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The effect of service quality and price on international airline competition

Author

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  • Jou, Rong-Chang
  • Lam, Soi-Hoi
  • Hensher, David A.
  • Chen, Chih-Cheng
  • Kuo, Chung-Wei

Abstract

A game theoretic model, integrated with passenger's international choice behavior, for the competition between international airlines is developed and used to identify the role of competing service quality. The empirical evidence suggests that safety, convenience and service quality have a major influence on the choice decision of air passengers. Passengers respond strongly to decreases in price, increased safety, service comprehensiveness and increases in convenience. In a Cournot model, airlines are predicted to increase service quality, with China Airlines, a dominant carrier, the winner on safety and service quality. Foreign companies are beneficiaries in providing convenient service quality. In a Stakelberg model, all the airlines will increase safety and diversify service quality to a reference point. Foreign airlines will additionally be winners in safety and convenience, and China Airlines will be a winner in diversifying service quality. This research can be used to assist airline companies in identifying the role of quality of service in the aviation market as a whole, adding competitive advantage to their business.

Suggested Citation

  • Jou, Rong-Chang & Lam, Soi-Hoi & Hensher, David A. & Chen, Chih-Cheng & Kuo, Chung-Wei, 2008. "The effect of service quality and price on international airline competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(4), pages 580-592, July.
    • Handle: RePEc:eee:transe:v:44:y:2008:i:4:p:580-592
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    Citations

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    Cited by:

    1. Truong, Dothang & Pan, Jing Yu & Buaphiban, Thapanat, 2020. "Low cost carriers in Southeast Asia: How does ticket price change the way passengers make their airline selection?," Journal of Air Transport Management, Elsevier, vol. 86(C).
    2. Gao, Yi & Koo, Tay T.R., 2014. "Flying Australia–Europe via China: A qualitative analysis of the factors affecting travelers' choice of Chinese carriers using online comments data," Journal of Air Transport Management, Elsevier, vol. 39(C), pages 23-29.
    3. Kattreeya Chanpariyavatevong & Warit Wipulanusat & Thanapong Champahom & Sajjakaj Jomnonkwao & Dissakoon Chonsalasin & Vatanavongs Ratanavaraha, 2021. "Predicting Airline Customer Loyalty by Integrating Structural Equation Modeling and Bayesian Networks," Sustainability, MDPI, vol. 13(13), pages 1-21, June.
    4. Mohammed Al Awadh, 2023. "Assessing the Quality of Sustainable Airline Services Utilizing the Multicriteria Decision-Making Approach," Sustainability, MDPI, vol. 15(9), pages 1-19, April.
    5. Escobar-Rodríguez, T. & Carvajal-Trujillo, E., 2014. "Online purchasing tickets for low cost carriers: An application of the unified theory of acceptance and use of technology (UTAUT) model," Tourism Management, Elsevier, vol. 43(C), pages 70-88.
    6. Kim, Yu Kyoung & Lee, Hyung Ryong, 2011. "Customer satisfaction using low cost carriers," Tourism Management, Elsevier, vol. 32(2), pages 235-243.
    7. Shiwakoti, Nirajan & Jiang, Hongwei & Nguyen, An Duong, 2022. "Passengers’ perception of safety and its relationship with demographics, service quality, satisfaction and loyalty in airlines sector - A case study of Vietnam to Australia route," Transport Policy, Elsevier, vol. 124(C), pages 194-202.
    8. Arim Park & Min Kyung Lee & Hyosoo (Kevin) Park & Ji-Hung (Ryan) Choi & Ju Myung Song, 2023. "The impact of security oversight on air cargo price and demand," Journal of Transportation Security, Springer, vol. 16(1), pages 1-22, December.
    9. Soyk, Christian & Ringbeck, Jürgen & Spinler, Stefan, 2021. "Effect of long-haul low-cost carriers on North Atlantic air fares," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    10. Vespermann, Jan & Wald, Andreas, 2011. "Intermodal integration in air transportation: status quo, motives and future developments," Journal of Transport Geography, Elsevier, vol. 19(6), pages 1187-1197.
    11. Kuo Cheng Chung & Paul Juinn Bing Tan, 2022. "Options to Improve Service Quality to Enhance Value Co-Creation for Customers in the Aviation Industry in Taiwan," SAGE Open, , vol. 12(1), pages 21582440221, March.
    12. Li Cheng & Liu Conglin, 2023. "Game analysis and pricing strategy of duopoly airlines based on service," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 14(3), pages 1103-1124, June.
    13. Chandra Mahapatra, Subas & Bellamkonda, Raja Shekhar, 2023. "Higher expectations of passengers do really sense: Development and validation a multiple scale-FliQual for air transport service quality," Journal of Retailing and Consumer Services, Elsevier, vol. 70(C).
    14. Lin, Hsiu-Fen & Huang, Yi-Wen, 2015. "Using analytic network process to measure the determinants of low cost carriers purchase intentions: A comparison of potential and current customers," Journal of Air Transport Management, Elsevier, vol. 49(C), pages 9-16.
    15. Tay T. R. Koo & Carlo Caponecchia & Ann Williamson, 2018. "How important is safety in making flight choices? Evidence from simple choice experiments," Transportation, Springer, vol. 45(1), pages 159-175, January.
    16. Zhong, Yuanguang & Yang, Tong & Zillmann, Stefan & Cao, Bin, 2022. "The role of government regulatory policies in financing capital-constrained retailers under competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).

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