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Better safe than service? The relationship
between service and safety quality in the US airline
industry

Dawna
L. Rhoades,  Blaise Waguespack. Managing
Service
Quality. Bedford: 1999.Vol.9, Iss. 6;  pg. 396

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Subjects:

Classification Codes

8350 Transportation & travel
industry,  5320 Quality control,  9190 United States,  4310 Regulation

Locations:

United States,  US

Author(s):

Dawna
L. Rhoades ,  Blaise Waguespack

Document types:

Feature

Publication title:

Managing
Service Quality. Bedford: 1999. Vol. 9, Iss. 6;  pg. 396

Source type:

Periodical

ISSN/ISBN:

09604529

ProQuest document ID:

86065131

Text Word Count

2646

Document URL:

http://proquest.umi.com/pqdweb?did=86065131&sid=11&Fmt=3&clientId=29909&RQT=309&VName=PQD

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Abstract (Document
Summary)

The commercial airline industry in the USA was deregulated in 1978.
Proponents of deregulation argued that regulation forced competition based
solely on service quality and thus created fares that in many cases were
50 percent higher than comparable intrastate (unregulated) fares. Studies
had concluded that regulation also forced carriers to accept low, uneconomical load factors and prevented carriers from establishing economies of scale that
would lower costs. While deregulation freed
carriers to create their own route structure
and set fares and service quality levels based on prevailing market
conditions, airline safety would continue to be regulated by the Federal
Aviation Authority (later incorporated into the US Department of
Transportation as the Federal Aviation Administration, FAA). Critics of
deregulation have long argued that safety has a price in that it is a
direct function of the level of investment in safety-related activities.
This "price" may seem too high to airlines faced with declining fares and
profit margins, who might then be tempted to reduce their investment.
Unfortunately, reductions in safety spending are less visible to the
traveling public than reductions in service quality spending. Accidents,
which garner the most visibility, are but one indicator of safety. Federal
inspections, maintenance reports, incidents, and other safety issues
regulated by the US government, also provide valuable information on the
safety quality of US airlines. However, this information is not easily
available to or interpretable by the general public. Because service
quality is more accessible, consumers may use service quality as a basis
for judging the overall quality of the airline. The purpose of this study
was to investigate the link between service and safety quality to
determine if consumers are justified in using service quality as a proxy
for safety quality.

Full Text (2646
words)

Copyright MCB UP Limited (MCB) 1999

Dawna L. Rhoades: Dawna L. Rhoades is an Assistant Professor at Embry-Riddle Aeronautical University, Daytona Beach, Florida,
USA.

Blaise Waguespack: Blaise Waguespack Jr is an Assistant Professor, both
at Embry-Riddle Aeronautical University, Daytona Beach, Florida,
USA.

Introduction

The commercial airline industry in the USA was deregulated in 1978.
Proponents of deregulation argued that regulation forced competition based
solely on service quality and thus created fares that in many cases were
50 percent higher than comparable intrastate (unregulated) fares. Studies
had concluded that regulation also forced carriers to accept low,
uneconomical load factors and prevented carriers from establishing
economies of scale that would lower costs (Caves, 1962; Jordon, 1970).
While deregulation freed carriers to create their own route structure and
set fares and service quality levels based on prevailing market
conditions, airline safety would continue to be regulated by the Federal
Aviation Authority (later incorporated into the US Department of
Transportation as the Federal Aviation Administration, FAA). Critics of
deregulation have long argued that safety has a price in that it is a
direct function of the level of investment in safety-related activities.
This "price" may seem too high to airlines faced with declining fares and
profit margins, who might then be tempted to reduce their investment (Lee,
1996; Rose, 1992).

Unfortunately, reductions in safety spending are less visible to the
traveling public than reductions in service quality spending. Accidents,
which garner the most visibility, are but one indicator of safety. Federal
inspections, maintenance reports, incidents, and other safety issues
regulated by the US government, also provide valuable information on the
safety quality of US airlines. However, this information is not easily
available to or interpretable by the general public. Because service
quality is more accessible, consumers may use service quality as a basis
for judging the overall quality of the airline. The purpose of this study
was to investigate the link between service and safety quality to
determine if consumers are justified in using service quality as a proxy
for safety quality.

Background

Following deregulation, US carriers began the rather painful process of
restructuring to reduce costs. A financial crisis in the early 1980s led
to industry consolidation and the creation of the hub-and-spoke system.
Industrywide losses of nearly $10 billion in the early 1990s saw the
airlines develop complex holding structures, expand non-airline and/or
discrete services, and race to create seamless global service networks,
primarily through strategic alliances (Rosen, 1995). As a result of these
actions, the major US carriers as a whole are more cost competitive than
all but some of the lower wage Asian carriers (Oum and Yu, 1998).

While there are no studies examining the pre- and post-deregulation
levels of service quality among US carriers, there is a general consensus
that it declined significantly following deregulation which ended mandated
levels of service quality. In the race to cut costs, service quality was
an early and obvious area in which to achieve cost savings for US
carriers, who have been conspicuously absent in recent years from surveys
ranking the service quality of international carriers (Towers and Perrin,
1991; Zagat, 1992).

What is not clear is whether safety quality has also declined since
deregulation. In fact, the question of safety quality has provoked intense
debate among researchers, consumer groups and politicians. The possible
link between financial stability/performance and safety levels has been
the source of frequent disagreements. The FAA, which continues to enforce
minimum safety standards, has long insisted that all operating carriers
are equally safe. However, several studies have suggested that there is a
link between operating profit margin and carrier accident and incident
rates (Rose, 1990; 1992). Rose (1990) has reported that a 5 percent
increase in operating profit margin results in a 15 percent decline in
accident and incident rate in the following year. Other researchers have
stated convictions that unprofitable airlines would cut back on
investments in maintenance and safety when facing economic hardships
(Graham and Bowes, 1979; Lee, 1996).

According to the US General Accounting Office (GAO), there are four
factors that affect the safe operation of airlines:

(1) financial stability;

(2) maintenance quality;

(3) management attitude; and

(4) pilot competence (GAO, 1988; 1996).

Management attitude and the attitude of staff and line personnel have
long been cited as critical to the success of any quality program (Deming,
1982; Mallak et al., 1997). These attitudes create a quality culture that
is expected to permeate the organization and affect everything that the
organization does. Our question was "Can organizations create a quality
culture that extends to only some aspects of their operation and not to
others?" Can an air carrier to be rated highly on safety quality and not
on service quality?

Method

Data for this study were collected for all nine major US carriers for
the period 1991-1997. A major carrier is defined as a certified carrier
whose annual gross revenues are over $1 billion. Information was collected
on four types of safety-related events:

(1) accidents;

(2) incidents

(3) near mid-air collisions, and

(4) pilot deviations.

The FAA Website (www.faa.gov) was the source of information on airline
accidents, incidents, and near mid-air collisions. The FAA defines an
accident as an occurrence associated with the operation of an aircraft in
which any person suffers death or serious injury. An incident is an
occurrence other than an accident that affects or could affect the safety
of operations. Examples include mechanical malfunctions, bird strikes,
fire or smoke in the cabin, etc. Near mid-air collisions are events where
aircraft collisions are possible due to aircraft proximities of less than
500 feet. Information on pilot deviations was obtained directly from the
FAA Office of System Safety. Pilot deviations are actions of the pilot
that result in a violation of a Federal Aviation Regulation or restricted
airspace. Examples include deviation from Air Traffic Control altitude or
course, reckless operation, takeoff without clearance, etc.

Data on airline quality were obtained from the Department of
Transportation's Air Travel Consumer Report. This publication reports
customer complaints for all US carriers. Complaint categories include
flight problems, ticketing complaints, refund complaints, fare complaints,
advertising complaints and credit complaints. Total yearly departures were
collected from the Bureau of Transportation Statistics.

A safety rate was calculated for each carrier by adding accidents,
incidents, near mid-air collisions, and pilot deviations and dividing the
total number by that carrier's yearly departures. Likewise, a service rate
was calculated by dividing total complaints by yearly departures. Service
quality and safety quality averages were calculated by year and by
carrier. These rates can be interpreted as the number of safety or service
problems per departure. The lower the rate the better the carrier.

Correlations were calculated between the service and safety averages
for each carrier and each year of the study. Since both rates were divided
by departures, we treated the averages as matched pairs and compared the
means by year and carrier using the paired t-test. Finally, the carriers
were ranked by year and overall by their service and safety rates. These
ranked lists were then compared using the Spearman's rho correlation. If
each carrier's safety rank is identical to their service rank, then the
Spearman's rho would yield a perfect 1.0. The lower the Spearman rho the
greater the difference between the service and safety ranking for the
major carriers.

Results

Table I reports the service quality rates and averages. The overall
industry rates improved from 1991 to 1995, reaching a low of five
complaints per 10,000 departures, then began to climb back to seven
complaints per 10,000 departures in 1997. Among the individual carriers,
Southwest had the lowest level of service problems for each of the seven
years of the study. TWA had the highest level of service problems.

Table II reports the safety quality rates and averages. The overall
industry average safety rate in 1991 was one problem per 10,000
departures. In 1997, this rate had improved to eight safety problems per
100,000 departures. Southwest again had the best yearly and overall safety
rates. Comparing these two tables, several observations are possible.
First, the safety rate is consistently lower (better) than the service
rate for all years and all carriers. Second, there is more variation among
carriers on service quality than on safety quality.

Table III reports the results of the mean correlations and the paired
t-test by year and carrier. The correlations between the industry average
yearly rate for quality range from -0.12 to 0.65, although none of the
correlations is significant. The paired t-test indicates that the mean
yearly safety and service levels for all nine major carriers are
significantly different. In examining the results, two carriers, Delta and
Northwest, posted a negative correlation between their service and safety
rates, indicating that as one increased the other declined. Examining the
calculated rates, the data show that service quality for both these
carriers has declined over the period of this study while safety quality
has improved. Former Delta
Air Lines CEO, Ronald W. Allen, has acknowledged that the airlines
pursuit of lower costs nearly doubled the airline's customer complaints
since 1994 (Zellner, 1997).

Table IV reports the results of the Spearman's rho performed between
the service and safety ranked list of carriers. With the exception of
1991, none of the correlations is significant, indicating that service and
safety level rankings for the major US carriers are not significantly
related.

The good news for passengers traveling on a major US airline is that
the level of airline safety is far higher than the overall level of
service quality. Since safety quality continues to be regulated in the
USA, there are clearly disincentives for failing to maintain at least
minimum levels of safety. These standards create a floor that apparently
prevents safety levels from falling to the level of service quality and
reduces the variation among the major carriers.

Service quality among the major US carriers, however, varies much more
widely. During the period 1990-1993, the US airline industry lost in
excess of $10 billion (Rosen, 1995). Judging from the trend in service
quality, US carriers were quite active in cutting the levels of service.
It is perhaps surprising that the overall levels of service quality did
not suffer even more during the period. The danger for these carriers may
be the extent to which consumers do link service and safety quality.
According to a 1995 poll of US travelers by Frequent Flyer, safety record
ranked eighth in importance when selecting a flight and only 10 percent of
the respondents had changed or cancelled a flight over safety concerns
(December 1995). Whether these numbers reflect a lack of concern for air
safety or an assumption that flying carriers are "safe enough" due to
government oversight has not been fully investigated. Also unclear is
whether international travelers share the same attitudes.

Observers have argued that US consumers are driven more by issues of
price than service and have substantially lowered expectations of service
quality in the 20 years since deregulation. If quality is defined as
meeting or exceeding customer expectations, then US consumers may be
getting exactly what they expect. In line with this reasoning, overall
levels of service quality do not necessarily reflect the level of service
quality for first- and business-class passengers who pay higher fares and
result in higher yields for the airlines. These classes of passengers have
become the focus of airline efforts to create a "branded" image that will
distinguish an air carrier from the competition and prevent air travel
from becoming a commodity (Fraser, 1996; Nelms, 1997). According to
Airline Marketing News (1997), the business traveler has been the main
beneficiary of recent quality improvement drives at the major airlines.
The issue of how the price/service quality relationship is addressed in a
liberalizing world market for air travel will be a major concern for both
air carrier management and researchers.

This study is not without limitations. The measures of service quality
used to calculate the rates presented deal primarily with issues of basic
service, that is the ability to issue tickets and refunds correctly and in
a timely manner, to avoid flight problems and overbooking, and to
advertise in a fair and open manner. Although there is a category for
other complaints, the Air Travel Consumer Report does not specifically
address areas such as meal quality, seat comfort, and in-flight
entertainment. There are also several questions that might be raised over
the calculation of our safety rates. We chose to treat accidents,
incidents, near midair collisions, and pilot deviations as equal safety
events. Obviously, from a passenger perspective an accident would be rated
far worse than a pilot deviation, however, it was not clear to the authors
that an accident is a better indicator of the overall level of airline
safety than a pilot deviation or incident. Accidents are fortunately rare
occurrences and often the result of multiple factors. In the absence of
compelling evidence of the relationship between the four types of safety
events used in this study, we opted for the equal weighting.

There are several areas of promising future research that extend the
issues addressed. The first area would be to examine the link between
financial performance and service and safety quality. A second area of
interest would be to replicate this study with regional carriers who are
believed to have lower levels of both service and safety quality. A final
area of interest would be to examine the service quality levels of
business and first class passengers.

References

1. Airline Marketing News (1997), "Airlines intensify battle for
business class passengers", Phillips Business Information, MD.

2. Caves, R. (1962), Air Transport and Its Regulators: An Industry
Study, Harvard University Press, Cambridge, MA.

3. Deming, W.E. (1982), Quality, Productivity and Competitive Position,
MIT, Center for Advanced Engineering, Cambridge, MA.

4. Fraser, D. (1996), "A personal approach", Airline Business, March,
pp. 58-61.

5. Frequent Flyer (1995), 1995 Frequent Flyer Poll, December, pp.
2531.

6. General Accounting Office (GAO) (1988), Aviation Safety - Measuring
How Safely Individual Airlines Operate, (GAO/RCED-88-61), GAO, Washington,
DC.

7. General Accounting Office (GAO) (1996), Aviation Safety - New
Airlines Illustrate Long-Standing Problems in FAA's Inspection Program,
(GAO/RCED-97-2), GAO, Washington, DC .

8. Graham, D.R. and Bowes, M. (1979), Do Finances Influence Airline
Safety, Maintenance, and Service?, (CRC-386), The Public Research
Institute, Alexandria, VA.

9. Jordon, W.A. (1970), Airline Regulation in America: Effects and
Imperfection, John Hopkins University Press, Baltimore, MD.

10. Lee, R. (1996), New Directions in Air Safety, The Bureau of Air
Safety Investigation, Canberra, Australia, reprinted from Lee. R. (1993),
Transport Safety at What Cost?, Brisbane, Australia.

11. Mallak, L.A., Bringelson, L.S. and Lyth, D.M. (1997), "A cultural
study of ISO certification", International Journal of Quality &
Reliability Management, Vol. 14 No. 4, pp. 328-48.

12. Nelms, D.W. (1997), "The name game", Air Transport World, August,
pp. 53-6.

13. Oum, T.H. and Yu, C. (1998), Winning Airlines: Productivity and
Cost Competitiveness of the World's Major Airlines, Kluwer Academic,
Boston, MA.

14. Rose, N.L. (1990), "Profitability and product quality: economic
determinants of airline safety performance", Journal of Political
Economics, Vol. 6 No. 2, pp. 944-64.

15. Rose, N.L. (1992), "Fear of flying? An economic analysis of airline
safety", Journal of Economic Perspectives, Vol. 6 No. 2, pp. 75-94.

16. Rosen, S.D. (1995), "Corporate restructuring: a labor perspective",
in Cappelli, P. (Ed.), Airline Labor Relations in the Global Era: The New
Frontier, Cornell University Press, Ithaca, NY.

17. Towers and Perrin (1991), Competing in a New Market: Is Airline
Management Prepared?, Towers and Perrin, San Francisco, CA.

18. Zagat (1992), Zagat United States Travel Survey, Zagat, New York,
NY.

19. Zellner, W. (1997), "Coffee, tea, and on-time arrival: customer
satisfaction is a top priority at airlines", Business Week, January 20, p.
30

[Illustration]

Caption: Table I; Service quality rates for
major airlines; Table II; Safety quality rates for major airlines;
Table III; Correlations and results of paired t-test; Table IV;
Results of Spearman's rho for 1991-1997

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