Service Quality, Passenger Expectations and Profitability in the Chinese Airline Industry

Service quality has become an important area for competition among Chinese carriers. This paper focuses on studying the relationship between customer satisfaction measured by customer complaints and their expectation of the on-time performance of Chinese carriers and how the customer complaints affect the financial performance of carriers. By using a quarterly balanced panel data set covering six large listed carriers, the empirical results show that an increase in actual on-time performance reduces customer complaints. However, an increase in expected on-time performance significantly raises customer complaints. An increase in customer complaint reduces the yield measured as revenue per revenue ton kilometer (RTK) of carriers.