A SSESSING A IRLINES : QUALITY AS A COMPETITIVE

VARIABLE

Xavier Fageda Universitat de Barcelona

Juan Luis Jimnez1

Ancor Surez-Alemn

Universidad de Las Palmas de Gran anaria

Abstract Price is no longer t!e sole varia"le a##ecting consumer c!oice in t!e airline sector$ Service %ualit&' (!ic! !as "een anal&zed #rom a range o# )ers)ectives' is o# increasing im)ortance in t!is mar*et$ Airlines )rovide a transportation service +t&)icall& #or )ur)oses o# tourism, and so anal&zing )assenger assessments !as "ecome crucial in t!is com)etitive industr&$ -!is )a)er see*s to determine t!e #actors t!at account #or airline )assengers. )erce)tions o# t!e %ualit& o# service t!e& receive$ /ra(ing on data #rom a surve& o# more t!an 01 airlines (orld(ide in t(o &ears' (e #ind t!at )erceived %ualit& increases #or larger com)anies t!at concentrate t!eir o)erations on a #e( routes$ 2egional airlines receive t!e (orst assessments' (!ile (e #ind no mar*ed di##erences "et(een lo(-cost and net(or* airlines$ -!e (ea* #inancial conditions o# a com)an& are also #ound to reduce t!e )erceived %ualit& o# t!e airline$

Keyw r!s: Perceived %ualit&3 Airlines3 -ourism "EL C !es: L40' L50

ontact aut!or6 Facultad de 7conom8a' 7m)resa & -urismo$ Universidad de Las Palmas de Gran anaria$ am)us de -a#ira$ 0191:' Las Palmas de G $ 7-mail6 ;l;imenez<daea$ul)gc$es3 tl#6 = 0> 5?4 >14 151$

1# I$tr !%ct& $ -!e !ig!l& com)etitive mar*et conditions t!at c!aracterize t!e airline industr& )lace airlines under great )ressure to deliver !ig!-%ualit& services +Pa*dil and A&din' ?99:,$ -!is increasing com)etition is re#lected in suc! as)ects as )rice' as a gro(ing num"er o# com)anies o##er t!eir services on a s)eci#ic route$ @n )articular' t!e emergence o# lo(-cost carriers +L , !as #orced net(or* airlines to rede#ine t!eir strategies as t!e& see* to retain t!eir mar*et s!ares +see' #or eAam)le' Fageda et al$' ?911,$ Bet' )rice is not t!e sole source o# com)etition among airlines$ @n a mar*et (!ere )rice com)etition is #ierce' service %ualit& emerges as a com)etitive varia"le$ -!is distinction su))oses t!at (!ile some com)anies #ocus on su))l&ing lo( )rices' ot!ers #ocus on su))l&ing !ig! %ualit& services$ At t!e same time' it s!ould not "e #orgotten t!at airlines o##er a transportation service conve&ing )assengers #rom t!eir )oint o# origin to t!at o# t!eir destination$ As (it! an& service )rovider' customer assessments are essential in u)!olding t!e com)an& image and' ultimatel&' sustaining t!eir "usiness$ ustomers. ;ourne&s are motivated "& t(o main )ur)oses6 "usiness +(or* motives, or )leasure +tourist activities,$ -!e #ormer involves com)anies satis#&ing !ig!-%ualit& demand' (!ile t!e latter involves t!e )rovision o# %ualit& to satis#& t!e customers. travel eA)erience$ Co(ever' in t!e airline industr&' %ualit& is a multi#aceted conce)t com)rising all t!e c!aracteristics t!at ma*e u) t!e )assengers. )erce)tions o# t!eir travel eA)erience$ From t!e moment a )assenger ste)s #oot in t!e air)ort terminal until s!e leaves t!e arrival air)ort' t!ere are a m&riad o# elements t!at can a##ect !er )erce)tion o# airline %ualit&6 t!e time at (!ic! t!e #lig!t can "e ta*en' t!e c!ec*-in eA)erience' t!e D"aggagingE s&stem' t!e aircra#t' t!e relia"ilit& o# t!e ca"in cre(' t!e )unctualit& o# ta*e-o##' on "oard com#ort' ot!er sta##ing issues' )rice-%ualit& ratio' overall e##icienc&' etc$ 7ac! o# t!ese #actors !as a "earing on )assenger assessment o# an airline and com)anies see*ing to )rovide !ig! %ualit& services cannot a##ord to lose sig!t o# t!is #act$ Co(ever' it mig!t "e t!e case t!at t!ese c!aracteristics are closel& associated (it! t!e s)eci#ic nature o# t!e o)erational and organizational models ado)ted "& airlines$ -!us' !ere' (e see* to determine (!et!er' #or eAam)le' "eing a large o)erator' "eing an alliance mem"er or a regional com)an& in#luences )assenger assessments o# airline com)anies$

@n t!is )a)er' (e t!ere#ore eAamine t!e #actors t!at eA)lain evaluations o# airline %ualit&$ Fore s)eci#icall&' (e anal&ze t!e relations!i) "et(een %ualit& )erce)tion o# an airline com)an& and varia"les o# o)erator size' t!e num"er o# air)orts #rom (!ic! a com)an& o)erates' t!e "usiness model ado)ted +net(or*' lo(-cost' regional, and t!e #inancial conditions o# t!e airline$ -!e )a)er is structured as #ollo(s6 in section ?' a s!ort revie( is underta*en o# studies o# %ualit& assessment in t!e airline sector$ Section 0 outlines t!e met!ods o# data collection ado)ted and t!e em)irical strateg& em)lo&ed$ Ge also )resent our descri)tive statistics$ 7stimation results are detailed in section >$ Finall&' our main conclusions are dra(n in section 1$ '# L&terat%re re(&ew -!e dimensions o# %ualit& and t!eir assessment !ave "een eAamined in de)t! "& "ot! t!e management and economics literature' a"ove all among service )roviders +A*an' 1551,$ Co(ever' as Liou et al$ +?911, claim Dt!ere is no universal and eAact de#inition o# service %ualit&3 t!e conce)t o# service %ualit& is conteAt-de)endent$ @ts measurements s!ould t!us re#lect t!e o)erational environment "eing investigated$E @n t!is )a)er' (e are interested )rimaril& in airline service %ualit& and t!e anal&ses underta*en to date in t!is sector$ A num"er o# studies s!o( service %ualit& to "e essential in )assenger c!oice +Bureau o# -rans)ort and ommunications 7conomics' 155>3 Pa*dl and A&din' ?99:,$ @ndeed' Sim et al$ +?99H, esta"lis!ed a descri)tive statistical relations!i) "et(een t!e in#luence o# service %ualit& and aircra#t )roductivit& on a #irm.s #uture )er#ormance' concluding t!at lo(er service %ualit& indicators are associated (it! a lo(er return on assets and on sales$ 7lse(!ere' em)irical studies !ave "een conducted "& Gurso& et al$ +?991,' #or eAam)le' in (!ic! t!e relative )ositioning o# t!e ten ma;or US airlines is considered "ased on service attri"utes t!at in#luence consumer )erce)tions$ -!e stud&' (!ic! dra(s on data #rom t!e Air -ravel onsumer 2e)ort )u"lis!ed "& t!e US /e)artment o# -rans)ortation' re#lects t!e im)ortance o# #eatures suc! as on-time )er#ormance' involuntar& denied "oarding' mis!andled "aggage and 1? customer com)laint areas$ Along t!e same line' Gil"ert and Gong +?990, develo)ed a %uestionnaire to evaluate )assenger eA)ectations regarding various dimensions t!at im)act on )erceived %ualit&' #ocusing on )assenger c!aracteristics and t!e in#luence o# t!ese on t!eir eA)ectations$ 0

DAssuranceE (as #ound to "e t!e most im)ortant service dimension$ It!er studies o# )assenger assessments include 7lliot and 2oac! +1550,' (!o evaluate airline service %ualit& using on-time )er#ormance' "aggage !andling' #ood %ualit&' seat com#ort' and ot!er criteria3 and A*so& et al$ +?990,' (!o eA)lore di##erences in t!e consumer eA)ectations o# domestic and #oreign )assengers on airline services in -ur*e&$ Li*e(ise' Pa*dl and A&din +?99:, s!o( !o( com)an& Dres)onsivenessE +"aggage' dela&s' etc$, is one o# t!e *e& dimensions o# )erceived %ualit&$ @n t!eir anal&sis' t!e aut!ors conclude t!at education levels a##ect )assenger valuations' and t!at eac! )assenger s!ould "e considered uni%ue and inde)endent o# all ot!ers$ @n relation to our issue' t!ere are ot!er relevant )oints to "e considered$ !ang and

Bang +?994, anal&zed airlines. "rand nic!es t!roug! measuring )assengers. re)urc!ase motivation' considering t!e im)act o# a range o# varia"les t!at included #lig!t #re%uencies' securit&' )rice' aircra#t c!aracteristics and service %ualit&$ -!e& used data #rom #our airlines t!at lin* -ai)ei and Cong Jong$ -!eir results indicate t!at eac! airline c!ooses a s)eci#ic %ualit& strateg& #or com)eting in t!is )articular corridor$ Ine o# t!e ot!er lines o# researc! in service %ualit& in t!e sector !as "een conducted in strategic alliance settings$ -!e relevance is o"vious i# (e consider t!at Dnegative )erce)tions o# one mem"er airline ma& !ave negative im)lications #or t!e entire allianceE +Ge"er and S)ar*s' ?99>,$ Ge"er +?991, assessed t!e im)ortance o# air travelers. )erce)tions o# airline alliance +including' S-A2 and IK7GI2L/, "ene#its and )er#ormance$ Based on a surve& conducted at Cong Jong @nternational Air)ort' t!e stud& #ound signi#icant di##erences in )erce)tions "et(een residents o# Gestern and Asian countries (!ic! !as led glo"al alliances to ado)t di##erent a))roac!es to di##erent mar*et segments$ -!e stud& concludes t!at #actors a##ecting traveler convenience are more im)ortant in alliances t!an t!e a"ilit& to earn #re%uent #l&er )oints or t!e )rovision o# an eAtensive route net(or*$ Similarl&' -iernan et al$ +?994, undertoo* an anal&sis o# international alliances in 7uro)e and t!e USA to determine (!et!er t!e& are li*el& to succum" to lo( cost )ractices or (!et!er t!e& (ill continue to ad!ere to %ualit& )olicies to distinguis! t!em #rom t!eir com)etitors$ -!e& conclude t!at service %ualit& is t!e main attraction #or )assengers (!en c!oosing to #l& (it! an alliance mem"er$

>

@n our anal&sis' (e see* to s!ed #urt!er lig!t on t!e relations!i) "et(een alliance mem"ers!i) and o"taining a "etter evaluation #rom )assengers in terms o# )erceived %ualit& in a (orld(ide conteAt$ Additionall&' eA)eriencing #inancial di##iculties or t!e e##ects o# a )eriod o# economic crisis ma& "e #actors t!at can im)act )assenger assessments o# airlines$ Borenstein and 2ose +?990, #ound t!at airline "an*ru)tcies reduce service )rovisions at some air)orts +most nota"l& at midsize air)orts,' re#uting t!e idea t!at "an*ru)tc& mig!t stimulate t!e eA)ansion o# ot!er com)anies as t!e& see* to re)lace #lig!ts no longer "eing o##ered$ Co(ever' no relations!i) (as esta"lis!ed "et(een airline service %ualit& and #inancial di##iculties$ -!is relations!i) is #urt!er tested in t!is )a)er$ -!us' (!ile t!e literature !as anal&zed in de)t! t!e im)act on service %ualit& o# s)eci#ic c!aracteristics suc! as )er#ormance' dela&s' "aggage !andling' etc$ +Gurso& et al$' ?9913 !ang and Bang' ?9943 7lliot and 2oac!' 15503 Pa*dl and A&din' ?99:,' no single stud&' to t!e "est o# our *no(ledge' !as soug!t to relate air traveler )erce)tions (it! airlines. general o)erational and organizational #eatures$ Cere' t!ere#ore' (e are s)eci#icall& interested in determining (!et!er )erce)tions are a##ected "& t!e #act t!at a com)an& uses regional aircra#t' "& its nationalit& or "& its size +measured in terms o# t!e num"er o# seats it ma*es availa"le and t!e num"er o# air)orts #rom (!ic! it o)erates,' in addition to t!e a#orementioned #actors o# "eing an alliance mem"er and t!e eA)eriencing o# #inancial )ro"lems$ @n t!is )a)er' dra(ing on surve& data +em)lo&ing a Li*ert scale,' (e eAamine (!et!er t&)e' o)erational and organizational c!aracteristics as (ell as t!e #inancial structure o# an airline are drivers o# )assenger valuations$ )# *ata a$! e+,&r&ca- strate.y Ge constructed a data"ase com)rising in#ormation #or several airlines in t!e t(o &ears availa"le +?99H and ?995,$ Ge dre( on various sources to gat!er data a"out t!e #actors t!at mig!t in#luence )assenger assessments$ @n t!is sense' our endogenous varia"le is airline %ualit& as )erceived "& consumers$ Passenger assessments o# airlines (ere o"tained #rom a surve& conducted among 4'H04 )assengers on 119 airlines +regional' national and international com)anies, "& t!e Irganization o# onsumers and Users o# S)ain +I U, toget!er (it! ot!er 7uro)ean User Associations in ?99H and ?995$

-!e airlines included in t!e surve& o)erate at air)orts around t!e (orld$ A cumulative anal&sis s!o(s t!at ninet& )er cent o# t!e com)anies o)erate #rom at least 09 di##erent air)orts$ 7uro)ean airlines constitute H1 )er cent o# t!e sam)le$ -!e I U uses a )erceived %ualit& indeA #or eac! &ear "ased on t!e #ollo(ing )arameters t!at see* to measure an airline.s o)erational environment6 relia"ilit&' )unctualit&' com#ort' sta##' )rice-%ualit& ratio' "aggage !andling and e##icienc&$ Ge t!en use t!e score o"tained "& eac! com)an& as our endogenous varia"le in an e##ort to identi#& t!e #actors t!at in#luence it$ Iur !&)ot!esis is t!at various attri"utes o# airline com)anies im)act on t!ese varia"les o# t!e o)erational environment and our goal is to identi#& (!at t!ese attri"utes mig!t "e$ S)eci#icall&' (e eAamine t!e im)act o# suc! attri"utes as size' "usiness model' #inancial condition' and nationalit& on consumers. )erceived %ualit&$ -!e most !ig!l& ran*ed "& customers in terms o# service %ualit& are t!e Asian and Fid7ast airline com)anies +4?$5 and 4H$0 res)ectivel&,3 at t!e "ottom o# t!e ran*ing' (e #ind various Sout! American airlines$ 2egards to t&)e o# airline' lo( cost airlines are t!e less valued +:> average3 minimum e%ual to HH,$ Foreover' average data on %ualit& )erceived s!o(s t!at airlines included in an alliance are a #actor t!at increases it$ G!ile com)anies in an alliance reac! :>$1' ot!er com)anies are situated at :?$1 average values$? A#ter t!is eA)lorator& anal&sis o# data' our em)irical multivariate anal&sis is "ased on t!e estimation o# t!e #ollo(ing e%uation #or t!e )erceived %ualit& o# airline i in &ear t6

Quality it = 0 + 1Seat Kmit + 2 Nairportsit + 3 Ltdebtit + 4 DiRegional Airline + 5 DiAlliance + 6 DiEU + 7 DiYear + it

+1,

-!e eA)lanator& varia"les included in t!e estimation o# t!e %ualit& e%uation are t!e #ollo(ing6 1$ Seat Kmit$- Availa"le seat *ilometers #or airline i in )eriod t$ -!is varia"le see*s to ca)ture an airline.s overall activit&' i$e$' its total su))l&$ /ata #or t!is varia"le (ere o"tained #rom t!e tra##ic statistics o# t!e @nternational ivil Aviation Irganization +@ AI,$ Ge (ould eA)ect a !ig!er )erceived %ualit& #or larger airline com)anies as )assenger *no(ledge o# t!e "rand can "e assumed to "e greater$ Furt!ermore' larger airlines can
?

Bot! means results !ave "een tested "& a t-test mean com)arisons$ -!e& are signi#icant at 1 )er cent in t!ose di##erences$

t&)icall& )rovide "etter services in terms o# #re%uent #l&er )rograms' #lig!t sc!edules and air)ort access +Borenstein' 15453 Berr& et al$' 155H,$ @m)ortantl&' larger airlines are also a"le to o##er !ig!er #lig!t #re%uencies on t!e routes t!at t!e& o)erate$ Flig!t #re%uenc& is a *e& %ualit& attri"ute among "usiness )assengers since it determines t!e sc!edule dela& cost +i$e$' t!e di##erence "et(een t!e actual and t!e desired time o# de)arture,$ ?$ Nairportsit$- Kum"er o# air)orts #rom (!ic! airline i o)erates in &ear t$ -!is varia"le (as o"tained #rom t!e RDC Aviation (e" )age +ca)stats,$ As (it! t!e seats varia"le' (e eA)ect a !ig!er )erceived %ualit& #or airlines o)erating #rom a !ig!er num"er o# air)orts$ -!eir "rand is also more li*el& to "e *no(n among )otential )assengers (is!ing to use t!eir services$ Co(ever' an airline (it! a !ig! num"er o# availa"le seat *ilometers does not necessaril& o)erate #rom a !ig!er num"er o# air)orts +in #act' t!e correlation "et(een t!e t(o varia"les in our sam)le is ;ust 9$1H,$ 0$ Ltdebtit$- Long--erm /e"t o# airline i in &ear t$ /ata #or t!is varia"le (ere o"tained #rom t!e #inancial statistics o# t!e @nternational ivil Aviation Irganization +@ AI,$ A )riori' (e (ould eA)ect airlines (!ose overall #inancial condition is (ea* to !ave more incentives to save costs$ An o"vious strateg& #or saving costs among airlines is to reduce t!e service %ualit& o##ered to )assengers in all as)ects deemed non-essential$ >$ /i2egional
Airline

- A "inar& varia"le t!at ta*es a value o# 1 i# t!e o"servation i

corres)onds to a regional airline' i$e$' t!ose t!at em)lo& regional aircra#t +regional ;ets' tur"o)ro)s and t!e li*e,$ G!ile several regional carriers are su"sidiaries o# net(or* airlines +airlines involved in alliances, or !ave #ranc!ise agreements (it! t!em' ot!ers' suc! as Aer Aran and Binter anarias' are no( inde)endent$ A )riori' t!e eA)ected sign o# t!is varia"le is unclear$ 2egional carriers ma&' on t!e one !and' o##er greater #lig!t #re%uencies given t!e num"er o# availa"le seats' "ut' on t!e ot!er' #lig!t com#ort' in terms o# ca"in s)ace' noise levels' cruising s)eed' eA)osure to tur"ulence' etc$' on regional aircra#t is not as great as t!at on mainline ;ets$ -!is is es)eciall& true o# tur"o)ro) aircra#t$ US regional airlines !ave largel& rene(ed t!eir #leet o# regional aircra#t' re)lacing tur"o)ro)s (it! regional ;ets' (!ile 7uro)ean carriers still tend to use tur"o)ro)s +Fageda and Flores-Fillol' #ort!coming,$ Kote t!at regional carriers t&)icall& o)erate on ver& s!ort-!aul routes so t!at most o# t!e regional carriers in our sam)le are #rom 7uro)e$ 1$ /iAlliance$- A "inar& varia"le t!at ta*es a value o# 1 i# t!e o"servation i corres)onds to an airline included in an airline alliance suc! as Ine(orld' Star or S*&-eam$ Ge eA)ect a )ositive sign #or t!is varia"le +as service %ualit& is t!e main attraction (!en c!oosing to #l& (it! an alliance mem"er' -iernan et al' ?994,$ Iverall' airlines t!at are mem"ers o# :

alliances can "e eA)ected to o##er a "etter service t!an t!at )rovided "& lo(-cost carriers$ A *e& di##erence "et(een t!e t(o is t!at net(or* airlines +i$e$' t!ose involved in alliances, o##er di##erent classes o# air#are (!ile lo(-cost carriers !ave ;ust a single #are class$ As suc!' net(or* airlines di##erentiate "et(een "usiness and tourist )assengers and so t!e )erceived %ualit& #or "usiness )assengers s!ould "e mar*edl& !ig!er$ G!en controlling #or t!e size o# t!e airline' it "ecomes less clear #or tourist )assengers t!at net(or* airlines o##er !ig! %ualit& services given t!e mar*ed degree o# convergence in t!e "usiness models o)erated "& t!ese t(o airline t&)es +no-#rills on "oard' dense seating con#iguration' "aggage #ees and so on,$ H$ /i7U$- A "inar& varia"le t!at ta*es a value o# 1 i# t!e o"servation i corres)onds to an airline located in t!e 7uro)ean Union$ A )riori' (e (ould eA)ect a )ositive sign #or t!is varia"le as our sam)le is "ased on a surve& o# )assengers #l&ing #rom 7uro)ean air)orts$ As a large )ro)ortion o# )assengers in our sam)le (ill "e 7uro)ean' non-7uro)ean airline "rands (ill not "e so (ell *no(n to t!em$ :$ /i&ear$- A dumm& varia"le t!at ta*es t!e value o# 1 #or ?995$ 2ecall t!at (e !ave data #or ?99H and ?995$ -!is varia"le allo(s us to eAamine (!et!er t!e )erceived %ualit& !as im)roved or (orsened "et(een t!e t(o dates$ Kote t!at t!e economic di##iculties #aced "& most countries in ?995' es)eciall& in com)arison (it! ?99H' ma& in#luence t!e result #or t!is varia"le$ -a"le 1 includes t!e descri)tive statistics #or t!e varia"les used in t!e em)irical anal&sis$ Ge !ave :1 o"servations #or almost eac! varia"le +(it! t!e eAce)tion o# Dnum"er o# air)ortsE and Dlong-term de"tE,$ -!e mean value o# t!e %ualit& indicator is :1$1' (it! a range o# ?1 )oints$ 2egional airlines re)resent t!ree )er cent o# our sam)le' (!ile :1 )er cent o# airlines are mem"ers o# an alliance$ -!e average airline o##ers H1 million seat *ilometers and o)erates #rom 1H di##erent air)orts$ -!e average long-term de"t is ?'?H9 million o# current dollars' and almost #i#t& )er cent o# t!e airlines are 7uro)ean$ I$sert Tab-e 1 ab %t /ere 0# Res%-ts -a"le ? s!o(s t!e results o# t!e estimation o# t!e e%uation #or t!e #actors driving t!e )erceived %ualit& o# airlines$ Ge used Irdinar& Least S%uares regression to estimate t!e e%uation (it! standard errors ro"ust to !eteros*edasticit&$ Ge estimated di##erent s)eci#ications o# t!e e%uation as (e !ave #e(er o"servations #or t(o o# t!e varia"les +num"er o# air)orts #rom (!ere eac! airline o)erates and long-term de"t,$ -!us' (e #irst 4

estimated t!e e%uation eAcluding t!ese t(o varia"les$ @n t!is regression' (e included :1 o"servations$ Ge t!en estimated t!e e%uation including t!e num"er o# air)orts varia"le and our sam)le (as reduced to H4 o"servations$ Finall&' (e included all t!e varia"les and t!e sam)le included ;ust >1 o"servations$ I$sert Tab-e ' ab %t /ere Ge #ound t!e )erceived %ualit& o# larger airlines to "e !ig!er$ @ndeed' t!e coe##icient associated (it! t!e num"er o# seats varia"le is )ositive and statisticall& signi#icant in eac! o# t!e t!ree regressions estimated$ Kote t!at larger airlines can eA)loit densit& economies derived #rom carr&ing more )assengers on t!e routes on (!ic! t!e& o)erate' since t!e& can #l& larger aircra#ts at !ig!er load #actors$ Iverall' t!e in#luence o# densit& economies is more closel& associated (it! t!e tra##ic on t!e route' "ut larger airlines are li*el& to o##er more seats on t!e routes on (!ic! t!e& o)erate$ -!us' t!e com)etitive advantage en;o&ed "& larger airlines ma& "e related to "ot! !ig!er )erceived %ualit& and lo(er costs$ B& contrast' t!e num"er o# air)orts #rom (!ic! airlines o)erate does not seem to in#luence )erceived %ualit&$ @n #act' t!e varia"le is not statisticall& signi#icant +and is actuall& negative and statisticall& signi#icant at t!e 19L level,$ -!us' it seems t!at airlines s!ould concentrate tra##ic in a small num"er o# air)orts "ecause t!is mig!t ena"le t!em to eA)loit densit& economies and avoid t!eir "eing a##ected "& )oor %ualit& )erce)tion$ As eA)ected' airlines (it! (ea*er #inancial conditions are )erceived as o##ering lo(er service %ualit&$ @ndeed' t!e coe##icient associated (it! t!e long-term de"t varia"le is negative and statisticall& signi#icant at t!e 19L level$ Li*e(ise' t!e dumm& varia"le t!at ta*es a value o# 1 #or ?995 +a &ear c!aracterized "& a severe #inancial crisis, is also negative and statisticall& signi#icant at t!e 1L and 1L levels +de)ending on t!e model considered,$ -!us' it (ould a))ear t!at airlines ad;ust service %ualit& (!en eA)eriencing #inancial di##iculties$ Ge #ind t!at t!e )erceived %ualit& o# 7uro)ean airlines is not as !ig! as t!at o# t!eir non-7uro)ean counter)arts3 !o(ever' t!e coe##icient associated (it! t!is varia"le is not statisticall& signi#icant$ -!e airline sector is a strongl& glo"alized industr& and' toda&' it (ould seem t!at 7uro)ean )assengers !ave a good *no(ledge o# most American and Asian airlines$ -!is is im)ortant since )assengers mig!t "ene#it #rom stronger com)etition "et(een 7uro)ean and non-7uro)ean airlines$ As #or t!e "usiness models o)erated "& t!e airlines' (e #ind t!at t!e )erceived %ualit& o# regional carriers is not as !ig! as t!at o# airlines using mainline ;ets$ -!e o"vious 5

im)lication o# t!is result is t!at regional carriers in 7uro)e could "ene#it #rom ado)ting regional ;et tec!nolog&$ @ndeed' t!e com#ort a##orded "& regional ;ets is com)ara"le to t!at )rovided "& mainline ;ets$ Co(ever' 7uro)ean airlines still tend to use tur"o)ro) aircra#t on s!ort-!aul routes +see Fageda and Flores-Fillol' ?91?' #or a #urt!er eA)lanation o# t!is de"ate,$ G!en controlling #or t!e size o# t!e airline' (e #ind no di##erences in t!e )erceived %ualit& o# net(or* and lo(-cost carriers' (!ic! in )art accounts #or t!e #ierce com)etition "et(een t!ese t(o t&)es o# airline$ Lo(-cost airlines are a"le to eA)loit several cost advantages in relation to net(or* airlines and t!is does not seem to condition t!eir )assengers. )erce)tions o# %ualit&$ Cence' large lo(-cost carriers' suc! as 2&anair and 7as&;et in 7uro)e and Sout!(est in US' are a"le to com)ete (it! traditional carriers not ;ust in costs "ut also in )erceived levels o# %ualit&$ -!is !as im)ortant im)lications in terms o# com)etition$ 1# C $c-%s& $s a$! !&sc%ss& $ urrent mar*et conditions in t!e airline industr& !ave led some com)anies to rede#ine t!eir strategies so as to retain +or eA)and, t!eir res)ective mar*et s!ares$ A num"er o# airlines !ave o)ted to en!ance t!e %ualit& o# t!eir service rat!er t!an engage in a )rice (ar$ Given t!at airlines o)erate in a service industr&' %ualit& is a *e& #actor and )assenger assessments cannot "e ignored$ @ndeed' airlines #orm )art o# t!e travel eA)erience and travelers can "e )articularl& a##ected "& t!eir )erce)tions o# %ualit&3 in ot!er (ords' t!eir travel eA)erience can "e considered as commencing at t!e de)arture air)ort +or even "e#ore,$ @n t!is )a)er' (e !ave soug!t to s!ed some lig!t on (!at mig!t under)in )assenger assessments o# airline com)anies$ As noted' our anal&sis suggests t!at user assessments o# t!e c!ec*-in eA)erience' aircra#t' ca"in cre( relia"ilit&' )unctualit& and com#ort' among ot!ers' ma& ultimatel& "e determined "& various organizational' o)erational and #inancial #eatures$ Iur eAamination o# t!ese o)erational and organizational c!aracteristics s!o(s t!at larger airlines !ave a !ig!er )erceived %ualit&$ -!is' toget!er (it! t!e eAistence o# densit& economies' gives a com)etitive advantage to t!e larger airlines$ Ge also s!o( t!at t!e dis)ersion o# an airline.s tra##ic among di##erent air)orts is not a signi#icant varia"le' and ma& in #act !ave a negative im)act on assessments o# )erceived %ualit&6 in ot!er (ords'

19

concentrating tra##ic in ;ust a #e( air)orts could "e "etter in terms o# %ualit& and allo( airlines to "ene#it #rom densit& economies as (ell$ -!e )erceived %ualit& o# regional carriers is not as !ig! as t!at o# airlines using mainline ;ets$ As suc!' 7uro)e.s regional carriers could "ene#it #rom t!e advantages o# ado)ting regional ;et tec!nolog&' es)eciall& given t!at 7uro)ean airlines !ave )oorer assessment scores t!an American and Asian airlines$ Iur eAamination o# #inancial c!aracteristics reveals interesting #indings6 namel&' t!at t!e #inancial conditions o# an airline a##ect users. )erce)tions o# %ualit&$ Foreover' it seems t!at t!e economic crisis !as served to undermine )assenger assessments o# %ualit& #urt!er as airlines see* to ad;ust t!e %ualit& o# service o##ered to )assengers as a cost cutting measure$ Based on our results' regions t!at see* to )romote activit& in t!eir air)orts s!ould attem)t to attract large airlines$ -!ese airlines ma& "e a"le to o)erate (it! lo(er costs due to t!e eA)loitation o# densit& economies$ Furt!ermore' t!e service t!at t!e& o##er seems to "e attractive #or )assengers regardless o# (!et!er t!e& are net(or* or lo(-cost airlines$

Re2ere$ces A*an' P$ +1551, /imensions o# service %ualit&6 a stud& in @stan"ul$ Managing Service Quality' Mol$1' H' ))$ 05->0$ A*so&' S$' Atilgan' 7$ and A*inci' S$ +?990,' Airline services mar*eting "& domestic and #oreign #irms6 di##erences #rom t!e customersN vie()oint' Journal of Air ransport Management' 5' 0>0-011$ Bureau o# -rans)ort and ommunications 7conomics +155>, !nternational aviation trends and issues$Australian Government Pu"lis!ingService' an"erra$ Berr&' S$' F$ arnall and P$-$ S)iller +155H,' Airline Cu"s6 osts' Far*u)s and t!e @m)lications o# ustomer Ceterogeneit&' KB72 Gor*ing Pa)er' 11H1' 1-04$ Borenstein' S$' 1545$ Cu"s and Cig! Fares6 /ominance and Far*et Po(er in t!e U$S Airline @ndustr&$ Rand Journal of "conomics' ?9' 0>>-0H1$ Borenstein' S$ And 2ose' K$ +?990, -!e @m)act o# Ban*ru)tc& on Airline Service Levels$ -!e American 7conomic 2evie(' Mol$ 50' Ko$ ?' Pa)ers and Proceedings o# t!e Ine Cundred Fi#teent! Annual Feeting o# t!e American 7conomic Association' Gas!ington' / ' ))$ >11->15$

11

7lliot' J$F$ and 2oac!' /$G$ +1550, Service %ualit& in t!e airline industr&6 are carriers getting an un"iased evaluation #rom consumersO Journal of #rofessional Services Mar$eting' 5' :1-4?$ Fageda' X$ and Flores-Fillol' 2$ +?91?, Air services on t!in routes6 2egional versus lo(-cost carriers$ Regional Science and %rban "conomics' >? +>,' :9?-:1>$ Fageda' X$' Jimnez' J$L$ and Perdiguero' J$ +?911, Price rivalr& in airline mar*ets6 a stud& o# a success#ul strateg& o# a net(or* carrier against a Lo(- ost carrier$ Journal of ransport &eograp'y' 15' H14-HH5$ Gil"ert' /$ and Gong' J$ $ +?990,' Passenger eA)ectations and airline services6 a CongJong-"ased stud&$ ourism Management ?>' 115-10?$ Gurso&' /$' !en' F$C$ and Jim' C$J$ +?991, -!e US airlines relative )ositioning "ased on attri"utes o# service %ualit&$ ourism Management' ?H' 1:-H:$ Jen' G$' -u' 2$ and Lu' -$ +?911, Fanaging )assenger "e!avioral intention6 an integrated #rame(or* #or service %ualit&' satis#action' )erceived value' and s(itc!ing "arriers$ ransportation' 04' ?' ))$ 0?1-0>?$ Liou' J$J$C$' !ao- !e' C$' Gen- !ien' B$ and 2ong-Co' L$ +?911,$ Using a modi#ied gre& relation met!od #or im)roving airline service %ualit&$ ourism management 0?' ))$10411044$ Pa*dl' F$andA&din' P$ +?99:, 7A)ectations and )erce)tions in airline services6 Am anal&sis using (eig!ted S72MQUAL scores$ Journal of Air ransport Management' 10' >' ))$ ??5?0:$ Sim' J$L$' Jo!' C$ $ and S!ett&' S$ +?99H, Some )otential issues o# service %ualit& re)orting #or airlines$ Journal of Air ransport Management' 1?' ?50-?55$ -iernan' S$' 2!oades' /$ and Gagues)ac*' B$ +?994,$ Airline alliance service %ualit& )er#ormance- An anal&sis o# US and 7U mem"er airlines( Journal of Air ransport Management 1>' ))$ 55R19? Ge"er' J$ +?991, -ravelersN )erce)tions o# airline alliance "ene#its and )er#ormance$ Journal of ravel Researc'' >0+0,' ?1:-?H1$ Ge"er' J$ and S)ar*s' B$ +?99>, onsumer attri"utions and "e!avioural res)onses to service #ailures in strategic airline alliance settings$ Journal of Air ransport Management 19' 0H?R0H:$

1?

TABLES
Tab-e 1# *escr&,t&(e stat&st&cs Obs# Mea$ St!# *e(# :1 :1 :1 :1 H4 >> :1 :1$1? 9$90 9$:1 H$1 e: 1H$:? ?'?H1'151 9$>4 H$H? H$: e: 0:$H> ?':91'501 -

Var&ab-es Qualit& 2egional airline Alliance Seat Jilometers Availa"le Kum"er o# Air)orts Long -erm /e"t +-!ousands current dollars, 7uro)ean Union

M&$ H0 9 9 14?'>:9 1 1$H: 9

Ma3 44 1 1 ?$4 e4 159 5'>H9'5:5 1

Source6 I(n ela"oration$ Kote6 I"sSI"servations

Tab-e '# OLS Est&+at& $s res%-ts E3,-a$at ry (ar&ab-es 2egional airline Alliance Seat Jilometers Availa"le Kum"er o# Air)orts Long -erm /e"t 7uro)ean Union Bear onstant I"servations F test 2? -?$?> +1$>0, -0$>? +1$>?,TT ::$41 +1$44,TTT :1 5$1>TTT 9$15 -9$4> +1$1:, -?$5H +1$>:,TT ::$1> +?$11,TTT H4 5$1?TTT 9$?> M !e- 1 -H$5H +1$5H,TTT -?$99 +1$40, ?$0e-4 +1e-4,TT M !e- ' -:$04 +?$1?,TTT -?$11 +?$95, ?$5e-4 +1$1e-4,TT -9$9> +9$9?,T M !e- ) -H$:4 +0$59,T -0$9H +0$10, H$1e-4 +0$1e-4,TT -9$90 +9$90, -1$>e-H +4$0e-:,T -?$:4 +?$14, -0$4? +1$5?,T :4$:0 +0$11,TTT >1 H$?0TTT 9$0H

Kote 16 Signi#icance test TTT 1L' TT 1L' T19L$ Kote ?6 Standard 7rrors among "rac*ets$

10