Customer Perception Effects of Airline Retention Programs: A Report

This report analyzes customer perception of airline retention programs, comparing budget airlines to national carriers. It examines the increasing global passenger traffic and evolving customer demands, emphasizing the importance of customer retention strategies for enhancing the consumer base and increasing sales. The literature review covers customer satisfaction, service quality, loyalty drivers, and the impact of in-flight ambiance and airline lounges. Methodologies include primary and secondary research to collect and scrutinize data, leading to recommendations for improving airline industry effectiveness. The study uses SERVPERF to measure service quality and explores factors influencing customer loyalty, such as price, frequent travel, and airline reputation. Ultimately, the research aims to provide insights for airlines to develop strategies that enhance customer satisfaction and foster loyalty in a competitive market.

The Customer Perception Effects of Retention Programs: Comparison of Budget Airlines to the
National Carrier

ABSTRACT
The purpose of this study is to effectively analyze the perception of customers regarding the
retention programs conducted by the airline companies. It has been evaluated by the
International Air Transport Association that the global passenger traffic is increasing every year.
In addition to this, the demands of the customers regarding the airline industry have been
growing rapidly. The major objective of this research to effective analyzes the perception and
reaction of the customers regarding the customer retention strategies that are used by the
national carrier. The sales of the company increase due to the customer retention program
such that it helps in enhancing the consumer base. The customer retention programs have
different impacts on the customers which are discussed in the study effectively.
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Table of Contents
ABSTRACT........................................................................................................................................1
INTRODUCTION................................................................................................................................3
LITERATURE REVIEW........................................................................................................................4
METHOD........................................................................................................................................13
RESULTS.........................................................................................................................................19
DISCUSSION...................................................................................................................................39
CONCLUSION.................................................................................................................................41
REFERENCES...................................................................................................................................42
APPENDICES...................................................................................................................................46
QUESTIONNAIRE........................................................................................................................46
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INTRODUCTION
The growing globalization possesses a rapid influence on the economy of the world along with
the huge development in the field of technology that is utilized in the airline industry. The
business environment of the airline industry has been attaining huge development and growth
at the substantial level. There are different services that are offered by the airline industry to
their several kinds of customers such as small distance travel, long-distance travel, or frequent
travel. In addition to this, there are various offers and discounts are provided by the airline
companies to the customers. The International Air Transport Association (IATA) has analyzed
that the number of travellers has been increasing with time. According to the statistics of the
IATA, the global passenger traffic results in 2016 have been raised by 6.3% which has been
growing with time (Jiang and Zhang, 2016). The major reason due to which the airline industry
has been observing the huge amount of growth due to the attractive strategies and techniques
of the airline companies regarding the customers.
It is also observed that the requirements of the customer have been changing with time which
influences the strategies and techniques of the airline industry. It is necessary for the airline
industry that they effectively analyze and evaluate the needs and requirement of the customer
in order to develop suitable strategies and techniques for the substantial growth and
development in the business. This research study is conducted in order to effectively analyze
the influence of retention programs on the perception and opinion of the customers that are
conducted by the airline companies along with the comparison of the budget airlines to the
national carrier. There are different aspects which will be effectively evaluated through the
research. For conducting the research study different research methodologies are utilized so
that effective understanding could be developed (Koklic, et al. 2017). The primary and
secondary research has a potential influence on the collection of data regarding the topic. In
addition to this, the collected data is critically scrutinized for acquiring the required outcomes
effectively. At last, suitable recommendations are made for the effectiveness of the airline
industry.
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LITERATURE REVIEW
There are several journals and documents that have been scrutinized effectively in order to gain
the required knowledge and adequate understanding of the influence on the customers
regarding the programs that are conducted by the airline companies. The data which would be
acquired from the journals and documents could be used in the research for attaining required
outcomes.
David Mc A (2013) has conducted a study in order to analyze the customer satisfaction and
service quality among the top 14 airlines of the US in the five year period of 2007-2011 by
utilizing the data from the Department of Transportation Air Travel Reports. The customer
satisfaction and service quality have been analyzed effectively in terms of the quality
dimensions of the airline by considering several aspects. In addition to this, there is a
substantial relationship observed between the passenger’s satisfaction and service quality
regarding the airline services.
It is also evaluated that the airline industry has been facing several challenges which influence
their business operations at the great level. The challenges are cost-cutting, managing the
fluctuating demands and requirements, maintaining the quality by providing adequate services
to the customers, and fulfilling the needs and requirements of the customers. These challenges
are still observed in the business functioning of the airline companies (Hussain, et al. 2015).
According to the data of Department of Transportation Air Travel Reports available in the study,
it is evaluated that percentage of on-time arrival, passengers denied boarding, customer's
complaint, and mishandled baggage are the major aspects which influences the customer in
using the services from the same airline company. There are two kinds of airlines such as low-
cost airline and high-cost airlines such that the report states the traditional carriers are
providing high quality to their customers by utilizing different measures. Further, the low-cost
carriers in the industry are found to be huge profit gainer than the tradition carriers as they
provide quality services to the customers under a nominal budget. The implications of the
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aspects could be observed in several areas such as market share, customer service, operation
costs, and infrastructure.
According to Dolnicar, et al. (2011) the loyalty of the airline company is dependent on various
drivers. The study helps in gaining required understanding and knowledge about the loyalty and
the methods and strategies of the airline industry for maintaining their loyalty towards the
customer. There are different strategies which are incorporated by the airline industry in order
to attain the huge number of customers such that providing different offers and discounts. In
addition to this, the airline industry effectively analyzes their services and implements suitable
technique for enhancing the weak areas effectively. The loyalty of the airline could be evaluated
on the basis of their services that are delivered to the customers. Further, the airline choice of
the travellers could be analyzed on the different basis such as the price of the tickets, status of
the national carrier, and airline reputation in the market. These aspects help the traveller in
choosing appropriate airline as per their need and requirement.
In the airline industry, behavioural loyalty among the customers could be understood on
different aspects such as price, frequent traveller of the airline, and airline possess the
reputation in the market. It is observed that the behavioural airline loyalty drivers are different
for every market segment such that the airline company should rely on appropriate
segmentation methods for building loyalty among the customers. Moreover, the loyalty
programs are effective for the airline company when they are associated with the behavioural
loyalty for frequent travellers and business travellers but it could not be count on the leisure
and casual travellers (Mellat Parast and Fini, 2010). The price aspect of the airline company
heavily influenced the leisure traveller to great extent. The satisfaction factor could not be
involved in the drivers of behavioural loyalty but the reputation factor is involved in the in the
drivers. In addition, the factors of the airline industry generally focus on the higher passenger
loyalty such that the company should focus on these factors for increasing loyalty among the
customers. Overall, the study helps in understanding the importance of loyalty programs by the
airline industry.
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Leong, et al. (2015) has conducted the study in order to analyze the influence of SERVPERF on
the customer satisfaction and the customer loyalty regarding the full service and low-cost
airlines. SERVPERF is known as the model which is utilized by the company in order to measure
and define the service quality effectively. Generally, the companies used GAP-5 model along
with SERVQUAL for measuring and defining the service quality. These models are helpful for the
company in analyzing the quality of their services such that identifying the weak areas and
utilize the appropriate strategies for overcoming them. This study helps in understanding the
new perspective that has been attained by utilizing SERVPERF along with an SEM-artificial-
neutral-networks predictive analytic approach. It is evaluated that this study is different from
other studies which are conducted regarding the application of advanced systems and
algorithms in terms of the full service and low-cost airline. This tool is helpful for the airline
company in analyzing the perception of the customers regarding their provided services
(Khuong, 2014). The data which have been attained from the tool states that SERVPERF
dimension has a significant influence on the customer loyalty and customer satisfaction by
55.6% and 63.1%. The collected data from the research could be utilized by the management
team of the air travel and tourism industry for developing better decisions and strategies in
order to enhance the customer satisfaction and loyalty. The business of the airline company will
attain substantial growth and development when their consumer base is satisfied and loyal to
them.
According to Han, (2013) the customers made the travelling decision regarding the airline
company depends on the in-flight ambience and functioning of the airline. In addition to this,
there are various aspects which are considered by the customers regarding the airline company
for their travelling. A study was conducted in order to analyze the perception of the customers
towards the low-cost airline company for their travelling. There are different areas which are
analyzed in the study and suitable relationship is formed between them such as ambient
conditions, cognitive and affective evaluations, behavioural intentions, function, and
satisfaction. It is evaluated that the ambience and function have a great importance in the
forming of intentions and also have a mediating influence on the passenger satisfaction and the
cognitive and affective evaluations. Moreover, the suitable survey was conducted in the study
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by several customers regarding the international low-cost airlines in order to evaluate the
required outcomes effectively (Baker, 2014). The survey helps in depicting the areas where the
customer focuses majorly like temperature, equipment or amenities, air quality, etc. which
leads to developing suitable cognitive and effective evaluation and satisfaction that further
influence the passenger's positive behavioural intentions.
Moreover, there are several variables which have mediating impact on these aspects. The
variables are inefficient customer care, ineffective services by the airline etc. Further, the
findings from the research are helpful for the market practitioner in building effective strategies
for the low-cost airline industry (Suki, 2014). It is also essential for the low-cost airline industry
to build an attractive ambience along with the quality services which will attract more number
of customers than usual.
Han, et al. (2012) had conducted the study for analyzing the perception of the passengers
regarding the airline lounges which are done by measuring the essential attributes that are
helpful in evaluating the usage and service quality in different areas. The facility and services
which are provided to the passengers at the airline lounges should be effective so that their
travel experience should be excellent. For evaluating the attributes that are necessary for the
passengers at the airline lounge suitable survey have been conducted which comprised of the
passengers travelling for international airlines. It has been evaluated from the survey that the
major attributes which should be considered in the airline lounges are the healthy atmosphere,
image and accessibility, food and beverage (F&B) service, and service dimensions. The major
things which are observed by the passenger at the airline lounge are the atmosphere and the
food and beverage (F&B) services. These attributes are majorly considered by the passengers
while their visit to the airline lounges. The passengers use airline lounge in order to attain
certain services such as relaxation, food and beverages, etc. In addition to this, there are service
quality variables which should be considered for analyzing the perception of the customers
regarding the airline lounge such as food and beverage (F&B) service, service dimensions,
atmosphere, and employee service.
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In service quality variables, the food and beverage (F&B) services are considered as the
essential aspect that leads to overall satisfaction and lounge revisit intention among the
passengers (Keiningham, et al. 2014). It is essential for the airline companies to effectively
provide the adequate services to the customers regarding their stay at the lounge. The airline
company should focus on utilizing appropriate methods for enhancing the services at the airline
lounges.
According to Fan and Ku, (2010) the airline companies should focus on the requirement of the
customer and also deliver efficient services and build customer relationship management in
order to attain high profitability. The major objective of the study was to analyze the influence
of knowledge sharing among the staff members and officials of the airline company on the
customer relationship management profitability. The collaboration among the staff members of
the airline company should possess effective knowledge regarding the customers, methods and
processes, markets, products and services, employee skills, competitors, and the regulatory
environment of the information systems. A suitable customer relationship management model
should be developed in the airline company in order to effectively maintain the healthy
relationship between the airline company and the customers. The staff members of the airline
company should be provided with the adequate knowledge and skills in order to manage
healthy relationships with the customers. In addition to this, they should fulfil the major needs
and requirement of the customers effectively (Gures, et al. 2014). The collaboration at the
airline company will play a substantial role in the business growth and development at the
great level.
There are different practices which could be followed by the airline company in order to
maintain the effective flow of knowledge among the staff members. The collaboration
approaches could be utilized in order to develop required knowledge and learning among the
members so that they could attain the required skills and abilities which helps in delivering
adequate service to the customers along with maximum satisfaction in them.
Namukasa, (2013) has conducted the study for analyzing the influence of airline service quality
on the passenger loyalty and satisfaction. The business of the airline company is dependent on
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the satisfaction level and loyalty of the customers towards the company such that the high level
of satisfaction will result in planning their travel with the airline company. For effectively
conducting the study, data has been collected from different sources and a survey is also
conducted by considering the respondents that are frequent international travellers. It has
been analyzed from the responses of the respondent that the airline company should focus on
several areas in order to deliver quality services such as the effective environment in the airline,
delivering required services to the customers, the flight arrive and depart on time, etc. The
customer loyalty and satisfaction has a huge influence on the business functioning of the airline
industry.
The survey which was conducted helps in understanding factors influencing the passenger
satisfaction. The major factors are the quality of post-flight, in-flight, and pre-flight services
which have a substantial influence on the satisfaction of the customers. Further, the passenger
satisfaction possesses a mediating influence on the loyalty of the passengers. In addition to this,
the passenger satisfaction level regarding the airline company is different in every person such
that some person is interested in the off-board facilities, other focus on the onboard facilities
while other people focus on the quality of food. In addition, there are some people who focus
on getting extra luggage in the airline. It is recommended for the airline company to effectively
consider suitable strategies in order to enhance the business operations and functioning along
with the quality of services (Min and Min, 2015). The airline company should enhance services
on the basis of demographic aspects of the customers like occupation, gender, age, and
education level.
According to Han, et al. (2014) the passenger loyalty towards the low-cost carrier is dependent
on several aspects. The study is conducted regarding the passenger loyalty and the in-flight
service performance by considering several travellers. There are various studies which have
been conducted regarding the airline industry in different aspects but there are no studies
regarding the encounter-service performance and in-flight core, satisfaction, cultural
influences, perceived value, and trust regarding the passenger loyalty. The major objective of
the airline companies in the industry is that they fulfil the requirements of the customer and
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provide them with the high-quality services. When the airline company fulfils this objective it
further leads to develop satisfaction among the customer such that building customer
satisfaction and loyalty effectively towards the airline company.
It has been evaluated from the study that the theoretical relationships among different aspects
are important and the in-flight encounter-service performance was prominent while the
satisfaction, trust, and value possess a mediating influence (Curras-Perez and Sanchez-Garcia,
2016). A suitable structured model should be followed by the airline company in order to
deliver high-quality services to the customers and managing several aspects. Moreover, the
data from the study states that relationship between the service performance, satisfaction, and
value in the proposed model is effective.
Akamavi, et al. (2015) has conducted a study in order to analyze the key determinants
regarding the passenger loyalty towards the low-cost airline business. The rivalry in the
transport industry has been huge as the passenger relationship management is the major
concern for the low-cost airline (LCA) segment. It is necessary for the low-cost airline that they
effectively identified the determinants which are necessary for the customer loyalty and further
take necessary steps to enhance those determinants for building satisfaction and loyalty among
the passengers. The major determinants of the passenger loyalty in the low-cost airline are
service employee self-efficacy, service recovery, price, passenger satisfaction and trust, should
be considered. It has been evaluated from the study that the passengers of the low-cost airline
are provided with the high-quality services such that the employees effectively deliver the
quality services which positively influence the service recovery and price but also influences the
trust of the passenger. Due to the service employee self-efficacy, the chances of bad service
experience for the passenger is effectively diminished and it further boosts up the satisfaction
among the passengers (Nesset and Helgesen, 2014). The passenger satisfaction and loyalty
possess a substantial relationship between each other which is effectively developed in the
airline company through service employee self-efficacy, passenger trust, and service recovery.
The major driver in the enhancement of the passenger loyalty is known as the passenger
satisfaction instead of price. In addition to this, the study helps in understanding the behaviour
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of the passengers in the low-cost airline which will be helpful in forming strategies and
decisions for delivering quality services. Moreover, it also helps in maintaining effective
passenger relationship management which leads to desired outcomes in the company.
According to Chou, (2015) the low-cost carrier travellers faced several issues in the low-cost
airline. A relationship has been understood in the study of the service recovery, service failure,
and loyalty regarding the low-cost carrier travellers. In addition to this, it is also analyzed that
the service recovery has a mediating effect on the loyalty and service failure towards the
satisfaction of the travellers. Moreover, the study states that the service recovery possesses a
positive influence on the behaviour and attitude loyalty of the passengers while the service
failure possesses the positive influence on the service recovery (Mayr and Zins, 2012). Still, the
influence of apology and compensation between the attitude loyalty and behaviour loyalty and
the delivery failure is partially mediating. It is also depicted that the low-cost carrier services
need enhancement at the substantial level so that the passenger loyalty and satisfaction could
be attained.
Rizan, (2010) has conducted the analysis regarding the service quality and customer satisfaction
and its influence on the customer loyalty. The passengers of the airline companies are not
satisfied due to issues regarding several aspects. There are several complaints which have been
observed regarding the low time performance of airline, the service delivery is not effective,
unsatisfactory services, staff members are not cooperative, food and beverages are not
qualitative and the baggage lost issue is also observed. The domestic airlines are facing huge
loss in their business as the passengers are avoiding travelling with them due to ineffective
services. The customer satisfaction level regarding the domestic airline is low due to these
aspects such that it also influences their loyalty toward the airline (Al-Jabaly and Khraim, 2014).
The increase in the competition among the airline companies also affects the consumer base to
great extent. It is essential for the airline companies to develop values among their customers
and deliver the required services for gaining effectiveness.
Ringle, et al. (2011) has conducted the study regarding customer satisfaction in the commercial
airlines. The major purpose of the study is to analyze customer satisfaction along with
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