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Are Customer Service Qualities Lead Indicators for Financial Performance? An Analysis of the Airline Industry
Khim L. Sim,
Roger Williams University
Khay Boon Tan, Nanyang Technological University
Larry N. Killough, Virginia Polytechnic Institute & State University
ABSTRACT. Prior studies have examined the value relevance of operating measures in the airline industry. These indicators, however, have been evaluated in isolation. This study adds to the extant literature by investigating the interactive effects of service quality (e.g., on-time arrivals, flight delays, mishandled baggage, and complaints) and aircraft productivity on the firm’s future performance as measured by one-quarter ahead Return on Assets or Return on Sales. Overall, results from this study show that negative factors such as complaints and mishandled baggage interact with aircraft productivity to further reduce one-quarter ahead Return on Assets or Return on Sales, with the results of complaints being more pronounced. The effects of “complaints” appear to persist into the following quarter, i.e., t+2.
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