Marching to the Beats of Their Own Drums: An Analysis of the Service-Satisfaction-Performance Relationship Between Low Cost and Network Airlines in the 21st Century

Abstract

This paper empirically investigates the service-satisfaction-performance relationship in the domestic airline industry between low cost and network carriers. Since the advent of the 21st century, low cost carriers have progressively risen in popularity, currently accounting for 30% of the domestic market share for revenue passenger miles. Their business models rely on offering discounted prices in regional markets and predominantly focus on the transportation element of service rather than investing resources into promoting customer service. Given the growth of these low cost firms in the past decade this study ultimately seeks to determine if, and to what degree, customer service impacts customer satisfaction and whether customer satisfaction influences corporate performance between network and low cost carriers. The results suggest that while the service-satisfaction-performance rapport holds for network carriers, this outcome does not seem to be the case for low cost carriers. A key takeaway from this paper involves ancillary revenues and how the benefits of issuing these additional fees substantially outweigh the costs of issuing these extra charges associated with losses in revenue as a result of reduced customer satisfaction.