s three LCCs have presented a bleak picture since their emergence in the market. Despite growth in domestic passenger numbers of about 40 per cent per annum since 2003 (Airport Authority of Thailand, 2007), Thailand’s three LCCs performed badly in comparison with the full-service carriers (FSCs). The persistent Thai Air Asia Date of commencement December 2003 Ownership 49 per cent owned by Malaysian Air Asia, 50 per cent by Thai Shin corporation and 1 per cent individual stake Routes Both domestic and international Destinations 11 destinations Profitability 36 million Baht net loss in forth quarter of 2006 Business strategies Promotional strategies Pricing strategies Distribution

Nok Air

One-Two-Go

July 2004 39 per cent owned by THAI airways and the rest owned by other private sectors

December 2003 100 per cent owned by Orient Thai company

Both domestic and international Six destinations 114 million Baht loss between July 2007 to June 2008 Low-cost strategy, low Low-cost strategy, low operational cost operational cost Advertisement, sales Advertisement, sales promotion and public promotion and public relations advertisement relations Differential pricing Differential pricing strategy with multiple strategy with multiple fare structure fare structure Online sales, call center, Online sales, SMS booking, Call centre and 7-11 convenience store bookings travel agents

Onboard food and drink Not provided but passenger can buy drink during the flight

Not provided but passenger can buy drink during the flight


Both domestic and international Six destinations Loss in 2007 Low-cost strategy, low operational cost Advertisement, sales promotion and public relations Single pricing strategy with one price on every seats and every flight Online sale, mobile payment, travel agents, ticket master, call center, One-two-go club Provided snack and many kind of drinks during the flight

Table I. Comparison of LCCs in Thailand

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increase in fuel prices and the adverse tourism environment in the south of the country also reduced profitability. In response to these developments, the three Thai LCCs engaged in a fierce price-cutting war, which led to even worse results. According to the Economic Review (2005), One-Two-Go realised a loss of about 100 million baht (approximately US$3 million) in 2005, and the other two airlines were financially vulnerable. When LCCs were first developed on a global scale, it was argued that they would open a new market by converting non-customers to customers by attracting low-income passengers who would not normally travel on FSCs. However, the Thai LCCs have failed to do so. Indeed, most LCC passengers in Thailand are relatively high-income people who are service sensitive. Moreover, successful LCCs in other parts of the world have recognised the importance of service quality in achieving sustainable growth in their respective markets. In view of Hanaoka and Chiamsiri’s (2006) contention that the high passenger-defection rates experienced by the Thai LCCs can be attributed, at least in part, to their failure to pursue a customer-focused strategy, the present study set out to investigate whether an improvement in service quality could be used by Thai LCCs as means of getting their passengers back. 4.2 Sample and data collection The sample for the study consisted of passengers who had flown on any of the three LCCs in Thailand in 2006. The passengers for the sample were selected by a quota sample to ensure proportionate representation of all LCCs in accordance with the size of their operations in terms of flights per week – Air Asia 102 flights per week (45.9 per cent), Nok Air 72 flights (32.4 per cent), and One-Two-Go 48 flights (21.6 per cent). Questionnaires were distributed among passengers waiting in the departure lounge of the domestic airport terminal in Bangkok. The survey was conducted during mid-June and July 2006. A total of 1,212 completed questionnaires were received from 554 passengers of Air Asia, 385 of Nok Air, and 273 of One-Two-Go. The mean age of respondents was 32 years, of whom 706 (58 per cent) were male. About 70 per cent were Thai nationals. The Thai respondents had an average monthly income of 40,000 Baht (approximately US$1,200), which indicates that they were more affluent than the average resident of Bangkok, who had an average monthly income of 29,245 Baht (US$965) at the time that the study was conducted. The respondents had made, on average, five airline trips (or 2.5 round trips) in the preceding twelve months. Approximately one-third (35.1 per cent) had travelled for work purposes, another third (33.3 per cent) for vacation purposes, and the remainder to visit family and relatives. 4.3 Measurements 4.3.1 Service quality. The service-quality dimensions used in the study were developed on the basis of: . a focus-group discussion with seven experienced customers of LCC services; and . the SERVPERF instrument (Cronin and Taylor, 1992). In the focus group, the traditional dimensions of reliability, assurance, tangibility, empathy, and responsiveness were discussed to evaluate their appropriateness for measurement of service quality in the context of LCC services. The discussion resulted in a consensus with regard to four broad factors:

(1) tangible factors: such as the newness of the plane, seats, and air conditioning; (2) flight schedule factors: such as convenience of schedule, on-time departure and arrivals; (3) flight attendants: such as dress and appearance, knowledge in providing services, and friendliness with the passengers; and (4) ground staff: identical items to those used for flight attendants. In all, a total of 21 items were initially developed for the four constructs (three for tangibles, four for schedule, and seven each for flight attendants and ground staff). All items were measured on a seven-point Likert-type scale (1 ¼ “strongly disagree”; 7 ¼ “strongly agree”). Exploratory factor analysis (EFA) using the principal component method of extraction and varimax rotation was conducted with these items. Factor loadings were between 0.49 and 0.89, which indicated high correlations between the items and the corresponding constructs. There were no substantial cross loadings, and all items were therefore retained. The set of items was then subjected to confirmatory factor analysis (CFA) to verify the convergent and discriminant validity of the four constructs. The four constructs were extracted on the basis of eigenvalues of 1.00, which explained 75.7 per cent of the total variance. 4.3.2 Satisfaction. Passenger satisfaction was measured with three items: (1) satisfaction with fare; (2) satisfaction with services; and (3) overall satisfaction with the airline. These items were developed from a value-based definition of customer satisfaction and are widely used in the literature (Heskett et al. 1994; Schneider and Bowen, 1995). All items were measured on a seven-point Likert-type scale (1 ¼ “strongly disagree”; 7 ¼ “strongly agree”). 4.3.3 Behavioural intention. Items for feedback, word-of-mouth, and repurchase intention were adopted from So¨derlund (1998). All items were measured on a seven-point Likert-type scale (1 ¼ “strongly disagree”; 7 ¼ “strongly agree”). The detailed specifications of the research model are shown in Figure 2. 4.3.4 Refinement of model. CFA was performed on two multi-factorial models: for service quality; and for passenger satisfaction and behavioural intention (Tables II and III). Following this analysis, six items were deleted due to cross loadings, low loading, or correlated error terms. Two items were deleted from the dimension of flight attendants, two from ground staff, one from flight schedule, and one from repurchase intention. The modified models then demonstrated a good fit. Although the chi-square statistic of the CFA model for the service-quality dimension was significant (x2(98) ¼ 669.76, p , 0.001), the other fit indexes were within acceptable ranges: normed fit index (NFI) ¼ 0.99; relative fit index (RFI) ¼ 0.99; Tucker-Lewis index (TLI) ¼ 0.99; comparative fit index (CFI) ¼ 0.99; and root mean square error of approximation (RMSEA) ¼ 0.07. The CFA model for satisfaction and behavioural intentions also demonstrated a good model fit (x2(8) ¼ 44.12, p , 0.000; NFI ¼ 0.99, RFI ¼ 0.99, TLI ¼ 0.99, CFI ¼ a 0.99, RMSEA ¼ 0.06).


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Figure 2. Model specifications with variables

In both models there were significant t-statistics for each path, and the path loadings (unstandardised coefficient) were greater than twice the standard error, which provided some evidence of convergent validity among items (Anderson and Gerbing, 1988). Moreover, inter-correlation values between 0.19 and 0.87 indicated discriminant validity among the constructs (Kline, 1998). After performing CFA, all constructs demonstrated good reliability – ranging from 0.86 to 0.98, all of which were greater than the lower limit of 0.70 (Hair et al., 1998; Nunnally, 1978). 4.4 Data analysis Analysis of the model was conducted at two levels. First, for a descriptive analysis, statistical means, standard deviations, and bivariate correlations were calculated for all constructs. Second, structural equation modelling (SEM) by AMOS 6.0 was used to verify multiple paths or relationships among the constructs of service quality, satisfaction, and behavioural intentions. The structural model was initially tested using all possible paths among the constructs. Following the elimination of insignificant paths, the model was then tested and analysed in terms of the remaining paths. Direct, indirect, and total effects were compared on the basis of the multiple relationships among the dimensions. The direct effect of one dimension on another was

Variable symbol

Standardized loadings

Constructs and items

Tangible features V1 The airline has new planes The air conditioners in the planes were V2 comfortable V3 The seats in the planes were comfortable

t-value

0.88 0.80 0.75

V6 V7

Services provided by ground staff: they are V8 Well dressed and neat appearance V9 Easy to contact Had sincere interest in fulfilling my V10 needs V11 Willing to help passengers V12 Never too busy to respond to my request V13 Friendly to passengers V14 Had knowledge to answer my questions Services provided by flight attendants: they are V15 Well dressed and had neat appearance V16 Easy to contact Had sincere interest in fulfilling my V17 needs V18 Willing to help passengers V19 Never too busy to respond to my request V20 Friendly to passengers Had knowledge in answering my V21 questions a

361

23.37 22.54 0.92

The airline has convenient flight schedule The air plane departed from the airport at schedule time The air plane arrived at the destination at schedule time The airline did not cancel the flight

V5

A study of lowcost airline carriers

0.72a

Schedules V4

Composite reliability

b

b

0.93a 0.92 0.63

41.63 25.06 0.95

b

0.81a 0.90 0.93 0.88 0.85

38.79 40.75 37.39 35.77

b

0.96 0.79a b

0.93 0.95

38.3 39.34

0.89

35.95

0.83

32.48

b

2

Notes: ¼ fixed parameter; ¼ item deleted; x ¼ 669.76, degree of freedom ¼ 98, p ¼ 0.000, CMIN/DF ¼ 6.8, NFI ¼ 0.99, RFI ¼ 0.99, TLI ¼ 0.99, CFI ¼ 0.99, RMSEA ¼ 0.07

specified by the path coefficient, whereas the indirect effects were calculated by multiplying all the path coefficients for each route of indirect influence (and taking the total of these if more than one route existed) (Bollen, 1989). The total effect was taken to be the sum of direct and indirect effects. 5. Results and discussion 5.1 Descriptive analysis As shown in Table IV, the passengers were apparently content with the overall service of the airlines, as evidenced by the mean satisfaction score of 5.1 and the mean service-quality scores between 4.6 and 5.5 (all on a seven-point scale).

Table II. CFA model for perceived service quality

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Variable symbol

Standardized Composite loadings t-value reliability

Constructs and items

Level of passenger satisfaction V22 The price of air ticket was reasonable V23 I was satisfied with how the airline had taken care of me V24 I was satisfied with this airline compared to other low cost airline Passenger’s repurchase intention V25 I would select the same airline again if I am going to fly another time V26 I will fly with any low cost airline again Word-of-mouth V27 I would recommend my family and relatives to fly with this airline V28 I would recommend my friends to fly with this airline

Table III. CFA model for satisfaction and behavioural intentions

Feedback V29 I would tell airline representatives exactly what I think if a certain situation occurs regarding this airline V30 I would demand to speak with manager in charge if a certain situation occurs regarding the airline

0.85

19.65

0.81

19.24 –

0.99

a

b

0.98 0.96a 0.98

97.3 0.89

0.99a 0.66

29.73

Notes: a ¼ fixed parameter; b ¼ item deleted; x2 ¼ 44.12, degree of freedom ¼ 8, p = 0.000, CMIN/DF ¼ 5.5, NFI ¼ 0.99, RFI ¼ 0.99, TLI ¼ 0.99, CFI ¼ 0.99, RMSEA ¼ 0.06

Constructs

Table IV. Means, standard deviations and correlation matrix

0.86 0.55a

1. 2. 3. 4. 5. 6. 7. 8.

Tangibles Schedule Ground staff Flight attendants Satisfaction Repurchase intention Feedback Word-of-mouth

Mean

SD

1

2

3

4

5

6

7

8

4.9 4.6 5.3 5.5 5.1 5.2 4.9 5.2

1.0 1.4 1.1 1.0 1.1 1.3 1.2 1.3

1 0.51 0.58 0.54 0.58 0.50 0.23 0.51

1 0.47 0.41 0.6 0.48 0.19 0.53

1 0.8 0.62 0.50 0.22 0.49

1 0.61 0.49 0.25 0.49

1 0.83 0.3 0.87

1 0.26 0.84

1 0.31

1

Notes: 1 ¼ strongly agree, 7 ¼ strongly disagree. All correlations are significant at 0.001 level; n ¼ 1,212

With regard to service quality, respondents were least satisfied with the dimension of schedules (mean 4.6). The standard deviation on this dimension (1.4) was greater than with other dimensions, which indicates that respondents tended to have extreme views about the airlines’ schedules, although lower satisfaction ratings were dominant.

Respondents generally gave a positive rating with respect to behavioural intentions. More specifically, the provision of feedback to the service providers had a mean of 4.9, repeat purchase had a mean of 5.2, and positive word-of-mouth communications to friends and relatives had a mean of 5.2. 5.2 Correlations Correlations among the service-quality dimensions revealed that the correlation between the dimension of schedule and the other three dimensions (tangibles, ground staff, and flight attendants) was relatively weak as compared with the correlations among all the dimensions of service quality. This result indicates that positive reactions to the tangibles of the flight or the service of staff were insufficient to compensate for negative reactions to a delayed arrival at a destination. The relationship between satisfaction and feedback was relatively weak; however, it was found to be a positive relationship (contrary to the negative relationship commonly reported in the literature). It is apparent in the present study that satisfied airline passengers also provided feedback to the airlines, although at lower level of intensity. The strongest relationship between satisfaction and behavioural intentions related to word-of-mouth communication, which shows that passengers who were satisfied with the services were more likely to provide positive word-of-mouth recommendations to their families and friends. The findings provide empirical support for the contention that passengers’ judgments of the service quality of domestic LCCs in Thailand influences their level of satisfaction, and that this level of satisfaction, in turn, influences their behavioural intentions. The fit indicators (NFI, RFI, TLI and CFI) were all greater than 0.95, which indicates a strong fit of the model to the data. RMSEA was 0.06, which is also supportive to the model fit. Although CMIN/DF was slightly greater at 4.6, this was within the range of 2 to 5, which indicates a reasonable fit (Arbuckle and Wothke, 1999). 5.3 Testing of hypotheses The first hypothesis (that service quality positively influences passengers’ satisfaction) is represented in Figure 3 by four paths – one from each of the dimensions of service quality (flight attendants, ground staff, schedules, and tangibles) to the construct of satisfaction. As shown in the diagram, the standardised coefficients (b) of these four paths were 0.24, 0.13, 0.34, and 0.21 respectively. Critical ratios (t-values) for these paths were 5.72, 2.95, 10.2, and 5.6 (which were all significant at a ¼ 0.001). These findings provide support for H1. The dimension of flight schedule was the most important aspect of service quality for passenger satisfaction, whereas the least important was the service provided by the ground staff. The second hypothesis (that passenger satisfaction positively influences word-of-mouth communication) was supported. As shown in Figure 3, the path for this relationship was significant (b ¼ 0.87, t-value ¼ 19.9). It is apparent that satisfied passengers responded strongly in terms of positive word-of-mouth. The third hypothesis (that passenger satisfaction positively influences intention to repurchase) was also supported. This relationship was significant at an alpha level of 0.001 (b ¼ 0.38, t-value ¼ 8.3). It is apparent that the greater the level of satisfaction, the more likely were customers to travel by the same airline. The fourth hypothesis (that satisfaction has a negative influence on the level of feedback) was not supported. The path from satisfaction to feedback had a positive


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364

Figure 3. Direct and indirect effects of service quality on satisfaction and behavioural intentions

coefficient that was found to be significant at the 0.001 level (b ¼ 0.26, t-value ¼ 6.6). This result is consistent with the descriptive findings reported above. In the context of Thai LCCs, it is apparent that passengers who were satisfied with the service quality were more likely to provide feedback, which is contrary to the findings commonly reported in the literature. In addition to the hypothesised relationships noted above, two other paths are worthy of note in the model. Services provided by flight attendants tended to have a positive (albeit weak) influence on the feedback of passengers (b ¼ 0.1, t-value ¼ 2.49), and word-of-mouth communication had a positive influence on repurchase intention (b ¼ 0.5, t-value ¼ 12.4). The results of the testing of the hypotheses in the context of Thai LCCs are summarised in Table V. The confirmation of the first hypothesis endorses the antecedent role of service quality in the current context and is consistent with the findings of previous studies (Oliver, 1997; Cronin and Taylor, 1992; Parasuraman et al., 1988). The confirmation of the second and the third hypotheses in the current context, which is in accordance with the results of Cronin and Taylor (1992), suggests that a high level of satisfaction fosters intentions to use the service again and to engage in positive word-of-mouth communication with others. The rejection of the fourth hypothesis should be assessed in the current context of high levels of passenger defection from the Thai LCCs. It is apparent that dissatisfied Thai passengers are less likely to provide feedback than simply change to another airline.

Standardized regression weight (b ) t-value Results

Hypotheses H1a: Tangible features of airline positively influence passengers’ satisfaction H1b: Flight schedule of airline positively influences passengers’ satisfaction H1c: Services provided by ground staff positively influence passengers’ satisfaction H1d: Services provided by flight attendants positively influence passengers’ satisfaction H2: Passenger satisfaction positively influences positive word-of-mouth H3: Passenger satisfaction positively influences repurchase intention H4: Passenger satisfaction negatively influences feedback of passengers Additional path 1: Services provided by flight attendants positively influences the feedback of passengers Additional path 2: word-of-mouth communication positively influences repurchase intention

5.6

0.21*

Supported

10.2

0.34*

Supported

2.95

0.13*

Supported

5.72

0.24*

Supported

19.9

0.87*

Supported

8.3

0.38*

Supported

6.6

þ0.26*

2.49

0.1*

Supported

0.51*

Supported

12.4


Not supported

2

Notes: * Significant at 0.001 level; x ¼ 1,109.2, degree of freedom ¼ 239, p ¼ 0.000, CMIN/DF ¼ 4.6, NFI ¼ 0.99, RFI ¼ 0.99, TLI ¼ 0.99, CFI ¼ 0.99, RMSEA ¼ 0.06

5.4 Direct and indirect relationships among constructs Although the services provided by the flight attendants had a minor direct impact on feedback (0.10), virtually all of the relationships between the dimensions of service quality and those of behavioural intention were indirect (mediated through passenger satisfaction) (see Table VI). Satisfaction had direct positive effects on word-of-mouth (0.87) and feedback (0.26), and a strong total effect on repurchase intention (0.82). Although the dimension of schedule was the lowest-rated dimension of service quality, it nevertheless had the strongest positive impacts on satisfaction (0.34), word-of-mouth (0.30), and repurchase intention (0.28). It is apparent that strict management of the schedule is very important for LCCs. Satisfaction influenced repurchase intention both directly and indirectly, with the indirect impact of satisfaction being effected through strong positive word-of-mouth communication. This finding indicates that repurchase intention was not only influenced by satisfaction; rather, passengers who were both satisfied (mostly as a result of the schedule) and communicated this to others through positive word-of-mouth were more likely to “convince themselves” that they should repurchase from the airline. Another service-quality dimension to influence repurchase intention was flight attendants, which contributed to repurchase intention through passenger satisfaction and word-of-mouth. This dimension received the highest mean rating (5.5), which indicates that respondents were satisfied with the flight attendants’ dress, sincerity, help, friendliness, and knowledge. It is apparent that the quality of flight attendants must be maintained or improved by the LCCs. This could be achieved by reviewing

Table V. Summary of testing of hypotheses

Table VI. Direct and indirect effects of service quality on behavioural intentions

0.21 0.24 0.13 0.34 – –

– – – – – –

Satisfaction Indirect

–

0.21 0.24 0.13 0.34

Total – – – – 0.87 –

Direct 0.18 0.21 0.11 0.30 – –

0.18 0.21 0.11 0.30 0.87 –

Word-of-mouth Indirect Total – – – – 0.38 0.51

0.17 0.20 0.11 0.28 0.44 –

0.17 0.20 0.11 0.28 0.82 0.51

Repurchase Intention Direct Indirect Total

– 0.10 – – 0.26 –

Direct

0.05 0.06 0.03 0.09 – –

Feedback Indirect

366

Tangibles Flight attendants Ground staff Schedule Satisfaction Word-of-mouth

Direct

0.05 0.16 0.03 0.09 0.26 –

Total

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passengers’ feedback – given that flight attendants represented the only dimension of service quality about which respondents provided direct feedback to the LCCs. Perception of tangibles should also be enhanced by ensuring satisfaction with regard to the aircraft, air conditioners, and seats. Although this dimension has been regarded as relatively unimportant in many studies of service quality (Zeithaml et al., 1990), tangibles create word-of-mouth impact in the case of LCCs in Thailand. The least important dimension of service quality identified in this study was the ground staff.

6. Conclusions, implications, and limitations 6.1 Main conclusions The three low-cost carriers (LCCs) in Thailand have suffered persistent financial losses since their inception. These losses have been attributed to a range of factors over which LCCs have little control – such as high fuel prices, internal rivalry, and the entrenched position of dominant full-service carriers (FSCs). However, despite evidence that successful LCCs in other parts of the world have not only offered low fares to their passengers but have also been sensitive to the quality of services they provide, the Thai LCCs have rarely adopted measures to improve service quality and/or customer satisfaction as a solution to their problems. The present study therefore investigated whether service quality and satisfaction influence passengers’ behavioural intentions (word-of-mouth, repurchase intention, and provision of feedback) in the context of LCCs in Thailand. The findings of the study are consistent with those of prior research in concluding that: service quality is a significant determinant of customer satisfaction; and quality and satisfaction influence such behavioural intentions as word-of-mouth, repurchase intention, and feedback. More specifically, passengers indicated overall satisfaction with the four dimensions of service quality examined in the study (tangibles, schedule, ground staff, and flight staff). In this regard it was interesting to note that the dimension of schedule had the lowest mean rating (significantly different from the other dimensions); however, the correlation between schedule and satisfaction was very strong, which implies that improvement in flight schedules is an important issue that requires attention from Thai LCCs. The dimensions of flight attendants and tangibles also had a significant influence on the construct of satisfaction. In contrast, service offered by ground staff was not found to be a significant influence on satisfaction in the present study. Contrary to the findings commonly reported in the literature, the present study found a positive (albeit weak) relationship between the level of satisfaction and feedback to the service provider. This finding indicates that LCC passengers provide positive feedback if their expectations are met (and negative feedback if unmet, at a very low level). Moreover, the study finds that passengers who do not intend to provide negative feedback are likely to remain silent and turn to other airlines. Analysis of the relationships among service quality, satisfaction, and behavioural intention revealed that satisfaction plays a direct role in enhancing passengers’ intentions to become involved in word-of-mouth activities and repurchase. However, as noted above, satisfaction had a weaker correlation with the provision of feedback; unsatisfied customers tended to move to other airlines. Passengers who engaged in word-of-mouth activities were found to become loyal customers subsequently. Having satisfied passengers was thus shown to be important in developing loyal passengers.


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6.2 Managerial implications The findings of the study have important implications for managers of LCCs, especially in terms of: the quality of services that could be provided; and the significant influence that satisfaction has on the behavioural intentions of their customers. In particular, managers should be aware that, among the various dimensions of service quality, reliability of flight schedule was especially significant in fostering satisfaction for the customers of Thai LCCs. It is apparent that timely operation of scheduled flights is critical for customer satisfaction. In addition, the satisfaction of passengers was significantly influenced by the performance of the flight attendants and the quality of the interior of the aircraft. It is thus apparent that managers of LCCs in Thailand could enhance customer satisfaction by maintaining or improving the quality of services offered by their flight attendants and the quality of the tangibles associated with the service. It is also apparent that the use of customer complaints (received through a web site or other means) as a performance indicator is not supported by the present findings. The satisfaction of passengers in this study did not have a significant relationship with feedback. 6.3 Limitations and future research The study has several acknowledged limitations. The first relates to the generalisibility of the findings. Although the study utilised a large sample, it would be prudent to apply the findings only in the context of Thai LCCs because: people who travel on LCCs in Thailand represent a relatively high-income group of the population; and Thailand is unlike other South-East Asian countries in offering good land transport to all parts of the country. Second, passenger satisfaction in this study was rather narrowly conceptualised in terms of only four dimensions of service quality. Although 54.5 per cent of the variation in passenger satisfaction was explained by the four service dimensions studied here, the remaining 45.5 per cent is explained by other factors that were not examined in this study. For example, passenger satisfaction might be influenced by such factors as financial incentives for flight delays, the image of the LCC, and transparency in airfares. It might be desirable for future studies to include these (and other) factors to assess their explanatory power. The third limitation concerns the method of analysis of the study. Although SEM is a powerful method for demonstrating several dependence relationships simultaneously, its correlational nature prevents any definitive conclusions being drawn about the causal relationships among the variables. The findings regarding the causal relationships among service quality, passenger satisfaction, and behavioural intentions in this study are therefore tentative. Further research should be conducted with panel study data to investigate these causal relationships (Biddle and Martin, 1987). References AirAsia Berhad (2005), Annual Report 2005, AirAsia Berhad. Airport Authority of Thailand (2007), available at: www.airportssuvanabhumi.com (accessed 14 December 2007). Anderson, E.W., Fornell, C. and Lehmann, D.R. (1994), “Customer satisfaction, market share, and profitability: findings from Sweden”, Journal of Marketing, Vol. 58, July, pp. 53-66.

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Tian-Cole, S., Crompton, J.L. and Willson, V.L. (2002), “An empirical investigation of the relationships between service quality, satisfaction, and behavioral intentions among visitors to a wildlife refuge”, Journal of Leisure Research, Vol. 34 No. 1, pp. 1-24. Tiernan, S., Rhoades, D.L. and Waguespack, B. Jr (2008), “Airline service quality – Exploratory analysis of consumer perceptions and operational performance in the USA and EU”, Managing Service Quality, Vol. 18 No. 3, pp. 212-24. Westbrook, R.A. (1987), “Product/consumption-based affective responses and post-purchase processes”, Journal of Marketing Research, Vol. 24, August, pp. 258-70. Wirtz, J. and Chew, P. (2002), “The effects of incentives, deal proneness, satisfaction, and tie strength on word-of-mouth behavior”, International Journal of Service Industry Management, Vol. 13 No. 2, pp. 141-62. Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1996), “The behavioral consequences of service quality”, Journal of Marketing, Vol. 60 No. 2, pp. 31-46. Zeithaml, V.A., Parasuraman, A. and Berry, L.L. (1990), Delivering Quality Service, Free Press, New York, NY. About the author Gour C. Saha is an Associate Professor at Pearl School of Business, Gurgaon. India. Previously, he served as a senior lecturer in the Department of Management, Assumption University in Thailand for about 18 years. He received his PhD in Technology Management from the Asian Institute of Technology, Thailand. He possesses an MBA from the University of Dhaka, Bangladesh, an MS in Computer Information Systems from Assumption University of Thailand, and a Bachelor in Statistics from the Academy of Statistics in Indonesia. His research interests are technological strategy, TQM, service quality, and organisational performance. Gour C. Saha can be contacted at: [email protected] Theingi obtained her PhD in marketing from the University of Western Australia in 2005. Her research interests are in the area of export marketing, small and medium-sized enterprises, business networks in Asia, and service quality. She has been teaching at the Department of Marketing, Assumption University, Thailand, for 13 years at both undergraduate and postgraduate levels.

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