(Luận văn thạc sĩ) the impact of service quality and air fare on customer satisfaction using low cost airlines in vietnam

MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY
-------------------

HUYNH THI THU HUONG

THE IMPACT OF SERVICE QUALITY AND AIR
FARE ON CUSTOMER SATISFACTION USING
LOW COST AIRLINES IN VIETNAM.

THESIS OF MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – 2012


MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY
-------------------

Huynh Thi Thu Huong

THE IMPACT OF SERVICE QUALITY AND AIR
FARE ON CUSTOMER SATISFACTION USING
LOW COST AIRLINES IN VIETNAM.
Subject: Master of Business Administration

THESIS OF MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR:

Dr. TRAN HA MINH QUAN

Ho Chi Minh City – 2012


I

ACKNOWLEDGEMENTS
I would sincerely like to thank the Professors in the University of Economics
Ho Chi Minh City, who taught and trained me in the MBA course. I also would like
to thank the Board of Management of Economics University who gave me the
opportunity to learn new things in the business administration. I am very honored to
be a member of this course.

In particular, I would like to express deep gratitude to Dr. Tran Ha Minh Quan who
has guided me enthusiastically, offered opinions and supported me through this
thesis.

My warmest thanks to all the Instructors for providing and sharing invaluable
knowledge on measurement and evaluation in education for me as well as other
students.

Finally, I like to thank my parents who gave me love, care and tolerance from
childhood to adulthood. My thanks too, to my friends and classmates for
encouraging me constantly to complete this thesis.

Huynh Thi Thu Huong
Ho Chi Minh City, November 22nd 2012


II

COMMITMENT
My name is Huynh Thi Thu Huong. I would like to commit that this thesis, “The
impact of service quality and air fare on customer satisfaction using low cost
airlines in Vietnam”, was conducted based on my real and independent research.
The enclosed data was collected from passengers waiting in the departure
lounge of Tan Son Nhat domestic airport, Vietnam by the author. The data was
handled and conducted by the author.
Huynh Thi Thu Huong
Ho Chi Minh City, November 22nd 2012


1

TABLE OF CONTENTS

ACKNOWLEDGEMENT ..................................................................................... I
COMMITMENT ................................................................................................... II
TABLE OF CONTENTS ..................................................................................... III
LIST OF TABLES ................................................................................................ V
LIST OF FIGURES............................................................................................... V
ABSTRACT ........................................................................................................... 1
Chapter 1 INTRODUCTION ............................................................................. 5
1.1 Vietnam’s low cost airlines background........................................................ 5
1.2 Vietnam’s low cost airlines product and service ........................................... 9
1.3 Research Motivation .................................................................................... 10
1.4 Research Objectives ..................................................................................... 11
1.5 Research Scopes .......................................................................................... 11
1.6 Structure of Research ................................................................................... 11
Chapter 2 LITERATURE REVIEW, THEORETICAL FRAMEWORK

AND HYPOTHESES ......................................................................................... 13
2.1 Service Quality ............................................................................................ 13
2.1.1 The SERVQUAL Instrument ................................................................ 15
2.1.2 Applying SERVQUAL in the Low cost airlines in Vietnam ................ 17
2.2 Customer Satisfaction.................................................................................. 22
2.3 Theoretical Framework and Hypotheses ..................................................... 25
2.3.1 Theoretical Framework ......................................................................... 25
2.3.2Research Hypotheses .............................................................................. 27
Chapter 3 RESEARCH METHODOLOGY ................................................... 28
3.1 Research Methodology ................................................................................ 28
3.2 Sampling Design ......................................................................................... 28
3.3 Data Collection Procedures ......................................................................... 29
3.4 Data Analyze Procedure .............................................................................. 31


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3.4.1 Reliability Analysis ............................................................................... 31
3.4.2 Descriptive Statistics ............................................................................. 32
3.4.3 Factor Analysis (FA) ............................................................................. 32
3.4.4Multiple Linear Regression Analysis ..................................................... 33
Chapter 4 ANALYSIS RESULT ...................................................................... 34
4.1 Respondents Demographics ........................................................................ 34
4.2 Reliability and Validity of SERQUAL Scales ............................................ 35
4.3 Dimensions of Service Quality in Low Cost Airlines in Vietnam .............. 37
4.4 Correlation testing ....................................................................................... 42
4.5 Hypothesis Testing and Discussions ........................................................... 47
4.6 Summary ..................................................................................................... 51
Chapter 5 CONCLUSIONS AND RECOMMENDATIONS ........................ 52
5.1. Summary of Findings ................................................................................. 52

5.2. Practical Implications ................................................................................. 52
5.3. Contributions of the Study ......................................................................... 56
5.4. Limitations and Future Research................................................................ 56
REFERENCES ..................................................................................................... 57
APPENDIX 1 ....................................................................................................... 60
APPENDIX 2 ....................................................................................................... 62
APPENDIX 3 ....................................................................................................... 67
APPENDIX 4 ....................................................................................................... 70


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LIST OF TABLES
Table 1. Product features of low-cost carrier and full service carrier in Vietnam.08
Table 2.1 Theoretical Framework ........................................................................ 26
Table 2.2: The Summary of Research Hypotheses .............................................. 27
Table 3.1: The Sources of Measurement Scale .................................................... 30
Table 3.2: Rules of Thumb about Cranach’s Alpha Coefficient Size.................. 32
Table 4.1: Demographic Characteristics of the Study ......................................... 35
Table 4.2: Cranach’s Alpha Measures of Variables in the Study ........................ 37
Table 4.3 KMO and Bartlett's Test of Five Independent Variables ..................... 39
Table 4.4: Rotated Component Matrix of Independent Variables ....................... 40
Table 4.5 KMO and Bartlett's Test and Component Matrix ................................ 42
Table 4.6 Correlation of Variables ....................................................................... 43
Table 4.7 ANOVAs for Construct ........................................................................ 44
Table 4.8 Model Summary of the Construct ........................................................ 45
Table 4.9a Coefficients of the Construct ............................................................. 46
Table 4.9b Coefficients of the Construct ............................................................. 46
Table 4.10 Overall Perceived Service Quality ..................................................... 48

4

ABSTRACT
In the any market, competition is an inevitable factor. Similarly it happens
with the airline industry, especially in Vietnam’s low cost airlines market. Low
airfare ticket is not a unique factor to compare but customer service is also very
important. Low cost airlines are also trying to understand their customers, to
measure their passengers’ satisfaction because passengers’ satisfaction may
guarantee good customer loyalty for their future business.
This study will provide a better understanding of how passenger satisfies
with Vietnam’ low cost airlines about customer service and air fare. Based on the
result of this study, airline managers may understand their level of service and
improve it.
During this study, the author measures service quality dimensions and air
fare impact on customer satisfaction via SEVRQUAL tool of (Parasuraman et al.,
1988).
With a sample of 150 passengers who had travelled on Vietnam’s low cost
airlines flights within 6 month is surveyed at Tan Son Nhat airport included Jetstar
Pacific Airlines and Vietjet Airlines passengers to test six hypothesized
relationships among the construct of impacted of service quality and air fare on
customer satisfaction.
The study also finds that the important dimensions of service quality tested
here is: tangibles”, “reliability”, “responsiveness”, “assurance”, “empathy” and “air
fare”. The study used Statistic Package for Social Science (SPSS) to analyze data
through Exploratory Factor Analysis (EFA) and regression analysis tools. The
results indicated that all dimensions have strong positive effect on customer
satisfaction.
.
Keywords: SERQUAL, Service Quality, Customer Satisfaction, Low Cost

Airlines, Vietnam.


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CHAPTER 1
INTRODUCTION

1.1 Vietnam’s low cost airline background:
This study examines in the context of low cost carrier (LCC) operating in
Vietnam. There are two LCC operating in Vietnam, ( Jetstar Pacific Airlines since
2005 and Vietjet Air since 2011).
Vietnam’s airline market is a market with a population of 88 million, shared
by 5 airlines (included Vietnam Airlines, Jetstar Pacific, Vietjet Air, Air Mekong,
Vasco) almost operating domestic and short-haul routes but Vietnam Airlines is a
flag carrier of Vietnam with both domestic and international routes. In the situation
of Vietnam changing from agriculture to a service market, we are opening the door
to welcome foreign investments from all over the world, standard of living higher,
moreover indoor and outdoor tourist market developing… as a result, the demand of
air transportation increasing significantly. It creates a potential airline market in
Vietnam.
Nevertheless, airline industry has been continuous operating on extremely
thin margins (IATA, 2011; Tiernan et al., 2008/1) with high operational costs
(Airline Trends and Ancillary Revenue Report, 2010). Thus, the volume is crucial
for the industry to stay profitable; the differences in prices for one flight can be
huge. Furthermore, the actual product of the airline industry (airline seat) is
extremely perishable. Once the aircraft takes off, the opportunity to sell a seat is
lost. Also the Vietnam’s Government control in the air fare via fare cap can cause
the situation more problems.
There are many difficulties that airlines face so it is necessary to find a

solution for Vietnam’s airlines. The solution must solve the current problem: “How
to trade off between the passenger’s demand and airline profit to keep the business
on right way and development.”


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Following the world trend, Vietnam applied the low cost airline model in
Vietnam market since May 2005, the first was Jetstar Pacific Airline which came
from the full service airlines- Pacific Airlines. Jetstar Pacific Airlines is a joint
venture company between Vietnam Airlines, Qantas group from Australia and some
individuals.
LCC model in Vietnam have the similar pricing and cost structures to the
European and North American LCC (Goh, 2005) including some specifications: the
same aircraft type, fast turn-around times, point - to - point services from main base,
offering low fare in exchange for no extra services as compared to traditional airline
offering free in-flight meals, beverages and in-flight entertainment but passengers
can purchase these items separately if they choose to. Passengers are encouraged to
use online ticket booking and electronic ticket, no more paper ticket being used in
cutting cost. Innovative marketing strategies such as direct selling, call centers, eticketing, e-payments and bank and supermarket networks…

Currently, there are two low cost airlines in Vietnam, Jetstar Pacific Airlines
and Vietjet Air:
Jetstar Pacific Airlines had a big start, becoming Vietnam’s first LCC in
2005, when the carrier (formerly known as Pacific Airlines) was rebranded and
adopted the low-cost model following investment from Qantas, operating four
domestic routes and 15 daily round trip frequencies, based on schedules from
Jetstar’s website. Jestar Pacific has been focusing on fleet renewal rather than
expansion but is planning to resume expansion in 2013, ending a hiatus of four
years in which growth was paused due partially to internal uncertainty. The carrier

began a more promising new period earlier this year after a 70% stake was
transferred to Vietnam Airlines, (which previously had been looking at launching its
own LCC subsidiary); Qantas owns the remaining 30% stake in Jetstar Pacific.
Jetstar Pacific for now is only planning to add two frequencies for the remainder of
this year (both of which will take effect in latter half of Oct-2012), giving the LCC


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five domestic routes and 17 daily roundtrips. Jetstar Pacific currently accounts for
about 14% of capacity in Vietnam’s domestic market while their new born
competitor, VietJet Air accounts for 9%.
The second low cost airline in Vietnam is Vietjet Air, Vietjet Aviation Joint
Stock Company. VietJet launched services in late Dec-2011 but has expanded
quickly and by its first year anniversary, it operates 22 daily roundtrip frequencies
on nine domestic routes. VietJet currently operates five domestic routes and an
average of 10 daily frequencies. VietJet currently offers about 25,000 weekly seats
but by late Dec-2012 – once all four of its new routes are launched and capacity is
increased on most existing routes – it will offer over 55,000 weekly seats in
Vietnam’s domestic market. This will give VietJet starting the last week of 2012
(24-Dec-2012 to 30-Dec-2012) an estimated 16% share of Vietnam’s domestic
market, second only to market leader Vietnam Airlines. (CAPA 2012)
Their network is expanding and their target is becoming Vietnam’s largest
low-cost carrier, overtaking Jetstar Pacific, by the end of 2012. VietJet is also
poised to beat rival Jetstar Pacific in becoming the first Vietnamese LCC to operate
international services. VietJet, which will expand its domestic network from five to
nine destinations in Nov/Dec-2012, is looking at launching its first international
route – possibly Ho Chi Minh-Bangkok – in late 2012 or early 2013. But the carrier
is adding capacity on four of its routes on 16-Oct-2012, at which point it will
operate 16 daily frequencies. On 04-Oct-2012 VietJet announced plans to add

another four routes in Nov-2012 and Dec-2012 – Ho Chi Minh to Hue, Phu Quoc
and Vinh and Hanoi to Dalat – and expand its total number of daily frequencies to
22 flights.


8

Vietnam LCCs domestic capacity share

(Source: CAPA – Centre for Aviation, VietJet, Jetstar &Innovata) .

Government-owned flag carrier Vietnam Airlines is projected to account for
approximately 68% of domestic capacity in Vietnam at the end of Dec-2012, down
from about 73% currently. This decrease of 5% comes despite the fact that Vietnam
Airlines is planning to expand domestic capacity by over 15% for the upcoming
northern hemisphere winter season (from just under 200,000 weekly seats to about
233,000), Vietnam Airlines already has seen its share of domestic capacity slip by
5% over the last year from about 78% in Oct-2011 to 73% in Oct-2012.
Since joining to the low cost airlines in Vietnam, LCC have brought more
seat capacities and more opportunities for passengers who can’t afford the full
service ticket. It also has a positive effect on Vietnam’s tourism market during the
economic crisis by offering more low fare tickets for some tourism destinations.
However, both of Vietnam’s LCC presented a bad picture for profitable business.
Competition on prices made the situation worse together with fare cap control from
the Government, high fuel prices leading to losses and more losses.


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1.2 Vietnam’s LCC product and service:

As a standard LCC model, the airfare does not include extra services. So
LLC offer extra services to meet passengers demand through separate pricing from
the airfare ticket price. The extra products and services include in-flight food and
beverages, merchandise, in-flight entertainment, excess baggage allowances, hotel
accommodation, tour packages, car rentals, rail/bus tickets sales, travel insurance
and charter services … (Datamonitor 2012).
Furthermore, to guarantee for the LCC short turn-around time to meet the on
time performance standard, LCC penalize passengers who do not check in on time.
These passengers are not allowed to board the plane (Barrett 2004) for their late
check in as penalty at the airport and are moved on to next available flights.

Low fare ticket class allow passengers a 7 kg carry – on luggage. Passengers
can also purchase more excess baggage during the time of booking their tickets or
later should they change their minds. Passenger can make changes via all available
channels. Otherwise at the airport higher baggage costs will be charged, penalty
charges also apply in this case.

Any change of names, flights, routes allowed depend on each fare classes.
For some types of fare classes and sale ticket, booking changes will be charged with
time restrictions for changes before flight time.

LCC fare structure offers the lowest fare prices for flights that are a long
time away. These fares will increase as the day of the flight departure draws closer.
Base on this, there is a lot of savings for passengers who planned well ahead for
their trips; they can secure their tickets at a reasonable or very low price. For
passengers who do not plan well, they will be penalized with a full fare ticket at the
day of the flight departure for the very same flight ticket.


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The table 1 below displays the overview of the differences between products
and services of full service and low cost airlines business.
Table 1. Product features of low-cost carrier and full service carrier in
Vietnam.
Product Features

Lost-cost carrier

Full service carrier

Fares

Simplified fare structure Complex fare structure

Distribution

Online, direct booking, Online, direct booking, and

Check-in

and agents

agents

Ticketless

Ticketless and IATA ticket
contract

Airports

Mostly secondary

Primary

Connection

Point-to-point

Interlining,

code

share,

global alliances
Class segmentation

One class

More than one class

In-flight

Pay for amenities

Complementary extras

Airport lounge service

No

Yes

Frequent flyer program

No

Yes

Seating assignment

No

Yes

Source: O’Connell and Williams (2005) and Barrett (2004)

1.3 Research Motivation:
Because of the special price structure of LCC, and the significant business
model make passenger confuse and unpleasant for the service. Moreover, LCC have
joined Vietnam market no longer, it’s a new conception about low cost airlines
services. For full service airline passengers in period of transferring into low cost
would not catch up yet the new service concept so that they still confuse and being
unpleasant with the new service like penalty paid or paid for food, entertainment as
they have never done before.


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The author understands the perception that service quality is one of the key
factor leading to success in the airline industry. In the hard section of price
competition between the two Vietnam low cost airlines, the most important part
would not be the quality services but the price. In this limited study, the author
would measure Vietnam’s LCC in perception of Vietnam LCC passengers and
finding out some recommendations for Vietnam LCC on improving their quality of
service, air fare as well as to satisfy passengers and that can improve profits to the
airlines business. Therefore, the viewpoint of customers about service quality and
air fare structure should be considered and defined on how to match with the
different levels of customer satisfaction. In order to identify the impact of service
quality and air fare factors on customer satisfaction in LCC in Vietnam, I would
conduct a survey to examine the relationship between service quality, air fare and
customer satisfaction.

1.4 Research Objectives:
The objectives of this study are:
 To examine the relationship between the components of service quality,
air fare and customer satisfaction in Vietnam’s LCC.
 To examine the impact of service quality and air fare on customer
satisfaction in Vietnam’s LCC.

1.5 Research Scopes:
The study will be focus in LCC passengers in Ho Chi Minh City.

1.6 Structure of Research:
The structure of research is divided into five parts. They are correlative with
five chapters in general with the main contents as follows:

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 Chapter one is an introduction and will discuss about Vietnam’s low cost
airlines’ background, Vietnam’s LCC product and service, motivation,
objectives and structure of the research.
 Chapter two namely literature review, theoretical framework and
hypotheses. It will discuss further about a comprehensive literature and give
out some definitions of variables, the hypotheses between variables and build
up framework for the research.
 Chapter three namely research methodology, will describe the methodology
of research, sampling design, data collection procedures and data analysis
procedures.
 Chapter four is the result of the analysis. This part will include descriptive
statistics, assessment of measurement model as well as hypothesized model
whether it has the good meaning or not.
 Chapter five consists of conclusions and recommendations. This chapter
will discuss on the summary of findings, the conclusions and implications for
management, contributions of the study, limitations and recommendation for
future research.

In this chapter, showing Vietnam’s low cost airlines. It include the LCC
model background, product, service offering, and current situation in airline
industry in Vietnam. Moreover, the problem statement and purpose will also be
mentioned at the end of this chapter. Following this introduction, the next section of
the paper presents a review of the relevant literature, followed by the presentation
of a conceptual model and hypotheses relationships among the constructs of
the model.


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CHAPTER 2
LITERATURE REVIEW, THEORETICAL FRAMEWORK
AND HYPOTHESES
The purpose of literature review is review and analyzes on some old research
that relate to the concepts of service quality and customer satisfaction. It also
provides some definitions of service quality, SERVQUAL, the concept of customer
satisfaction. Besides that, this chapter finding out the relationship between variables
and main reasons lead to the framework and hypotheses of research.
The main purpose of this study is to evaluate Vietnam’s low cost airlines
service and to identify how much Vietnamese passengers are satisfied or
dissatisfied with the current two domestic low cost airlines through customers’
perspectives.

2.1 Service Quality:

Normally service quality and passenger satisfaction are always key variables
for passengers’ consideration for making a decision over a service of one provider
to another (Park et al., 2004).
Service quality and air fare in the Airlines industry are deemed as
competitive marketing strategy factors. It includes customer focus, innovation,
creative service and striving towards to achieve an excellent service. There is a
standard for airlines services. However it has been modified to adapt with each
airlines business model. Flight scheduling, ticket prices, in-flight services, airport
service, employee’s attitudes, facilities, safety and ticketing procedures are key
factors to determine the airline service quality. These factors do influences
passengers' choice of airline.


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According to a passenger’s experience, full service airlines are always voted
for the better service as compared with low cost airlines. Full service passenger is
served well with extra services during the flight while passengers of low cost
airlines have to pay to be served. Passengers understand the level of service
included with the airlines they have chosen; full service passenger have to pay
higher for their full service ticket and low cost passenger will pay lower for their
flight but in the bottom of thinking, they used to support full service airlines for a
pleasant serviced flight. The quick growth of low cost airlines all over the world
currently had proven that they can successfully compete with full service airlines in
the price – sensitive leisure and high quality standard market.

In recent years, there are many researchers who have researched on service
quality but only a few of them have examined customer expectations of service
quality in the airline industry (Cunnigham et al., 2002).

Why is quality of service one of the most important factors that gets more
attention from the airline industry manager? And why are there so many researchers
studying it? So we need to understand the meaning of service quality via some
famous researchers to make it clearer. Firstly, Parasuraman defined service quality,
as “service quality is determined by the differences between customer’s
expectations of services provider’s performance and their evaluation of the services
they received” (Parasuraman et al., 1985; 1988). The next definition by Asubonteng
(Asubonteng et al., 1996) is “service quality can be defined as the difference
between customers” expectations for service performance prior to the service
encounter and their perceptions of the service received”. Ueltschy (Ueltschy et al.,
2004) defines service quality as the consumer’s judgment about the overall
excellence or superiority of the service. DeMoranville and Bienstock (2003) also
define service quality as “a measure to assess service performance, diagnose service
problems, manage service delivery and as a basis for employee and corporate

15

rewards”. In summary, all previous literatures offer many valuable definitions of
service quality. However, in this study, we will focus on the most popular definition
of service quality by (Parasuraman et al, 1985).
All the service quality definitions show us that service quality is the
differences between customer’s expectations and service received. It is a very
important factor to be concerned with passenger experience and the behavioral
intentions in service generally and airline service specifically so that there are so
many studies examined service quality and also some researchers have studied
service quality in airlines industry, some of them have contributed the big value to
develop service quality in Airlines industry. The first study belong to Kearney
(1986), studied service quality from perspective of the airlines consumer in his
doctoral thesis delaminated service quality from perspective of industry-based
economic and marketing measures. In the 70’s the Civil Aeronautics Board (
Douglas & Miller, 1974; Jordan, 1970) developed the initial tools of service quality
measurement in the airline industry in the U.S.A, the study were based on economic
variables, and pre – deregulation, developed as service quality assessments from the
perspective of the airline consumer.
Wen Li and Chen (1998) studied the quality evaluation of domestic airline
industry using modified Taguchi loss function with different weights and target
values. By using Taguchi loss function, one can quantify quality and thus compare
service quality objectively. According to Wen Li and Chen (1998), the process of
travelling on a domestic airline can be described as follows: ticket -> check-in ->
boarding -> departure -> flying -> arrival -> baggage claim.

2.1.1 The SERVQUAL instrument:

There are many researchers who developed a number of measurement tools
in difference field such as:


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Garvin (1983) who measures quality by counting the number of internal and
external failures. Internal failures are observed before a product leaves the factory
and external failures are incurred after a unit has been installed. Quality is in
conformance to the customers and not to the company’s specifications.
Gronroos (1984) classifies service quality into technical and functional
quality. Technical quality refers to what the service providers deliver during the
service provision process. Functional quality refers to “how the service is provided
by the service employee”

Parasuraman et al. (Parasuraman, Berry, & Zeithaml, 1991; Parasuraman,
Zeithaml, & Berry, 1985) published a set of services quality dimensions.
Parasuraman, Berry and Zeithaml are all marketing professors from Texas A&M
University. Since their services quality dimensions was published in 1985, it
became well known and had brought to the authors many scholars. The dimensions
have since been used in many service firms (Forster, 2001). At the beginning, they
consider ten dimensions of service quality to determine the perceived services
quality including of reliability, responsiveness, competence, access, courtesy,
communication, credibility, security, understanding the customer and tangibles.
However, over next three years 1988, they narrow the initial ten dimensions of
service quality to five dimensions which is called SERVQUAL. SERVQUAL
(Parasuraman et al., 1988) has gained a wide scale of acceptance and has proven to
be a popular measurement tool with academicians and practitioners as well. The
SERVQUAL instrument measures service quality by examining the gap between
“expectations” (the service that customers think should be provided) and

“perceptions” (what customers think actually has been provided).
The SERVQUAL instrument has five dimensions: tangibles, reliability,
responsiveness, assurance (combining communication, credibility, security,
competence and courtesy) and empathy (combining understanding and knowing the


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customer with accessibility). These dimensions are defined by the authors as
follows:
1. Tangibles: physical facilities, equipment, appearance of personnel.
2. Reliability: ability to perform the promised services dependably and
accurately.
3. Responsiveness: willingness to help customers and provide prompt
service.
4. Assurance: knowledge and courtesy of employees and their ability to
inspire trust and confidence.
5. Empathy: caring, individualized attention the firm provides its customers.
6. Air fare: the total value of money which has been paid for air transport
from point to point.

2.1.2 Applying SERVQUAL in low cost airlines in Vietnam:

SERVQUAL model had been widely used in many past studies in difference
industry such as banking (Gronrroos, 1984), health care (Norkhazzaina, 2009),
restaurants (Dayang & Rozario, 2009), tourism service encounter (Baker &
Fesenmaier, 1997), hotel (Mattssoon 1992; Juwaheer & Ross, 2003) and airlines
(Groonroos, 1984).

In the context of this study, the SERVQUAL instrument will be applied to

test the service quality and air fare impact on customer satisfaction in Low Cost
Airlines industry. SERVQUAL instrument measures service quality based on five
dimensions namely reliability, assurance, tangibles, empathy, and responsiveness.
The instrument is based on the premise that customers’ assessments of overall
service quality are determined by the “gap” between their level of expectations and
their perceptions of actual performance.


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The instrument has been used by researchers to measure airline service
quality such as: Fick and Ritchie (1991), Fick & Ritchie and Gourdin &
Kloppenborg were the first to apply the service quality gap model to the airline
industry in 1991. Sultan and Simpson (2000) and Young et al. (1994). In general,
service quality literature recognizes expectations as an instrumental influence in
consumer evaluations of service quality (Parasuraman et al., 1985 as cited in Sultan
& Simpson, 2000). (Cunnigham, et al., 2002) had a research under service quality
about examining customer expectations of service quality in airline industry.
Ariffin, et al., (2010) studied service quality and satisfaction for LCCs. M.Mehdi
Bozorgi, (2006) measured service quality of the airline using SERVQUAL model.

Five dimensions of SERVQUAL (Parasuraman et. Al, 1988) included
tangibles, reliability, responsiveness, assurance, and empathy will be used to test the
service quality impact on customer satisfaction in LCC industry in this study.
Besides that, one more dimension about air fare was developed to measure the
impact on customer satisfaction in the airline industry by the context of this study.
These dimensions are defined as follows:

1. Tangibles: physical facilities, equipment, appearance of personnel.
2. Reliability: ability to perform the promised services dependably and

accurately.
3. Responsiveness: willingness to help customers and provide prompt
service.
4. Assurance: knowledge and courtesy of employees and their ability to
inspire trust and confidence.
5. Empathy: caring, individualized attention the firm provides its customers.
6. Air Fare: the total value of money which has been paid for air transport
from point to point.


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 Tangibles: the appearance of physical facilities, equipments and personnel.
This dimension is referring to airline’s aircraft fleet, in-flight service
equipments, airport operation equipments, system support to selling ticket,
all airlines staff included selling ticket, airport staff and cabin crew, pilot …
A modern aircraft fleet can guarantee for more safe operations. Beside
safety issues, a modern aircraft fleet will save on maintenance costs for LCC,
new aircrafts require less costly maintenance and will also establish the
airline’s good reputation. The modern aircraft with comfortable internal
furniture together with high technical airport equipments; flexible ticket
booking system and convenient check-in process together with well
presented uniform staff and cabin crew will ensure a good image for an
airline carrier.
Base on previous researches and the author experience, the tangible
should be focused in on Vietnam’s LCC to build up an airline’s image to the
passenger in the new low cost airlines market.
Based on research purpose and literature of all theories and articles
mentioned above, this is the first hypothesis:
 Hypothesis 1: Tangibles has a positive effect on customer satisfaction.

 Reliability: Ability to perform the promised services dependably and
accurately.
According to (Zeithaml et al., 1990), reliability is one of the most
important factors towards services industry because most of the customer
would like to expect that service providers are able to perform the promised
services dependably and accurately (Zeithaml et al., 1990).
This dimension has a close relationship with passenger satisfaction,
special in airlines industry. But for the special airlines services, sometimes
conducting promised services to passengers is beyond airlines’ ability due to
unexpected situations such as delayed or cancelled flights due to technical


20

reasons, the weather or air traffic. This then sometimes breaks the airline’s
promise to the passenger about conducting service at the first commitment.
When the unexpected situations happen, airlines showed their duty of care
towards passengers by quickly responding to fix the problems or to
compensate the passenger.
It is also a factor helping LCC to build up trust from their passengers
and being a base for repeat customer services. This has a direct impact on
satisfaction, so the second hypothesis would be:
 Hypothesis 2: Reliability has a positive effect on passenger satisfaction.
 Responsiveness: Willingness to help customers and provide prompt service.
Responsiveness is perceived to be the most important dimension
(Zeithmal et al., 1990). Therefore, it is important to ensure the employees of
service organizations are well trained and be willing to assist the passengers;
to know how to be patient and to be able to convince the passengers to
understand the unexpected situations. It shows the willingness of the airlines
to be caring towards their passengers and be prepared to correct their

mistakes when they could not serve passengers as promised. The better the
level of employee services, the better the level of quality service the
customers perceived. Therefore, the third of hypothesis is as follows:
 Hypothesis 3: Responsiveness has a positive effect on passenger
satisfaction.
 Assurance: Knowledge and courtesy of employees and their ability to
inspire trust and confidence.
In a standard service as airlines industry, most of passengers expect to have a
warm caring or guided correct information or appropriate identification in
the certain situation. Furthermore, in the airline industry, most of the
passengers require safety and security. If the staff is confident in their job


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with in-depth occupational knowledge, that will inspire truth and confidence
in the guests towards to the firms (Parasuraman et al., 1988). This factor can
affect the passengers’ satisfaction. Therefore, the fourth of hypothesis is as
below:
 Hypothesis 4: Assurance has a positive effect on passenger
satisfaction
 Empathy: Caring, individualized attention the firm provides its customers.
This dimension is used to measure service quality based on the ability of the
management of LCCs organizations to understand the customer needs and
requirements from airlines. It shows that airlines pay attention to the
passenger’s profit and how they understand about passengers’ needs. Then,
the fifth of hypothesis is:
 Hypothesis 5: Empathy has a positive effect passenger satisfaction
 Air fare: the total value of money which has been paid for air transport from
point to point.

Price is the amount of money that you have to pay for an item or service
(Oxford dictionary, 2005). From the passengers’ view, price plays an
important role in assessing and measuring the benefits and quality of
products or services that have been paid. The simple concept is “the more the
customers pay, the better the quality and product they will require”.
Additionally, price is associated with the cost budget by the customers to
purchase the products or to pay for the service. Normally, shareholders often
resist expenditure on costs while customers often are reluctant to pay higher
prices for higher quality of services (Presbury et. Al, 2005)
There are many forms of prices with many functions. Rent, fares,
fees, rates, tolls wages and commission; all may in some way be the price for
people to pay for goods or services (Kotler & Keller, 2009).