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| Better safe than service? The = relationship=20 between service and safety quality in the US airline=20 industry |
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| Document types: | Feature |
| Publication title: | |
| Source type: | Periodical |
| ISSN/ISBN: | 09604529 |
| ProQuest document ID: | 86065131 |
| Text Word Count | 2646 |
| Document URL: | http://proquest.umi.com/pqdweb?did=3D86065131&sid=3D11&a= mp;Fmt=3D3&clientId=3D29909&RQT=3D309&VName=3DPQD |
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| Abstract = (Document=20 Summary) |
|
The commercial airline industry in the USA was deregulated in =
1978.=20
Proponents of deregulation argued that regulation forced =
competition based=20
solely on service quality and thus created fares that in many =
cases were=20
50 percent higher than comparable intrastate (unregulated) fares. =
Studies=20
had concluded that regulation also forced |
| Full = Text (2646=20 words) | ||
| Copyright MCB UP Limited (MCB) 1999
Dawna L. Rhoades: Dawna L. Rhoades is an Assistant Professor at =
Blaise Waguespack: Blaise Waguespack Jr is an Assistant =
Professor, both=20
at Introduction The commercial airline industry in the USA was deregulated in = 1978.=20 Proponents of deregulation argued that regulation forced = competition based=20 solely on service quality and thus created fares that in many = cases were=20 50 percent higher than comparable intrastate (unregulated) fares. = Studies=20 had concluded that regulation also forced carriers to accept low,=20 uneconomical load factors and prevented carriers from establishing = economies of scale that would lower costs (Caves, 1962; Jordon, = 1970).=20 While deregulation freed carriers to create their own route = structure and=20 set fares and service quality levels based on prevailing market=20 conditions, airline safety would continue to be regulated by the = Federal=20 Aviation Authority (later incorporated into the US Department of=20 Transportation as the Federal Aviation Administration, FAA). = Critics of=20 deregulation have long argued that safety has a price in that it = is a=20 direct function of the level of investment in safety-related = activities.=20 This "price" may seem too high to airlines faced with declining = fares and=20 profit margins, who might then be tempted to reduce their = investment (Lee,=20 1996; Rose, 1992). Unfortunately, reductions in safety spending are less visible = to the=20 traveling public than reductions in service quality spending. = Accidents,=20 which garner the most visibility, are but one indicator of safety. = Federal=20 inspections, maintenance reports, incidents, and other safety = issues=20 regulated by the US government, also provide valuable information = on the=20 safety quality of US airlines. However, this information is not = easily=20 available to or interpretable by the general public. Because = service=20 quality is more accessible, consumers may use service quality as a = basis=20 for judging the overall quality of the airline. The purpose of = this study=20 was to investigate the link between service and safety quality to=20 determine if consumers are justified in using service quality as a = proxy=20 for safety quality. Background Following deregulation, US carriers began the rather painful = process of=20 restructuring to reduce costs. A financial crisis in the early = 1980s led=20 to industry consolidation and the creation of the hub-and-spoke = system.=20 Industrywide losses of nearly $10 billion in the early 1990s saw = the=20 airlines develop complex holding structures, expand non-airline = and/or=20 discrete services, and race to create seamless global service = networks,=20 primarily through strategic alliances (Rosen, 1995). As a result = of these=20 actions, the major US carriers as a whole are more cost = competitive than=20 all but some of the lower wage Asian carriers (Oum and Yu, = 1998). While there are no studies examining the pre- and = post-deregulation=20 levels of service quality among US carriers, there is a general = consensus=20 that it declined significantly following deregulation which ended = mandated=20 levels of service quality. In the race to cut costs, service = quality was=20 an early and obvious area in which to achieve cost savings for US=20 carriers, who have been conspicuously absent in recent years from = surveys=20 ranking the service quality of international carriers (Towers and = Perrin,=20 1991; Zagat, 1992). What is not clear is whether safety quality has also declined = since=20 deregulation. In fact, the question of safety quality has provoked = intense=20 debate among researchers, consumer groups and politicians. The = possible=20 link between financial stability/performance and safety levels has = been=20 the source of frequent disagreements. The FAA, which continues to = enforce=20 minimum safety standards, has long insisted that all operating = carriers=20 are equally safe. However, several studies have suggested that = there is a=20 link between operating profit margin and carrier accident and = incident=20 rates (Rose, 1990; 1992). Rose (1990) has reported that a 5 = percent=20 increase in operating profit margin results in a 15 percent = decline in=20 accident and incident rate in the following year. Other = researchers have=20 stated convictions that unprofitable airlines would cut back on=20 investments in maintenance and safety when facing economic = hardships=20 (Graham and Bowes, 1979; Lee, 1996). According to the US General Accounting Office (GAO), there are = four=20 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=20 long been cited as critical to the success of any quality program = (Deming,=20 1982; Mallak et al., 1997). These attitudes create a quality = culture that=20 is expected to permeate the organization and affect everything = that the=20 organization does. Our question was "Can organizations create a = quality=20 culture that extends to only some aspects of their operation and = not to=20 others?" Can an air carrier to be rated highly on safety quality = and not=20 on service quality? Method Data for this study were collected for all nine major US = carriers for=20 the period 1991-1997. A major carrier is defined as a certified = carrier=20 whose annual gross revenues are over $1 billion. Information was = collected=20 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=20 accidents, incidents, and near mid-air collisions. The FAA defines = an=20 accident as an occurrence associated with the operation of an = aircraft in=20 which any person suffers death or serious injury. An incident is = an=20 occurrence other than an accident that affects or could affect the = safety=20 of operations. Examples include mechanical malfunctions, bird = strikes,=20 fire or smoke in the cabin, etc. Near mid-air collisions are = events where=20 aircraft collisions are possible due to aircraft proximities of = less than=20 500 feet. Information on pilot deviations was obtained directly = from the=20 FAA Office of System Safety. Pilot deviations are actions of the = pilot=20 that result in a violation of a Federal Aviation Regulation or = restricted=20 airspace. Examples include deviation from Air Traffic Control = altitude or=20 course, reckless operation, takeoff without clearance, etc. Data on airline quality were obtained from the Department of=20 Transportation's Air Travel Consumer Report. This publication = reports=20 customer complaints for all US carriers. Complaint categories = include=20 flight problems, ticketing complaints, refund complaints, fare = complaints,=20 advertising complaints and credit complaints. Total yearly = departures were=20 collected from the Bureau of Transportation Statistics. A safety rate was calculated for each carrier by adding = accidents,=20 incidents, near mid-air collisions, and pilot deviations and = dividing the=20 total number by that carrier's yearly departures. Likewise, a = service rate=20 was calculated by dividing total complaints by yearly departures. = Service=20 quality and safety quality averages were calculated by year and by = carrier. These rates can be interpreted as the number of safety or = service=20 problems per departure. The lower the rate the better the = carrier. Correlations were calculated between the service and safety = averages=20 for each carrier and each year of the study. Since both rates were = divided=20 by departures, we treated the averages as matched pairs and = compared the=20 means by year and carrier using the paired t-test. Finally, the = carriers=20 were ranked by year and overall by their service and safety rates. = These=20 ranked lists were then compared using the Spearman's rho = correlation. If=20 each carrier's safety rank is identical to their service rank, = then the=20 Spearman's rho would yield a perfect 1.0. The lower the Spearman = rho the=20 greater the difference between the service and safety ranking for = the=20 major carriers. Results Table I reports the service quality rates and averages. The = overall=20 industry rates improved from 1991 to 1995, reaching a low of five=20 complaints per 10,000 departures, then began to climb back to = seven=20 complaints per 10,000 departures in 1997. Among the individual = carriers,=20 Southwest had the lowest level of service problems for each of the = seven=20 years of the study. TWA had the highest level of service = problems. Table II reports the safety quality rates and averages. The = overall=20 industry average safety rate in 1991 was one problem per 10,000=20 departures. In 1997, this rate had improved to eight safety = problems per=20 100,000 departures. Southwest again had the best yearly and = overall safety=20 rates. Comparing these two tables, several observations are = possible.=20 First, the safety rate is consistently lower (better) than the = service=20 rate for all years and all carriers. Second, there is more = variation among=20 carriers on service quality than on safety quality. Table III reports the results of the mean correlations and the =
paired=20
t-test by year and carrier. The correlations between the industry =
average=20
yearly rate for quality range from -0.12 to 0.65, although none of =
the=20
correlations is significant. The paired t-test indicates that the =
mean=20
yearly safety and service levels for all nine major carriers are=20
significantly different. In examining the results, two carriers, =
Delta and=20
Northwest, posted a negative correlation between their service and =
safety=20
rates, indicating that as one increased the other declined. =
Examining the=20
calculated rates, the data show that service quality for both =
these=20
carriers has declined over the period of this study while safety =
quality=20
has improved. Former Table IV reports the results of the Spearman's rho performed = between=20 the service and safety ranked list of carriers. With the exception = of=20 1991, none of the correlations is significant, indicating that = service and=20 safety level rankings for the major US carriers are not = significantly=20 related. The good news for passengers traveling on a major US airline is = that=20 the level of airline safety is far higher than the overall level = of=20 service quality. Since safety quality continues to be regulated in = the=20 USA, there are clearly disincentives for failing to maintain at = least=20 minimum levels of safety. These standards create a floor that = apparently=20 prevents safety levels from falling to the level of service = quality and=20 reduces the variation among the major carriers. Service quality among the major US carriers, however, varies = much more=20 widely. During the period 1990-1993, the US airline industry lost = in=20 excess of $10 billion (Rosen, 1995). Judging from the trend in = service=20 quality, US carriers were quite active in cutting the levels of = service.=20 It is perhaps surprising that the overall levels of service = quality did=20 not suffer even more during the period. The danger for these = carriers may=20 be the extent to which consumers do link service and safety = quality.=20 According to a 1995 poll of US travelers by Frequent Flyer, safety = record=20 ranked eighth in importance when selecting a flight and only 10 = percent of=20 the respondents had changed or cancelled a flight over safety = concerns=20 (December 1995). Whether these numbers reflect a lack of concern = for air=20 safety or an assumption that flying carriers are "safe enough" due = to=20 government oversight has not been fully investigated. Also unclear = is=20 whether international travelers share the same attitudes. Observers have argued that US consumers are driven more by = issues of=20 price than service and have substantially lowered expectations of = service=20 quality in the 20 years since deregulation. If quality is defined = as=20 meeting or exceeding customer expectations, then US consumers may = be=20 getting exactly what they expect. In line with this reasoning, = overall=20 levels of service quality do not necessarily reflect the level of = service=20 quality for first- and business-class passengers who pay higher = fares and=20 result in higher yields for the airlines. These classes of = passengers have=20 become the focus of airline efforts to create a "branded" image = that will=20 distinguish an air carrier from the competition and prevent air = travel=20 from becoming a commodity (Fraser, 1996; Nelms, 1997). According = to=20 Airline Marketing News (1997), the business traveler has been the = main=20 beneficiary of recent quality improvement drives at the major = airlines.=20 The issue of how the price/service quality relationship is = addressed in a=20 liberalizing world market for air travel will be a major concern = for both=20 air carrier management and researchers. This study is not without limitations. The measures of service = quality=20 used to calculate the rates presented deal primarily with issues = of basic=20 service, that is the ability to issue tickets and refunds = correctly and in=20 a timely manner, to avoid flight problems and overbooking, and to=20 advertise in a fair and open manner. Although there is a category = for=20 other complaints, the Air Travel Consumer Report does not = specifically=20 address areas such as meal quality, seat comfort, and in-flight=20 entertainment. There are also several questions that might be = raised over=20 the calculation of our safety rates. We chose to treat accidents,=20 incidents, near midair collisions, and pilot deviations as equal = safety=20 events. Obviously, from a passenger perspective an accident would = be rated=20 far worse than a pilot deviation, however, it was not clear to the = authors=20 that an accident is a better indicator of the overall level of = airline=20 safety than a pilot deviation or incident. Accidents are = fortunately rare=20 occurrences and often the result of multiple factors. In the = absence of=20 compelling evidence of the relationship between the four types of = safety=20 events used in this study, we opted for the equal weighting. There are several areas of promising future research that = extend the=20 issues addressed. The first area would be to examine the link = between=20 financial performance and service and safety quality. A second = area of=20 interest would be to replicate this study with regional carriers = who are=20 believed to have lower levels of both service and safety quality. = A final=20 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=20 business class passengers", Phillips Business Information, MD. 2. Caves, R. (1962), Air Transport and Its Regulators: An = Industry=20 Study, Harvard University Press, Cambridge, MA. 3. Deming, W.E. (1982), Quality, Productivity and Competitive = Position,=20 MIT, Center for Advanced Engineering, Cambridge, MA. 4. Fraser, D. (1996), "A personal approach", Airline Business, = March,=20 pp. 58-61. 5. Frequent Flyer (1995), 1995 Frequent Flyer Poll, December, = pp.=20 2531. 6. General Accounting Office (GAO) (1988), Aviation Safety - = Measuring=20 How Safely Individual Airlines Operate, (GAO/RCED-88-61), GAO, = Washington,=20 DC. 7. General Accounting Office (GAO) (1996), Aviation Safety - = New=20 Airlines Illustrate Long-Standing Problems in FAA's Inspection = Program,=20 (GAO/RCED-97-2), GAO, Washington, DC . 8. Graham, D.R. and Bowes, M. (1979), Do Finances Influence = Airline=20 Safety, Maintenance, and Service?, (CRC-386), The Public Research=20 Institute, Alexandria, VA. 9. Jordon, W.A. (1970), Airline Regulation in America: Effects = and=20 Imperfection, John Hopkins University Press, Baltimore, MD. 10. Lee, R. (1996), New Directions in Air Safety, The Bureau of = Air=20 Safety Investigation, Canberra, Australia, reprinted from Lee. R. = (1993),=20 Transport Safety at What Cost?, Brisbane, Australia. 11. Mallak, L.A., Bringelson, L.S. and Lyth, D.M. (1997), "A = cultural=20 study of ISO certification", International Journal of Quality = &=20 Reliability Management, Vol. 14 No. 4, pp. 328-48. 12. Nelms, D.W. (1997), "The name game", Air Transport World, = August,=20 pp. 53-6. 13. Oum, T.H. and Yu, C. (1998), Winning Airlines: Productivity = and=20 Cost Competitiveness of the World's Major Airlines, Kluwer = Academic,=20 Boston, MA. 14. Rose, N.L. (1990), "Profitability and product quality: = economic=20 determinants of airline safety performance", Journal of Political=20 Economics, Vol. 6 No. 2, pp. 944-64. 15. Rose, N.L. (1992), "Fear of flying? An economic analysis of = airline=20 safety", Journal of Economic Perspectives, Vol. 6 No. 2, pp. = 75-94. 16. Rosen, S.D. (1995), "Corporate restructuring: a labor = perspective",=20 in Cappelli, P. (Ed.), Airline Labor Relations in the Global Era: = The New=20 Frontier, Cornell University Press, Ithaca, NY. 17. Towers and Perrin (1991), Competing in a New Market: Is = Airline=20 Management Prepared?, Towers and Perrin, San Francisco, CA. 18. Zagat (1992), Zagat United States Travel Survey, Zagat, New = York,=20 NY. 19. Zellner, W. (1997), "Coffee, tea, and on-time arrival: = customer=20 satisfaction is a top priority at airlines", Business Week, = January 20, p.=20 30
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Content-Transfer-Encoding: quoted-printable Content-Location: http://proquest.umi.com/js/retrieve.js var naicArray =3D new Array(50);=0A= var naicIndex =3D 0;=0A= var sicArray =3D new Array(50);=0A= var sicIndex =3D 0;=0A= var tickerArray =3D new Array(50);=0A= var tickerIndex =3D 0;=0A= var subjectArray =3D new Array(50);=0A= var subjectIndex =3D 0;=0A= var paperKeywordArray =3D new Array(50);=0A= var paperKeywordIndex =3D 0;=0A= var advisorArray =3D new Array(50);=0A= var advisorIndex =3D 0;=0A= var generateMoreLikeThis =3D false;=0A= var absoluteDatabaseName =3D null;=0A= var requestString =3D null;=0A= var naicsExist =3D false;=0A= var sicExist =3D false;=0A= var tickerExist =3D false;=0A= var tickerName =3D ' ';=0A= var naicsName =3D ' ';=0A= var sicName =3D ' ';=0A= var subjectName =3D ' ';=0A= =0A= function setTickerName(name) {=0A= tickerName =3D name;=0A= }=0A= =0A= function setNaicsName(name) {=0A= naicsName =3D name;=0A= }=0A= =0A= function setSicName(name) {=0A= sicName =3D name;=0A= }=0A= =0A= function setSubjectName(name) {=0A= subjectName =3D name;=0A= }=0A= =0A= function addSubject(sub) {=0A= //alert('adding subject '+sub+' Index '+subjectIndex);=0A= // Check to see if there is any repetition=0A= //alert("Entered subject: " + sub);=0A= for ( i =3D0 ; i < subjectIndex; i++ ) {=0A= //alert('ARRAY VALUE ['+subjectArray[i]+'] sub value ['+sub+']');=0A= if ( subjectArray[i] =3D=3D sub )=0A= return;=0A= }=0A= subjectArray[subjectIndex++] =3D sub;=0A= =0A= }=0A= =0A= function addPaperKeyword(sub) {=0A= for ( i =3D0 ; i < paperKeywordIndex; i++ ) {=0A= =0A= if ( paperKeywordArray[i] =3D=3D sub )=0A= return;=0A= }=0A= paperKeywordArray[paperKeywordIndex++] =3D sub;=0A= }=0A= =0A= function addAdvisor(sub) {=0A= for ( i =3D0 ; i < advisorIndex; i++ ) {=0A= =0A= if ( advisorArray[i] =3D=3D sub )=0A= return;=0A= }=0A= advisorArray[advisorIndex++] =3D sub;=0A= }=0A= =0A= =0A= function addNaic(sub) {=0A= //alert('adding naic '+sub+' Index '+naicIndex);=0A= // Check to see if there is any repetition=0A= for ( i =3D0 ; i < naicIndex; i++ ) {=0A= //alert('ARRAY VALUE ['+naicArray[i]+'] sub value ['+sub+']');=0A= if ( naicArray[i] =3D=3D sub )=0A= return;=0A= }=0A= naicArray[naicIndex++] =3D sub;=0A= }=0A= =0A= function addSic(sub) {=0A= //alert('adding sic '+sub+' Index '+sicIndex);=0A= for ( i =3D0 ; i < sicIndex; i++ ) {=0A= if ( sicArray[i] =3D=3D sub )=0A= return;=0A= }=0A= sicArray[sicIndex++] =3D sub;=0A= }=0A= =0A= function addTicker(sub) {=0A= //alert('adding ticker '+sub+' Index '+tickerIndex);=0A= for (i =3D0 ; i < tickerIndex; i++ ) {=0A= if ( tickerArray[i] =3D=3D sub )=0A= return;=0A= }=0A= tickerArray[tickerIndex++] =3D sub;=0A= }=0A= =0A= function generateSubjectMLT() {=0A= var str =3D ' ';=0A= var temp =3D '';=0A= if ( subjectIndex > 0 ) {=0A= str =3D str + '
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