AirIndia document for reference PDF

Preview

Summary

Just for someone need to understand Air India case study...

Description

See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/264277412

Air India: Identifying Service Quality Gaps and Positioning through SERVQUAL and Perception Mapping Conference Paper · December 2012 DOI: 10.13140/2.1.4942.6561

CITATIONS

READS

0

11,279

4 authors, including: Ajoy Kumar Dey Birla Institute of Management Technology 57 PUBLICATIONS134 CITATIONS SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Workplace Bullying among employees in Indian Organizations: A Grounded Theory Approach View project

Student engagement; Effect of culture, engagement, job crafting on personal level outcomes, Patient engagement View project

All content following this page was uploaded by Ajoy Kumar Dey on 29 July 2014. The user has requested enhancement of the downloaded file.

Air India: Identifying Service Quality Gaps and Positioning through SERVQUAL and Perception Mapping

Annie Mattoo*, Charu Saxena*, Lakshmi Ninan* and A.K. Dey**

ABSTRACT In a connected and globalised world, civil aviation is a catalyst for economic development and trade. The domestic sector of Indian civil aviation is also witnessing a boom. The market is dominated by six players: Air India, Jet Airways, Kingfisher, Spice Jet, Indigo and Go Air. Service quality is one of the most important determinants which affect the competitiveness in

the aviation

industry. In

spite of being the

largest carrier with

longest standing and support of the government, the market share of Air India is behind Kingfisher and Jet Airways. This study attempts to uncover the reasons for Air India’s lack lustre perfor mance by measur ing the se rvice quality and comparing with other five airlines by creating perception maps of travellers and travel agents. A total of 100 Air India passengers; 100 fliers of other five airlines and 23 travel agents were involved in this study. SERVQUAL model identified that for Air India customer e xpectations are falling short of pe rceptions on Tangibility, Reliability and Assurance dimensions. These areas nee d reinfor cements. Attribute based maps created with the perceptions of fliers as well as of travel agents re vealed that Air India positioning is more close to Go Air and far removed from the industry leaders Kingfisher and Jet Airways. But the perceptual map of different airline brands as a whole indicates that users of airlines perceive Air India to be similar to Kingfisher and Jet Airways. This indicates that there is a strong case for re-positioning Air India by strengthening its service levels, redesigning its ser vice package and creating distinctive positioning through communication. Keywords: Indian aviation, SERVQUAL, Service quality, Perception map

INTRODUCTION With private airlines accounting for more than 75 per cent of the sector of the domestic aviation market, the Indian aviation industry has become the ninth largest aviation market

* PG Student, Bimtech Institute of Management Technology, Greater Noida, India; E-mail: [email protected],

[email protected],

[email protected] ** Professor, Bimtech Institute of Management Technology, Greater Noida, India; E-mail: [email protected]

Air India: Identifying Service Quality Gaps and Positioning through SERVQUAL ...

361

in the world. The domestic sky is dominated by six major players: Air India, Jet Airways (including JetLite), Kingfisher, Spice Jet, Indigo and Go Air. Today less than 2% of Indians fly domestic and only 0.5% international each year. With a population only slightly larger than India, China’s domestic air traffic (198 million) is 5 times the size of Indian domestic air traffic. Australia with a population of just 22 million, generates more domestic passengers than the whole of India (Table 1). The Indian domestic air travel volume is set to rise rapidly. Table 1: Comparison of domestic air traffic

Country

Population

Million Australia USA

Trips per

GDP per

Traffic

Capita

Capita

Million

Number

USD

21

50

2.38

38,100

307

650

2.12

46,900

26

14

0.54

15,200

Brazil

199

~50

0.25

10,200

China

1,339

198

0.15

6,000

India

1,200

52

0.04

2,900

Malaysia

Sou rce: C en tre for A sia 5

Domestic

th

Pa cific

Aviation,

IFFAAD

Sem ina r,

New

Delh i,

April 2011

DRAMATIC CHANGE Perhaps the period of 2003 - 2008 witnessed the fastest metamorphosis of a national aviation industry in history. The country realized the generational shift in attitudes towards the role of aviation in the economy. LCC model truly established itself in India. Some of the nation’s full service airlines rank amongst the best in the world. Airport upgrades will serve India well for decades to come. Areas that are of concern are: strengthening of the regulatory regime –technical as well as economic; development of skills through education and training; external environment turned sharply negative; fuel prices( reached US$147/ gallon) – resultant cost pressure became a

huge burden; global recession

resulted in

slowdown in Indian GDP growth; collapse of international financial markets; impending threat of terrorist attacks impacted inbound tourism. Even during such gloomy environment LCC model bloomed, highlighting its strength. IndiGo reported strong profit in 2009/10. Jet / Kingfisher converted most domestic capacity to low cost operations. From 2010 onwards growth has resumed and domestic traffic is on upswing; private airlines were on track to post combined profit of US$250m for FY10/11, but impacted by fuel price increases in March quarter; opening of Delhi T3 a landmark development in Indian aviation. Focus on the upgrade of non-metro airports has resumed. DGCA is preparing for long term restructuring –creation of new organisation. Decision to hive of ATC is an important decision.

362

Building Competencies for Sustainability and Organizational Excellence

POSITIVE INDICATORS Some of the indicators that make us believe that growth of domestic aviation sector will continue are: •

IndiGo recently announced plans to acquire 180 narrow bodies;

•

CAPA expects Indian carriers to order up to 200 new aircraft this year with list price

•

Indian carriers expected to raise up to US$1.5 billion equity from the markets;

•

Air India will be seeking additional equity infusion from government;

•

Two Indian LCCs planning to launch IPOs.

of US$11-12 billion;

However, not everything is rosy. Indian carrier debt is expected to reach close to US$20 billion by end of this year - 50% aircraft related and 50% working capital/trade creditors; big three airline groups are low on cash, need to reduce debt and increase liquidity.

CHALLENGES The challenges that national air carrier firms will have to grapple are: Increase of fuel prices is a major concern; inflation at a macro level may require tightening measures –could affect demand; governance and corruption scandals have impacted investor sentiment; congestion is re-emerging at the 4-5 largest airports; Navi Mumbai Airport tender is expected to be delayed until late this year; shortage of skills is affecting ability to support expansion plans; discovery of pilot licenses issued against forged documents is a serious concern; impending cabinet reshuffle has slowed momentum. Administration of aviation in India requires transformational not ad hoc change. In India, Air India had been the prominent airline carrier from the beginning of the aviation industry. The entry of several private carriers in the airline industry, has led to intense competition in the market. The growth of new low cost, no-frills airlines has made air travel a lot easier and affordable for all. Continued liberalization and ‘open skies’, the impact of global alliances, on-line ticket selling, improved infrastructure and privatization of state-owned airlines are some of the crucial developments that have been impacting the airline business at a time of continually falling average fares and yields. These factors present imminent threats for Air India. The presen t situation

is not favourable for

Air India. A critic al analysis

of the

information contained in Table 2 reveal that as per May 2011 performance data released by DGCA its share of domestic market is 18.7% is below Jet Airways and Kingfisher; on time performance 82% is second lowest; seat factor 78.1% is the lowest; percent of flights cancelled is 200 times the next rival; and during the period Jan – July 2010, the number of passengers (1.989 million) carried for 58 destinations with combined (post merger of Air India…..) fleet of 158 aircraft is marginally more than the lowest figure in the industry (1.651 million) that of GoAir covering 19 destinations with 10 aircrafts. Only favourable

Air India: Identifying Service Quality Gaps and Positioning through SERVQUAL ...

363

figure is the number of complaints per 10000 passengers is the lowest among the six airlines. Table 2: Performance of domestic air carriers ( Source: DGCA data of May 2011) Airlines

No. of

Current

On Time

Destinations

market share

Performance

covered

(%)

(%)

May 2011

May 2011

Fleet size

Seat factor

May 2011

Passengers

No. of

flew

complaints per

flights

Jan – July

10000

cancelled in

2010

passengers

May 2011

Million

May 2011

Percentage of

Jet Airways

90

44

26.9

94.0

79.8

5.588

3.3

Kingfisher

66

63

19.8

87.5

88.4

6.300

1.6

0.9

154*

58

18.7

82.0

78.1

1.989

1.4

18.0

Air India

0.7

Indigo

33

22

16.2

89.9

89.4

4.616

2.2

0.0

Spice Jet

22

19

12.6

82.7

82.7

3.187

2.5

0.2

Go Air

10

19

5.8

80.1

87.0

1. 651

2.7

0.2

Source: Information contain ed in the above table extracted from DGCA Re ports; *National Aviation Company of India Ltd. Number of aircraft deployed on domestic routes could not be ascertained.

RESEARCH QUESTIONS In spite of long tenure in the industry, backing of government, deployment of relatively large resources compared to other domestic carriers, largest fleet of aircraft, why market share of Air India is behind Jet Air and Kingfisher? Why passengers are not selecting Air India? How do they perceive the services offered by Air India as compared to competing airlines? Do the travel agents no longer find Air India as their choice airline? What are their perceptions? How to detect the gap between expectations and perceptions for the passengers as well as retailers of airline tickets?

LITERATURE REVIEW Service quality is recognised to be the cornerstone for operational efficiency and business profitability. Customer loyalty through improved service has become vital for small airlines to survive in this increasingly competitive global environment.

Air travel, driven by

liberalization and globalization, remains the fastest-growing market. Focus on service quality is the need of the hour if the airlines aspire to improve market share and further enhance financial performance in domestic and international markets. A necessary corollary is that domestic airlines need to have valid and reliable measures to better understand the variables likely to have a bearing on the service quality offered by their organization, e.g. expectations and perceptions of airline passengers vis-à-vis service quality. This study uses the SERVQUAL model developed by Parasuraman, Berry, & Zeithaml (1988), a service quality measure, which states that the customer’s assessment of overall service quality is

determined by the degree and direction of the

gap between their

expectations and perceptions of actual performance levels. They also identified five essentials for service quality: tangibles, reliability, responsiveness, assurance, and empathy. This model is perhaps the most widely used customer-perceived service quality model.

Gilbert

364

Building Competencies for Sustainability and Organizational Excellence

and Wong (2003) have measured and compared the differences in passengers’ expectations of airline service quality by developing a questionnaire containing Reliability, Assurance, Facilities, and Employees, Flight Patterns, Customization and Responsiveness dimensions. Other researchers have examined the relationship between airline service quality, passenger satisfaction, and behavioral intention /loyalty (Ostrowski & O’Brien, 1993; Chan, 2000). Other researchers who have studied the relationships between service quality and airline service include

Etherington and Var (1984) and Furrer, Liu, and Sudharshan (2000).

There is a general agreement that excellent passenger service quality is a source of competitive advantage in the airline industry. In simple terms, satisfaction is the result of customers’ assessment of a service based on a comparison of their perceptions of service delivery with their prior expectations. If customers’ perception of the service, the experience, and outcomes match their expectations then they should be satisfied. If their perceptions of the service exceed their expectations then they will be more than satisfied, even delighted. If their perceptions of the service do not meet their expectations then they may be dissatisfied, even disgusted or outraged (Andreassen, 2001; Schneider and Bowen, 1999). Cronin and Taylor (1992) have also developed a model measuring service quality, called SERVPERF, which is

based on service performance.

Service Quality and Satisfaction for low cost carriers were studied by Ariffin, Salleh, Norzalita, and Asbudin (2010). The results revealed that “caring and tangible” was the most important dimension of service quality for low cost carriers, followed by “reliability”, “responsiveness”, “affordability” and “visual attractiveness”. However, only “caring and tangible” dimension contribute significantly to the prediction of satisfaction on the services of low cost carriers. Passengers’ views of Service Quality in Thai low cost carriers were studied by Somwang (2008) who found that the expectations of Thai low cost carriers’ passengers on service quality were higher than their perceptions. Agarwal & Dey (2010) studied the perception of travellers for the six domestic airlines in India. The perception of Malaysian consumers of the quality of airline services was examined by Abdullah, Manaf, & Noor (2007) using the SERVQUAL measurement. The results of the study indicate that the most significant factors in Malaysian customers’ perception of service quality are Empathy, Tangibles and Assurance. In addition, the respondents indicated that the airlines surveyed performed better than expected on the Responsiveness dimension of service quality. Ling, Lin & Lu (2005) developed an instrument, based on the SERVQUAL model, to gauge the characteristics of specific cross-strait routes, in order to measure the service quality, perceived by travellers from Taiwan and Mainland China. The results indicated that there were significant differences between the perceptions of Taiwanese and Mainland Chinese travellers related to cross-strait airlines, in all service attributes. Huang (2010) sought to improve the understanding of air passengers’ decision-making processes by testing a conceptual model that considers service value, airline service quality, satisfaction, perceived sacrifice, and behavioural intentions. Two modelling approaches

Air India: Identifying Service Quality Gaps and Positioning through SERVQUAL ...

365

were applied: the structural equation modelling (SEM) and the importance-performance analysis (IPA). The SEM results of the study showed that the service value was the major fa ctor

th at

cou ld

in flu en ce

th e be hav iou ral

inten ti on.

IPA

re su lts

indic ate d th at

responsiveness was the most important airline service quality attribute for passengers. Diggines (2010) conducted a research to gain an understanding of the perceptions South African passengers had of the low-cost carrier model and the full-service carrier model and establish how these perceptions related to choice of airline when deciding to fly. Clemes, Gan, Kao, and Choong, (2008) conducted an empirical analysis of customer satisfaction in international air travel. The study examined which dimensions had a positive influence on service quality and which dimensions had the most and least important impact on service quality in international air travel, as perceived by airline passengers. In this study, we attempt to examine the Gap 5 of SERVQUAL model and develop perception maps based on the inputs received from travellers across the five dimensions of service quality. Similarly the perceptions of travel agents have been studied to find out as to why they do not prefer Air India? The analysis was done in three ways-using the research work carried out by Khan, Dutt and Bansal (2007) on perceptions and gaps, factor analysis and SERVQUAL analysis.

RESEARCH METHODOLOGY

Qualitative research and results To determine the service quality gaps from the perspective of Air India passengers SERVQUAL model with 22 items was selected. The wordings were marginally modified to incorporate the context of airline service. Responses of 100 Air India users have been recorded. With the help of survey of literature and brainstorming sessions with travellers, tour organizers and ticket booking agents, important factors affecting service quality and image of the airlines were identified. Factors affecting the choice of airlines from the perspectives of air travellers and travel agents were identified. Two questionnaires were drafted, one for travellers and the other for the travel agents, pilot testing done and contents finalized.

Surveys Personal interviews conducted at air port exit lounges, various offices and shops in different colonies of Delhi yielded 100 responses from air travellers using any of the six airlines. This questionnaire had a question ...