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Developing an understanding of the relationship between service quality and profitability is of central importance to operations management scholars. In this study we seek to reconcile inconsistencies between extant theory and empirical findings regarding the relationship between service quality and profitability in the airline industry. More speci...
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... controlled for seasonal effects using a vector of three dummy variables for the quarter of obser- vation. To conserve space, we do not report these coefficients in Table 3. ...
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... airline-effects as random has advantages in that [1] the first-order term for Non-Focused can be included in the model 3 , thus improving interpretability of the findings, and [2] the parameter estimates from the random-effect specification will be more efficient. To ascertain whether airline- effects should be treated as random or fixed, we fit Model 2 in Table 3 specifying airline-effects both ways 4 . Results from a series of Hausman tests (Hausman, 1978) comparing the difference in the coefficients (ı) for models using airline fixed-effects vis-à- vis airline random-effects were all non-significant [Arrival Delays (ı = −0.014; ...
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... negative sign for the quadratic-by-linear interaction would indicate that this rela- tionship is more concave (inverted U-shaped) for non-focused airlines. Consistent with our expectations, as shown in Table 3 the coefficient for Arrival Delays 2 × Non-Focused is negative and dif- fers significantly from zero. To better understand the relationship implied by Model 3, we plot the predicted relationship between Arrival Delays and Profitability for focused and non-focused airlines in Fig. 2 assuming average levels of the remaining service fail- ures. ...
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... tested H2 using Model 4 by including an interaction between Mishandled Baggage and Non-Focused (Mishandled Bag- gage × Non-Focused), with our theory predicting that the sign of this interaction effect will be positive. Consistent with this expectation, as shown in Table 3 the sign of the coefficient for Mishandled Bag- gage × Non-Focused is statistically significant and positive. We plot the predicted relationship between Mishandled Baggage and Pro- fitability in Fig. 4 for focused and non-focused airlines assuming an average level of the other service failures. ...
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... tested H3 using Model 5 by including an interaction between Involuntary Denied Boarding and Non-Focused (Involuntary Denied Boarding × Non-Focused), with our theory predicting that the sign of this interaction effect will be positive. As shown in Table 3, this interaction is not statistically significant. Combined with the results from Model 2, there is no evidence that involuntary denied boarding affects the profitability of focused and non-focused air- lines. ...
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... tested H4 using Model 6 by including an interaction between Customer Complaints and Non-Focused (Customer Com- plaints × Non-Focused), with our theory predicting that the sign of this interaction effect will be positive. Consistent with this expec- tation, as shown in Table 3 the sign of the coefficient for Customer Complaints × Non-Focused is statistically significant and positive. We plot the predicted relationship between Customer Complaints and Profitability in Fig. 5 for focused and non-focused airlines assuming an average level of the other service failures. ...
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... When a flight is late it leads to unmet expectations. Likewise, a negative confirmation occurs when a passenger is inadvertently denied boarding and unable to arrive at the intended destination (Mellat-Parast et al., 2015). ...
Plain Language Summary
Customer Responses to Airline Service Failure
Air service failures and negative customer reactions are topics of increasing interest in recent times, both practice and academic. Although there are few previous studies on this topic, this study is based on the expectation disconfirmation theory to examine the effect of airline service failures on negative emotions and negative behavior of customers. The collected data was from 561 customers who experienced an air service failure within the past 6 months. The results show that, consistent with the expectation disconfirmation theory, prior expectations and actual experiences when an airline service failure occurs lead to disconfirmation, and this determines the negative emotions of customers. The results also show that, worry and frustration only lead to negative word-of-mouth intentions. Meanwhile, anger over an airline service failure will affect both complaints, negative word-of-mouth, and intention to switch to another airline. The contribution of this study is extending and demonstrating the relevance of EDT theory to the context of airline service failures. Implications and recommendations for future research are also provided.
... The prevalence and cost of preventable adverse events can affect hospital quality ratings and profitability. Related research has found positive quality-profitability relationships in numerous non-healthcare industries [20][21][22][23]. However, such research is relatively sparse in the healthcare setting. ...
Hospitals are perpetually challenged by concurrently improving the quality of healthcare and maintaining financial solvency. Both issues are among the top concerns for hospital executives across the United States, yet some have questioned if the efforts to enhance quality are financially sustainable. Thus, the aim of this study is to examine if efforts to improve quality in the hospital setting have a corresponding association with hospital profitability. Recent and directly relevant research on this topic is very limited, leaving practitioners uncertain about the wisdom of their investments in interventions which enhance quality and patient safety. We assessed if eight different quality measures were associated with our targeted measure of hospital profitability: the net patient revenue per adjusted discharge. Using multivariate regression, we found that improving quality was significantly associated with our targeted measure of hospital profitability: the net patient revenue per adjusted discharge. Significant findings were reported for seven of eight quality measures tested, including the HCAHPS Summary Star Rating (p < 0.001), Hospital Compare Overall Rating (p < 0.001), All-Cause Hospital-Wide Readmission Rate (p < 0.01), Total Performance Score (p < 0.001), Safety Domain Score (p < 0.01), Person and Community Engagement Domain Score (p < 0.001), and the Efficiency and Cost Reduction Score (p < 0.001). Failing to address quality and patient safety issues is costly for US hospitals. We believe our findings support the premise that increased attention to the quality of care delivered as well as patients’ perceptions of care may allow hospitals to accentuate profitability and advance a hospital’s financial position.
... The prevalence and cost of preventable adverse events can affect hospital quality ratings and profitability. Related research has found positive quality-profitability relationships in numerous non-healthcare industries [20][21][22][23]. However, such research is relatively sparse in the healthcare setting. ...
Hospitals are perpetually challenged by the dual requirements of concurrently improving the quality of healthcare and maintaining financial solvency. Both issues are among the top concerns for hospital executives across the United States, yet some have questioned if the efforts to enhance quality are financially sustainable. led us to examine if improving quality in the hospital setting impacts revenue. Using multivariate regression, we assessed if numerous quality measures were associated with our targeted measure of hospital profitability: the net patient revenue per adjusted discharge. The independent variables included the HCAHPS Summary Star Rating, Hospital Compare Overall Rating, All-Cause hospital-wide Readmission Rate, Total Performance Score, Clinical Outcomes Domain Score, Safety Domain Score, Person and Community Engagement Domain Score, and the Efficiency and Cost Reduction Score. Our results indicated that improving quality was significantly associated with improved net patient revenue per adjusted discharge for seven of the eight of these quality measures at the hospital level. It is clear that failing to address quality and patient safety issues is costly for US hospitals, thus we believe our findings support the premise that increased attention to the quality of care delivered as well as patients’ perceptions of care may allow hospitals to accentuate profitability and advance a hospital’s financial position.
... Customer assessments of service quality indicate the degree to which the service provided meets customer expectations, shaping customer attitudes and behaviors toward the service provider (Hennig-Thurau et al. 2006;Berry 1985, 1988). In the airline industry, research has shown that the reasoning behind customer evaluations of service quality is complex and generally includes consideration of both operational dimensions such as safety (Rhoades and Waguespack 1999), on-time arrivals and baggage handling (Dresner and Xu 1995;Mellat-Parast et al. 2015;Tiernan, Rhoades, and Waguespack 2008), and human dimensions related to passenger-employee interactions, such as the employee's individual attention, assurance, empathy, and responsiveness (Babbar and Koufteros 2008). Boetsch, Bieger, and Wittmer (2011) find that flight costs, the emotional value attributed to the airline brand, the airline network characteristics (such as flight frequency and availability of direct flights), and service quality (measured in terms of inflight experience) are the top four dimensions providing value to passengers. ...
... Service failures, also thought of as the "inverse of service quality" (Mellat-Parast et al. 2015, 14), are key determinants of customers' assessments of airline service quality and airline profitability. Service failures, commonly associated with arrival delays, mishandled baggage, and involuntary denied boarding (Dresner and Xu 1995;Mellat-Parast et al. 2015;Wittman 2014), have been found to negatively impact customer satisfaction (Dresner and Xu 1995), customer demand and societal welfare (Britto, Dresner, and Voltes 2012;Yimga and Gorjidooz 2019), as well as customer utility (Yimga 2020). However, Suzuki (2004) found that service failures did not affect future purchasing behaviors, as passengers tend to maximize their utilities in each trip. ...
... On the one hand, service underperformance impacts customer outcomes and demand, which in turn impacts the airline's market share and profitability (Britto, Dresner, and Voltes 2012;Dresner and Xu 1995). On the other hand, any increases in the service quality result in increased costs, which can reduce firm profitability (Dresner and Xu 1995;Mellat-Parast et al. 2015;Steven, Dong, and Dresner 2012). Airline strategy and industry-level factors have also been found to impact the relationship between service failures and firm performance. ...
Airlines constantly seek to attenuate the negative impacts of operational service failures, namely arrival delays, mishandled baggage, and involuntary denied boarding, on customer satisfaction. Our study examines the roles of two management decisions—advertising expenses and flight personnel salaries—in shaping customer satisfaction via ex-ante expectations and the actual service experience, respectively. Drawing from expectancy disconfirmation theory (EDT) and the airline service quality literature, we investigate the effectiveness of these two expenses in moderating the impact of service failures on customer satisfaction. We test our hypotheses with a panel dataset created by merging data on 15,979 online airline ratings, operational service failures, and financial and traffic performance from three data sources for the 2010–19 period. We find that both arrival delays and involuntary denied boarding negatively affect customer satisfaction. In addition we find that while advertising positively impacts customer satisfaction, it strengthens the negative effect of involuntary denied boarding on customer satisfaction. However, increasing flight personnel salaries helps mitigate this negative effect through a positive and empathic service experience. These findings underscore the importance of managing passenger expectations about the service and enhancing the inflight experience as to ameliorate the negative effects of operational failures on customer satisfaction.
... From a managerial perspective and a shareholder point of view, benchmarking and performance evaluation are vital, because the compensation schemes of upper management and "the chief executive office tenures are attached to operational productivity and financial performance" (Davila & Venkatachalam, 2004;Mellat-Parast et al., 2015). One of the most widely used models to assess performance benchmarking is Data Envelopment Analysis (DEA). ...
... Mallikarjun, S. (2015) 'Efficiency of US airlines: A strategic operating model', Journal of Air TransportManagement, 43, Mellat-Parast, M.,Golmohammadi, D., McFadden, K.L. and Miller, J.W. (2015) 'Linking business strategy to service failures and financial performance: Empirical evidence from the US domestic airline industry', Journal of Operations Management, 38, pp. 14-24.Monmousseau, P., Marzuoli, A., Feron, E. and Delahaye, D. (2020) 'Impact of COVID-19 on passengers and airlines from passenger measurements: Managing customer satisfaction while putting the US Air Transportation System to sleep', Transportation Research Interdisciplinary Perspectives, 7, pp. ...
Coronavirus outbreak has been highly disruptive for aviation sector. There is strong correlation between COVID-19 related news, volatility in transportation, low confidence in travel safety, and uncertainty in this era. In this research, we study and distinguish the COVID-19's impact on U.S. airlines' performance. The network and low-cost carriers responded differently to it in terms of capacity reduction, market share reduction, scheduled flights reduction, flight cancellations, and service quality in the year 2020. We illustrate low-cost carrier had higher efficiency compared to network ones during pandemic by applying Network Data Envelopment Analysis. Furthermore, the effects of two key factors that emerge from COVID-19, the government's stringency actions and passengers' panic, on U.S. airlines efficiency are studied. Our analysis demonstrate that the negative effect is more significant for passengers' panic than it is for governments' stringency measures. In addition, we show that passengers' panic has more impact on the efficiency of network carriers compared to low-cost carrier.
... Airlines serving the domestic U.S. market adopt one of two strategies. Mellat-Parast et al. [39] explained these two strategies: "The first strategy, which has been labeled 'focused' [32], [39], [55], 'geographic specialist' [31], and 'low-cost' [59], is characterized by [1] flying point-to-point, [2] serving a limited number of geographic regions and/or city pairs, [3] operating fleets consisting of a few aircraft types, [4] primarily targeting economy customers seeking low prices, and [5] making limited use of strategic alliances. Southwest and JetBlue exemplify this strategy. ...
... Airlines serving the domestic U.S. market adopt one of two strategies. Mellat-Parast et al. [39] explained these two strategies: "The first strategy, which has been labeled 'focused' [32], [39], [55], 'geographic specialist' [31], and 'low-cost' [59], is characterized by [1] flying point-to-point, [2] serving a limited number of geographic regions and/or city pairs, [3] operating fleets consisting of a few aircraft types, [4] primarily targeting economy customers seeking low prices, and [5] making limited use of strategic alliances. Southwest and JetBlue exemplify this strategy. ...
... In line with previous studies, we group airlines that serve the U.S. domestic market into two groups: network (legacy) airlines such as United and American Airlines that use a hub-and-spoke logistics system, and low-cost airlines such as Southwest and America West that use a point-to-point logistics system [31], [32], [55], [59], [39]. These two groups of airlines also attract different sets of customers: network airlines tend to serve sophisticated business travelers and low-cost airlines tend to serve more budget and leisure travelers. ...
The competitive strategy of U.S. airlines has been characterized as either cost-focused, like Southwest Airlines, or full-service (legacy), such as United Airlines. This study investigates the impact of each strategy on customers’ expectations and their inclination to file a complaint when flights are canceled. It also explores whether slack resources would moderate the number of flight cancellations and thus reduce the number of customer complaints. At the same time, the study examines the degree to which moderation would be different for the two prevailing strategies. By combining the perspectives of multiple research streams from the strategic management and service operations literature, the study argues and empirically shows why airlines with a cost-focused strategy have an inherent advantage in receiving fewer customer complaints when flights are canceled. Confirming the theoretical expectations, the results also support the role of slack resources in mitigating the impact of service failure—in the form of flight cancellations—on passengers’ perceived service quality. Finally, a noteworthy finding is that the moderating role of slack resources in reducing customer complaints when flights are canceled is quadratic in nature, with different inflection points for the two competitive strategies. We also examine the robustness of our result using a machine learning technique.
... Research-based arguments regarding Southwest Airlines, Toyota, or Zara, often incorporate general knowledge of these specific firms as warrants in arguments. For example, researchers of the airline industry are seldom called to present direct empirical evidence that Southwest's competitive strategy is based on low cost (Lapré & Scudder, 2004) or that JetBlue is a focused airline (Mellat-Parast et al., 2015). Further, binary categorizations-an airline is either focused or unfocused-are also commonly accepted without explicit justification. ...
The process of justifying a generalized theoretical conclusion from a specific empirical analysis continues to elude us. In this article, we suggest that this stems from an incomplete understanding and specification of how arguments are structured. Most importantly, in addition to empirical data, a generalized conclusion hinges on the application of various rules and principles of reasoning that British philosopher Stephen Toulmin labeled warrants. In this article, we apply Toulmin's model of argument structure to empirical management research by examining in particular the roles of four types of warrants: theoretical, inferential, procedural, and contextual. Based on our analysis, we suggest that making warrants and their backings explicit paves the way toward a more comprehensive understanding of how arguments are structured and how claims are justified. Importantly, an examination of warrants reveals that the choices researchers make are not limited to matters such as choosing the research topic or a particular research design, but they also extend to how we produce our claims. If we wish to understand argument structure, we must understand these choices.
... If strategic planning is not accomplished, to include thoroughly focusing on detailed business strategies, diminished company fiscal performance follows (Bennett, 2016;Mellat-Parast, Golmohammadi, McFadden, & Miller, 2015). Reduced financial performance, connected to unstable economies coupled with augmented unemployment, is an additional business failure sign (Sassen, 2016). ...
... The airline business competition today brings the importance for their executives, managers, and business involvers to consider the factors that can affect the business in this industry to be successful (Enz, 2002;Mellat-Parast et al., 2015;Hapsari et al., 2016;Tiwasing et al., 2019). In addition, the trend of Industry 4.0 evolved Thailand 4.0 by focusing on the increase in people's quality in the country by using the technology such as advanced machinery, information, and communication technology as well as Internet of Things. ...
... Porter (1985) suggested generic strategies including low-cost leadership, differentiation, and focus as well as other scholars introduce various strategies in numerous aspects. These strategies can include employee service strategy, marketing strategy, customer experience creation strategy, and others (Mellat-Parast et al., 2015;Hapsari et al., 2016;Tiwasing et al., 2019). However, to create the right strategies, both inside and outside organization factors to drive the business in the airline industry should be taken into account. ...
... For inside organization factors, there can be such as business resources management; business and marketing strategies; employee training, development, and management, business service process development and others. In the meantime, the outside organization factors can include such as customer focus, business environment scanning, technology availability, supplier networking, service innovation, and others (Mellat-Parast et al., 2015;Hapsari et al., 2016;Tiwasing et al., 2019). When the impressive effective strategies can be conducted and conveyed to the customers, they will feel satisfied and their impressive experience will appear (Solimun & Fernandes, 2018;Ban & Kim, 2019). ...
The research aimed to investigate the effect of customer-contact business strategies on organizational reputation of airline business in Thailand 4.0. The samples were of 350 customers residing in Bangkok and Metropolitan area and used to use services from airline businesses in Thailand. The questionnaires were used to collect the data with the purposive sampling and convenient sampling methods. Data analysis consisted of descriptive statistics including frequency, percentage, mean and standard deviation and inferential statistics including structural equation model (SEM). The results showed that personnel strategy had a direct effect on marketing strategy and customer experience building strategy, and an indirect effect on organization reputation with standardized coefficient as of 0.790, 0.557, and 0.605. The marketing strategy had a direct effect on customer experience building strategy and organization reputation with standardized coefficient as of 0.352 and 0.321, respectively. Lastly, the customer experience building strategy had a direct effect on organization reputation with standardized coefficient as of 0.283 at the significant level as of 0.001. The study results can contribute managerial implications in developing personnel strategy, marketing strategy, and customer experience to create the organization reputation in era of Thailand 4.0.
... Firms involved in a strategic alliance could create value through several sources: Scale economies, reduced operational costs resulting from joint purchasing, economies of density, marketing and branding, effective risk management, knowledge sharing, cost-efficient market entries, and, especially, learning from partners (Arrigo, 2012;Butigan & Benid, 2017;Chao & Kao, 2015;Iatrou & Alamdari, 2015;Ireland, Hitt, & Vaidyanath, 2002;Kleymann & Seristö, 2017;Lee & Moon, 2016;Mellat-Parast, Golmohammadi, McFadden, & Miller, 2015;Min & Joo, 2016;Thendu, 2020;Vasigh, Fleming, & Tacker, 2018;Wang, 2014;Zou & Chen, 2017). Thus, alliances' success can be summarized as trust, the establishment of information & coordination system, provision of required resources, partner alliance experience, team spirit, agreement on fundamental values, appropriate scope; open communication; shared control, scrutinizing and selecting suitable strategic partner, cultural compatibility; measurable goals; and partner accountability and commitment of top management (Biggs, 2006;Dadfar, et al., 2014;Masoud, et al., 2020;Niesten & Jolink, 2015). ...
... The review identified several successful alliance globally and the factors responsible (Klus, et al., 2019;McDaniel & Malone, 2012;Uddin & Akhter, 2011) and recognized the success factors responsible (Arrigo, 2012;Butigan & Benid, 2017;Chao & Kao, 2015;Iatrou & Alamdari, 2015;Ireland et al., 2002;Kleymann & Seristö, 2017;Lee & Moon, 2016;Mellat-Parast, et al., 2015;Min & Joo, 2016;Thendu, 2020;Vasigh, et al., 2018;Wang, 2014;Zou & Chen, 2017). Success stories are always encouraging for adoption, therefore, it is proposed that: P 3 : The factors that made strategic alliance successful today, will improve and be applicable in the future. ...
