A Study of Customer Satisfaction in Nepal Airlines Corporation

CHAPTER 1
INTRODUCTION
1.1 Background of the study
The airline industry is one of the fastest-changing industry sectors in the world today
(Kernchen, 2004). Changing market conditions including empowered customers, new
distribution channels and a cogent trend towards disintermediation and re-intermediation
constantly forces airlines to adopt and improve their operations and business models
(Shaw, 2011; Kossmann 2006). Advances in the field of Information and Communication
Technologies (ICT) contributed to the empowerment of customers who became more
experienced, sophisticated and striving for individual and independent products (Buhalis
& Law, 2008). The two authors conclude that in the tourism industry “the key success lies
in quick identification of consumer needs and in reaching potential clients with
comprehensive, personalized and up-to-date products and services that satisfy those
needs”. This statement and the fact that so far there has been little discussion on
passenger behavior support the need for further investigation. The aim is to detect how
potential clients get information about an airline, which information and booking
channels they prefer and which attributes of the airline product are most important for
them.

Airline industry is highly competitive and customers are most important factor of the
traveling process. Besides enhancing service quality and flight safety; customer
satisfaction is the most important strategies of the airlines (Fried, 1989; Gardner, 2004;
Zaid, 1995) [1], [2], [3].

In order to fulfill the customers’ needs, the ultimate concern for airlines is the service
offered. The contributing factor is due to the fact that only satisfied customers will have
the intention of repeat purchase (Jusuf, 2011). Additionally, they will tend to share their
great experiences and benefits with their network of friends. Many people would argue
that price is the most crucial element of concern among the customers. However, the
service provided is closely related as the most significant concern in the airlines industry.
Continuous improvement in the service provided to the customers should be planned and
executed to maximize the business performance.
The improvement in customer satisfaction for airlines industry can be linked with the
measurements of service quality (SQ) such as schedule, services provided by ground staff
(GS) , in-flight services (FS), online services (OS) and level of passenger satisfaction.
According to Brown (1991), Service quality is difficult to define because of the intangible
nature of the service offering. The definition of quality may differ from situation to
situation and from person to person.

In this study, customer satisfaction towards service quality is focused on Nepal Airlines
Corporation. By applying the measurements of SQ like schedule, services provided by
GS, OS, FS and level of passenger satisfaction, the researchers have identified the
dimension of SQ that affects the CS. This dimension serves as the most critical dimension
for Nepal Airlines. By conducting this study, the information and results have practical
implications for Nepal Airlines’ managers as they can manage company resources to
make improvement for CS.

1.2 Research Objectives

The objectives of this research were to:
 Identify the relationship of service quality dimensions that affects customer
satisfaction and service quality in NAC.
 Examine the level of satisfaction on service quality provided by NAC and retain
the customer loyalty.

1.3 Statement of the Problem

According to the observation and interview done with the airlines’ staff and passengers,
researcher realized that there is a severe lack of customer satisfaction in Nepal Airlines’
business. Most of the staffs’ focus is on the cost management without considering most
important aspect of the sevice industry i.e. customer relationship management. That is
why the airline is suffering from very intense competition in its domestic as well as
international market.

A focus of quality is crucial to service business and it has acted as a basic for organization
to survive the competition, get society’s acceptance and be able to achieve its missions
(Natalisa & Subroto, 2003). Besides, airlines industry has played an important role in the
global economy especially serving as a vital component in the tourism industry and
remains essential to the conduct of international business (Tiernan, Rhoades, & Jr, 2008).
1.4 Research Question
Keeping in view the above stated situational preamble, objectives and statement of the
problem, the present research wes primarily guided by a set of two distinctive research
questions (RQ) which are stated as follows:

RQ1: How can customer satisfaction in service quality of NAC be improved?

RQ2: Do the service quality dimensions i.e. tangible features, schedules, ground staff
services, in-flight services and online services affect customer satisfaction in service
quality of NAC?

1.6 Rationale of the Research

This study contributes to address the core problems, challenges and issues pertaining to
NAC’s customer satisfaction and retention with a hope to establish the real picture of the
problem, its diversity and intensity. The certainty and reliability of the result are able to
act as a guideline for future research in Nepalese airline industry. In organizational
perspective, this study helps to foster better understanding and knowledge on the
customer satisfaction between service quality with tangible features, schedule, ground
staff services, in-flight services and online services.

Besides, this study helps to determine the contributing variable which has the most
significant relationship on service quality. It also helps NAC to identify the real needs and
wants of the customers in putting effort to acquire as well as retain the customer loyalty.
Furthermore, this study helps the airlines by providing useful information to set
appropriate policy in making sure that the customer experiences maximum level of
satisfaction.

1.7 Limitations of the Study

As one of the major limitations of the study, the present research has been conducted on
the basis of present researcher’s personal observation, review of related literature and
supplementing it with only a small amount of sample of survey research. Other
limitations of this study were the constraints of resources, access and time.

1.8 Organization of the Thesis Report

The study report has presented the systematic presentation of the research design,
analysis, presentation, and findings of the study. Besides that in the beginning of the
report abstract has been written. It has divided into five chapters.
Chapter-I: Introduction
The beginning chapter of the study is introduction, which highlighted the basic
information of the research area, various problems of the study, and objectives of the
study, rationale of the study.

Chapter-II: Review of Literature

The second chapter of the study assures readers that they are familiar with important
research that has been carried out in similar areas by earlier scholars in related areas. It
also establishes that the study as link in a chain of research that is developing and
emerging knowledge about concerned field.

Chapter-III: Research Methodology

The third chapter describes the various research methods (i.e. research design, source of
data, data collection techniques, data collection methods, data collection instrument etc.).

Chapter-IV: Presentation and Analysis of Data

The developed information has finished in required form in fourth chapter. It presented
and analyzed the information by using various statistical tools with the help of SPSS
software in specified form to meet the stated objective of study.

Chapter-V: Summary, Conclusion, and Recommendations

On the basis of the results from data analysis, the researcher concluded about the research
work. Besides, it also gives important suggestions to the concerned organization for better
improvement.

Finally, the researcher presented bibliography, Appendices & various sources &
information.
 CHAPTER 2

REVIEW OF LITERATURE
2.1 Introduction
Published articles, journals and books were collected to investigate the theories and past
empirical studies which are related to this study. This chapter consists of literature
review, review of relevant theoretical model, conceptual framework, hypothesis
development and overall conclusion for Chapter 2.

2.2 Review of Historical Perspectives of NAC

The development of aviation industry in Nepal can be traced back to the late 1940s, when
a lone pilot who flew over the mountains, dipped into Kathmandu valley landing on a
cow grazing field. That field, Gaucharan, is now the site of Nepal’s only international
airport, Tribhuvan International Airport (TIA). In April 1949, a four-seater, lone powered
Vintage Beach-craft Bonanza Aircraft of Indian Ambassador Mr. Sarjeet Singh
Mahatahia landed at Gaucharan and thus heralded the beginning of aviation in Nepal
(Civil Aviation Authority of Nepal [CAAN], 2013).

The first charter flight by Himalayan Aviation Dakota from Gauchar to Calcutta in 1950
was the first passenger aircraft and later in the year 1955, the then King Mahendra
inaugurated Gauchar Airport and renamed it as Tribhuvan Airport and grassy runway was
transformed into a concrete one. The same year, brought the foundation of Department of
Civil Aviation (CAAN, 2013). Later in 1958, realizing the importance of linking the
country internally and externally, the then Royal Nepal Airlines Corporation (RNAC) was
established with one Douglas DC-3 (CAAN, 2013).

According to CAAN (2013), in the beginning the then RNAC services were limited to
Simara, Pokhara, Biratnagar and Indian cities like Patna, Calcutta and Delhi. In 1961,
Pilatus Porter short take off and landing (STOL) aircraft joined the fleet and in 1963, a
twelve-seater Chinese Fong Shou-2 Harvester’s were brought into service, opening up the
Kingdom’s more remote routes. In 1966, a Turboprop Fokker F27 was added to the
airline’s fleet. In 1970, RNAC acquired its first Hawker Siddley HS-748 followed by
Twin Otter’s in 1971 and Boeing 727s in 1972. Two Boeing 757s gradually replaced the
airline’s Boeing 727s in 1987. In May 2014 the airline added its new aircraft Airbus
A320. Likewise in april 2015 it received its second Airbus also.
To say Nepal's topography is unique would be a profound understatement. In fact, the
mountainous terrain has never been traversed by railroad. Even paved roads are rare.
While the elevation at the Kathmandu Airport is some 4,300 feet, some of the then
RNAC's flights start at 12,300 feet (from Syangboche), and another runway at 9,300 feet
features a 1,000-foot drop from one end to the other, making it the ultimate ski jump
(Davies, 1997).

To add to the adverse flying conditions, most of RNAC's airports lacked communications
equipment and navigational aids. Lack of Visual Flying Rules (VFR) meant that weather
would cancel many flights. For example, Singh, (1991) has reported that 24 of the 34
airports served by the then Royal Nepal Airlines Corporation were actually inoperative
during the Monsoon season.

In the 1950s, Indian Airlines was permitted to fly to Nepal, as King Tribhuban effected a
modernization of the country's government and infrastructure. Tourists, however, were
not even allowed in Nepal until 1951 (early climbers of Mount Everest entered from
Tibet); the tourism industry in Nepal only began to develop after 1960, according to
Vaidya (1987), by the 1980s, though, tourism would be second only to foreign aid as a
source of foreign currency.

The Nepali government and private sector joined to form the then Royal Nepal Airline
Corporation (RNAC) on July 1, 1958 (it was formally incorporated four years later). The
government's partner was a managing agent from India who held the minority share in the
airline. The then RNAC was obliged not only to provide aviation services, but also to
construct its own landing fields (Singh, 1991).

On July 3, 1958, staffed by 97 employees, the new airline began flying a single Douglas
DC-3 Dakota aircraft on several routes formerly operated by the Indian Airlines
Corporation (Davies, 1997). The first towns connected were Simra, Biratnagar, Pokhara,
and Bhairahawa. Nepal's government was eager to accelerate the airline's expansion, and
became its sole owner in October 1959. Three months later, RNAC took over a route to
Patna, India, which connected to Delhi and Calcutta (Davies, 1997).

Nepal’s geopolitical situation produced a strange, politically mixed fleet, which was
typically financed through aid programs from the country of manufacture. Seven more
DC-3s were added to the fleet between 1959 and 1964. Furthermore, China supplied a
couple of AN-2 Fong Shee aircraft which did not enter scheduled service. Bell
Helicopters that had been made in the United States and leased from Singapore were also
used for charters. Two Russian MI-4 helicopters also flew on scheduled routes to remote
points. The route network was expanded internally and externally, soon reaching Dhaka
in what was then East Pakistan (Singh, 1991).

With the arrival of a more advanced turboprop plane in 1966-the 40-passenger Dutch
Fokker F-27 Friendship the then RNAC commenced aerial sightseeing tours of five of the
world's eight tallest mountains. Unfortunately, this plane was lost in a crash in January
1970. Despite the setback, the airline still expanded its services both internationally and
domestically, soon linking some otherwise very isolated villages. A pair of Avro 748
aircraft took over the trunk routes in 1970. The next year, the then RNAC dispatched a
handful of Canadian DHC-6 Twin Otters-a specialized STOL (short take-off and landing)
plane at higher elevations. These were augmented by the even higher-performance Pilatus
Porter for fields above 12,000 feet (Vaidya, 1987).

The domestic market was liberalized in 1992, and a handful of new competitors emerged:
Necon Air, Nepal Airways, Everest Air, and Himalayan Helicopters. According to Davies
(1997), by the 1997 these four competitors accounted for 70 percent of Nepal's domestic
air traffic. Scheduled service to Japan was inaugurated in October 1994 with a Boeing
757 aircraft-a 15-hour trip requiring a refueling stop in Shanghai. Prior to that, the then
RNAC had been bringing in Japanese tourists with charter flights.

The positive trend that came from inauguration of the Japan route, though, seemed to end
just a few months later when a Twin Otter crashed in January 1995, killing its pilot. The
then RNAC lost another plane, a Pilatus Porter, in November 1998. Economic constraints
soon frustrated the then RNAC's efforts in maintaining enough jet aircraft in its fleet.
Finance ministry officials declined to subsidize two new Airbus A330s worth US$ 100
million each for the airline in April 1997. The then RNAC had by this time begun to post
losses (McMillan, 1998).

Adding to struggles as the millennium approached were allegations of corruption which

periodically surfaced. One case involved Dinesh Dhamija, who later founded the
Ebookers Internet travel site. Dhamija had been accused of receiving his post as director
of the then RNAC's European operations in the early 1990s on account of cronyism with
the then Prime Minister Girija Prasad Koirala. Dhamija won a substantial settlement with
the airline after a bitter court battle over these charges (Walsh, 2000).

An even larger scandal revolved around the lease of a Boeing 767 aircraft from Austria's
Lauda Air, which entered service in December 2000 over protests from employees and
government officials. The latter claimed the deal was unnecessary since RNAC was not
getting enough usage from its two existing Boeing 757s; further, the actual cost per flight
hour of the Lauda jet ended up being US $5,000 (US $1,150 above the cost specified in
the contract).The then RNAC chairman Haribhakta Shrestha was suspended during an
investigation, along with other executives; Nepal's Tourism and Civil Aviation Minister
Tarani Dutt Chataut resigned soon after (Chhabra, 2000).

As the company entered the new millennium, and its struggles seemed to continue, the
topic of privatization continued to come up regularly at planning meetings-just as it had
for the past twenty years. Some felt that the airline would be better equipped to deal with
its obstacles if it could operate as a private corporate entity, instead of being restrained by
the necessity of answering to the Nepalese government.

2.3 Review of technical perspectives for customer retention in airlines industry

Passenger satisfaction in airline operations has become critically important. Dennett,
Ineson, Stone, and Colgate (2000) suggest that as competition created by deregulation ht
from overall satisfaction and perceived quality. Service quality will vary; the definitions
are all formulated from the customer perspective: that is, what customers perceive are
important., 1994; Darby, 1999) while Rogerson (1983) stated that good reputation could
increase an organization's sales, attract more customers, and reduce customer departures.

Maintaining quality are the main concerns of business today. Providing quality is not a
concern of manufacturing companies alone. The delivery of high-quality service becomes
a marketing requirement among air carriers as a result of competitive pressure (Ostrowski
et al., 1993). Chang and Keller (2002) argue that quality in airline service is difficult to
describe and measure due to its heterogeneity, intangibility, and inseparability, and only
the customer can truly define service quality in the airline industry (Butler and Keller,
1992).Previous airline service studies are concentrated in modeling the effect of perceived
service quality at the
aggregate construct level, though examining the effects of individual dimensions of
service attributes has potentially great utility for airline managers(Patterson & Spreng,
1997).The perceptions of airline service quality are quite diverse and do not seem to fit
any single existing quality model such as the service quality (Haynes & Percy, 1994).

The technical perspectives of airline industry for retention of passengers are discussed
below:

2.4 Customer Satisfaction

A number of researchers have introduced various explanations and descriptions for
customer satisfaction (Forozia, Zadeh, and Gilani, 2013). Likewise, many studies have
examined the value of understanding and maintaining consumer satisfaction through the
service industry particularly. Because satisfied customers are keys to long-term business
success, both academics and practitioners also recognized the importance of customer
satisfaction (Jones and Suh, 2000). The objective of this research is to further advance the
research on consumer satisfaction in tourism (Song, Veen, Li and Chen, 2012). A great
deal of empirical search has recognized that customer satisfaction culminates in higher
customer loyalty, positive word of mouth, word of mouth recommendations, increased
market share, and profitability (Fornell and Wernerfelt, 1987; Song et al.; 2012).
Consumer satisfaction is thus important to work with survival due to its substantial
bottom-line financial implications, quality and service considerations.

Customer Satisfaction (CS) has continuously gained increasing attention in business to

measure products or service performance. In the simpler terms, CS is regarded as
customers’ evaluation of their purchases and consumption experience with a product or
service to meet the customers’ needs (Chen, Chang, Hsu, & Yang, 2011). Cadotte,
Woodruff and Jenkins (1987) defined CS as the emotional response of the customers.
Helms and Mayo (2008) defined CS or dissatisfaction as the derivation from the
customers’ experience with a service encountered and the comparison of that experience
to a given standard. In marketing literature, service satisfaction can be classified as an
emotional feeling by the consumers after experiencing certain service which in turn leads
to an individual overall attitude towards purchasing of service (Oliver, 1981). Hence,
customer emotional response, feeling, personal experience will determine the satisfaction
and dissatisfaction of the service delivered.
Additionally, Gronroos (1984) stated that satisfaction of airlines passengers can be
determined through the contacts with the employees of the company, physical and
technical resources, plane itself, meals and other passengers in the flight. For the airlines
industry, service quality (SQ) is more visible and passengers may use it as a basis to
judge the overall quality. Service provided by the employees is the most visible for
customers (Rhoades &Waguespack, 1999). According to Lorenzoni and Lewis (2004), an
understanding of the airlines customers and showing their involvement and enthusiasm in
delivering customer services is the key in satisfying and retaining the customers.

There are empirical researchers who have identified SQ, expectations, disconfirmation,
performance, desires and equity as significant antecedents of customer satisfaction
(Kaushik, Kaushik & Taneja, 2008). Carman (1990) stated that CS is fostered when the
service offered by the organization has exceeded their expectations. At the same time,
Woodside, Wilson and Milner (1992) stated that the customers of business services tend
to stay with the same provider (organization) if they are satisfied with service delivered in
a consistent basis. Besides, customer who satisfied with the service provider could
recommend the provider to other customers as well (Lam, Shanker, Erramilli & Murthy,
2004). In a service-profit chain, Heskett, Jones, Loveman, Sasser and Schesinger (1994)
defined that a low level of CS will lead to lower customer retention rates and fewer
referrals, which translates to reduced profitability and slow down the growth of
company’s revenue.

2.5 Customer Segmentation

Customer segmentation has become particularly important after industry deregulation
(Teichert et al., 2008). With a competition coming from low cost carriers, it is important
for the airlines to know their customer preferences and thus better target their marketing
campaigns. Also, Jones and Sasser (1995) state that serving wrong customers may be
very expensive, especially in a long run as they do not bring any profit to the company.
Excellent example of clear understanding of customer segmentation and its connection to
profitability is SAS (Carlzon, 1989): when the company underwent a complete
transformation, it discontinued any targeted marketing to leisure travelers, concentrating
all its efforts on business customers only. The company turned profitable within two years
after the transformation efforts begun.
The simplest way to segment the customers is by trip purpose or gender. Differences
between business and leisure customers have been widely discussed and the segmentation
has advanced beyond simple business vs. leisure differentiation (Shaw, 2007). Most
airlines serve more or less equally (depending on route and season) both types of
customers. However, some airlines concentrate their efforts purely on business customers,
and some operate only on leisure roots. This implies that an improved understanding of
their needs is required in a continuous strive to improve service quality as e.g. Weber
(2005) argues that differences in service expectations between travelers with different
national background or travel frequency can be significant. As well, Gilbert & Wong
(2003), in their research, have noted nationality/ethnicity related differentiation, as they
found differences in service expectations between North American, West European,
Chinese and Japanese ethnic groups. This type of differentiation is not discussed in this
study.

2.5.1 Business vs. leisure customer

Airlines most commonly divide their customers into business and leisure travelers (Shaw,
2007; Teichert et al., 2008). Thus, carriers are able to align their product strategy and
provide flexibility that is needed by business travelers, as well as cheap economy tickets
for other passengers, e.g. leisure travelers (Teichert et al., 2008).

The decision-making for business and leisure customers is also much more complicated
as it may seem at first. According to Shaw (2007), business travelers are usually not the
ones to make purchasing decision as the activity in the companies is often performed by a
secretary or is outsourced to a travel agency. Shaw (2007) argues that even in the case
when actual customer is not choosing the ticket, there are certain needs that have to be
met to influence the decision. For example, people prefer easier solutions, and if one
option requires calling an airline and another is online booking, the decision maker will
most likely go the easier way: book a ticket online.

Another motivator behind decision-making is greed. Hence, many airlines have executive
secretary clubs, to offer discounts and corporate entertainment in return for loyalty.
Furthermore, to create incentives to everyone in the business travel market, airlines use
frequent flyer programs for individual travelers as well as corporate discounts for
companies. As for leisure customers, the decision maker is a traveler him-/herself (or a
group of travelers, such as family which this makes decision-making a complex process
 (Shaw, 2007). Another difference is that in the business segment, people tend to travel a
lot – one person making tens of trips per year. In leisure segment, trips can be rare, some
travelers making only one trip in their lifetime. In addition, in leisure segment wholesale
market is still widely present (in a form of tour operators), and many airlines (especially
those that provide purely leisure flights to holiday destinations) have to consider tour
operators as very important group of customers.

Teichert et al. (2008) argue that as clear market segmentation to business and leisure
customer is becoming obsolete, there is a need to discover new customer segments and
target the customers that the airline is willing to serve. The authors suggest that more
business customer segments can be identified based on product and demographic data:

 Efficiency / Punctuality – mostly male, such customers fly very often (few times per
week) and are travelling for business reasons. Decision making on ticket purchase is
outsourced.

 Comfort – elderly business customers in high-rank positions. Fly several times per
month. Decision making is outsourced.

 Price – lower management, no leadership responsibilities. While highly educated (as

previous two segments), they fly few times a year, and decision making is done by travel
agents in order to minimize costs.

 Performance – entrepreneurs are largely represented in this segment, as they are

concerned with price, but performance is more important than in Price –segment. This
segment also includes most women compared to other segments and business trainees. It
is youngest segment among all of them.

 Catch all / Flexibility – this segment includes managers in important positions, flying few
times per month and outsourcing their decision. This segment is the most complex due to
its highly differentiated preferences.

Such detailed segmentation provides an opportunity to airlines to better understand their

customers and identify their value and preferences. Marketing efforts then can become
more efficient as targeted to adequately chosen group as well as distinct product packages
can be created for different groups (Teichert et al., 2008).
In addition to business and leisure segments, commuting customers have appeared with
increasing globalization and growth of air transportation, which are likely to travel on the
same destination due to personal reasons, work, etc. Not much has been discussed about
such customers in the literature yet.

Furthermore, more passengers in general tend to choose economy tickets (Mason, 2005)
and such price sensitivity destroys carriers’ already low margins. Teichert et al. (2008)
say that with such market changes, full network carriers has started to compete on costs,
thus sabotaging quality. This has inevitably led to dissatisfaction of business segment that
is not satisfied with the quality, and leisure segment receives higher quality levels but is
not yet satisfied with the price.

Chang & Yeh (2002) argue that the service quality defines the choice of an airline for
both business and leisure customers. An airline should differentiate its service offering
based on which both business and leisure customers' value and the services must be
delivered smoothly and consistently on high levels. According to the authors this would
lead to high customer satisfaction.

2.5.2 Male vs. female customers

An interesting aspect concerning differences in male and female service values was
brought up by Westwood et al. (2000). According to the article, travel is widely
associated with masculine values such as adventure and pleasure, and numerous
researchers do not recognize gender specific concerns and incorporate gender-neutral
values into travel. Many women feel discriminated and perceive airlines as masculine
organizations. Thus, there is a need to understand and satisfy the needs of female
travelers. And, as roles of women in business and hence business travel grow constantly,
it is dangerous customer segment to overlook nowadays.

Furthermore, customer retention is important, as keeping an old customer is less

expensive than acquiring a new one, and female travelers who are not satisfied with the
services, may switch to another carrier. However, as authors claim, the airlines keep
seeing air travel as a gender-neutral experience and despite the research on the subject of
female travelers, refuse to cater to women’ needs.

Another issue, which rose up in the surveys conducted by Westwood at al. (2000), is the
attitude of flight attendants that tend to pay more attention to men and assume that
women are not travelling on business. Furthermore, the research criticizes design of
lounges and aircraft, and this leads to higher level of dissatisfaction in air travel and
mostly would push female customers to try other carriers. As the article shows, females
value such things as comfort, safety, and staff attitude more than male travelers. Another
important point brought up in the article, is that the end of flight experience should not
end at the aircraft door. Female travelers are keen on receiving more help upon arrival
from a carrier, as they may feel less secure at the destination country. Male/female and
business/leisure/commuting customer segmentation is used for the purposes of this study

2.5.3 Loyalty
To date, customer loyalty has been widely agreed in the academic discipline as a three
dimensional conceptualization namely behavioral, attitudinal, and composite (Yoo and
Bai, 2013). There have been several studies attempted to identify the determinants of
customer loyalty (Dick and Basu, 1994). Researchers may have distinctive ideas in
conceptualizing loyalty, thus, resulting in different discussions in verifying the
antecedents of loyalty (Yoo and Bai, 2013). The construct of loyalty has been researched
in a variety of contexts including brand loyalty (Jacoby and Chestnut, 1978). Customer
loyalty is the focus of the current study. It has been proposed a comprehensive and often-
cited conceptual model of customer loyalty (Dick and Basu, 1994). Loyalty customers are
of great value for the airline brand (Bowen and Chen, 2001).

Earlier, several researchers examined the drivers of customer loyalty, as loyal customers
in both consumer and business markets are possible to engage in repeat purchases from a
seller or increase their “share” of purchases from a specific seller. Furthermore, they may
possibly provide referrals of business to sellers or engage in word of mouth promotion
(Lam and Burton, 2006). Barsky (1994) articulates that customer loyalty can lower costs
or increase profitability, as the cost of recruiting a new customer is said to be five times
more than the cost of retaining an existing customer.

Shoemaker and Lewis (1999) describe loyalty as it pertains specifically to the hospitality
industry: loyalty takes place when “ the customer feels so strongly that you can best meet
his or her relevant needs that your competition is virtually excluded from the
consideration set, the customer buys almost exclusively from the preferred service
organization- referring to you” (p. 349).
Jacoby and Chestnut (1978) have stated that loyalty is as a repeat purchase behavior
and/or the expression of a favorable attitude toward such behavior. Likewise, loyalty is
described as repeated purchasing or relative volume of same brand purchasing (Lee, Jeon,
and Kim 2011). Newman and Werbel (1973) suggested that loyal customers who
purchased a brand or service lots of times considered only the same brand and they made
no efforts to search for related information of another brand. Even though there are
numerous definitions of loyalty, loyalty toward a company is defined as “a deeply held
commitment to rebuy or re-patronize a preferred product/service consistently in the
future, thereby causing repetitive same-brand or same brand-set purchasing, despite
situational influences and marketing efforts having the potential to cause switching
behavior” (Oliver, 1999, p. 34). According to him, loyalty includes both attitudinal and
behavioral/action phases, and the attitudinal phase of loyalty has three key stages (i.e.,
cognitive, affective and conative).

2.5.4 Service Quality

It is stated that service quality is like beauty in the eyes of the beholder and hence a
matter of perception (Rhoades and Waguespack, 2004).However, it is measurement, plays
a really great role in assessing a service organization’s performance, scrutinizing service
problems, managing service delivery and determining corporate rewards (DeMoranville
and Bienstock, 2003). As service excellence and delivering quality service became of
overall importance to service firms. Service companies like airlines emphasized their
service attributes to establish a favorable image to distinguish themselves from their
competitors (Gursoy et al, 2005)

Service is a fundamental characteristic in the satisfaction of a client across every area that
encompasses information. Services differs from products, such as software because they
relate to performance and process rather than more concrete traits, which is seen, tested,
counted and measured. Consumption and creation of services are inseparable, making the
customer an active participant in delivery and quality control difficult. Service is also
different under constant product conditions, as service personnel and perspectives change.
The volatility and less tangible features of service make it more difficult to establish ways
to measure quality levels, especially given that quality of service is based on the
expectations and perceptions of the service consumer (Jiang, Klein, Parolia, and Li,
2012).
Moreover, service quality is generally deemed to comprise a comparison of expectations
with performance. This conceptualization goes back many years and is well summarized
by Jiang et al. (2012): “Service quality is a measure of how well the service level
delivered matches customer expectations. Delivering quality service means conforming to
customer expectations on a consistent basis” (p. 150).

Services are distinguished from goods in various ways. The most important difference is
intangibility. Services cannot be perceived, felt and tasted in the same manner in which
goods can be sensed. Consequently, services are an experience. Quality services are
different from producer to producer, from consumer to consumer and from situation to
situation. It makes it tough to standardize. During service delivery, quality often occurs in
relations between the customer and contact personnel of the service company. As a result,
service quality depends totally on the performance of employees, an organizational
resource, which is controlled to the degree that components of the tangible goods is
engineered. It is obvious that offering good quality is a demand on companies to satisfy
their customers. For companies offering good quality usually means differentiating from
competitors. In other words, superior quality is understood as a competitive weapon
(Ishfaq, Muhammad, Usman, Muhammad, Naveed, and Rehman, 2010)

Ishfaq et al. (2010) mentation that companies want to create and maintain competitive
advantages against rivals need to offer quality of services to their consumer. Further, to
survive and compete in the long time, companies are necessary to pay more attention
towards investing considerable amount and time on provision of a great service to their
consumers (Ishfaq et al.; 2010).

Leonard and Sasser (1982) and Rabin (1983) stated that the quality of goods and services
has become a recognized issue in the marketing context. Therefore, organization has to
understand and achieve Service Quality (SQ) to satisfy the customers’ expectations and
needs (Chen, et al., 2010). At the same time, SQ is at the forefront of many carriers’
marketing strategies (Lorenzoni & Lewis, 2004). SQ has been defined in many different
ways. Zeithaml (1988) indicated that quality is a relatively global value judgment; it can
be defined as product and/ or service excellence or superiority. Perceived SQ is evaluated
by the actual performance of the service in terms of particular service attributes in the
specific context (Oliver, 1993). According to Kasper, Van Helsdingen and De Vries
(1999), they defined SQ as the degree of which the service, its process and its
organization can fulfill the consumers’ expectation.

Parasuraman, Zeithaml and Berry (1988) defined that SQ is the consumers’ judgment
about the overall excellence of a service provider. The judgment is the outcome of the
difference between what a customer believes a service provider should offer for them
which based on his or her expectation and the actual performance of the service.
SERVQUAL instrument measures the SQ which is based on the assumption of the
perceived SQ derived from the comparison between the expected service and the actual
service delivered by the service provider. There are five dimensions under SERVQUAL
model which are tangibility, reliability, responsiveness, assurance and empathy.

SERVQUAL instrument has been used by several researchers in their research to measure
the SQ in the airlines industry (Fick & Ritchie, 1991; Sultan & Simpson, 2000). Other
than SERVQUAL instrument, Zagat used five basis criteria which are overall
performance, comfort, service, food and website of the firm to rate the airlines services
(Rhoades, 2006). The customers are the ones who judge the quality of service and assess
SQ by comparing what they are expected with what they perceive to receive. Instead of
money, the customers rely on what they have spent to judge the quality of service process
delivered by the firm. According to Pham (2011), improving SQ is a conventional way
for service firms to gain competitive advantages over their rivals. Hence, by improving
SQ lead to improving CS which in turn gaining competitive advantages.

SERVQUAL-model measures discrepancy between what customers expect from the

service and how customer perceives it. Parasumaran et al. (1985) identifies five gaps:

 Gap 1: consumer expectation – management perception gap,

 Gap 2: management perception – service quality specifications gap,
 Gap 3: service quality specifications – service delivery gap,
 Gap 4: service delivery – external communications gap,
 Gap 5: expected service – perceived service gap.

Service quality, according to this model, depends on the size of Gap 5 (expected service –
perceived service gap), which in its turn depends on previous four gaps, i.e.
Gap5 = f(Gap1, Gap2, Gap3, Gap4).
To measure perceived service, Parasumaran et al. (1985) identifies ten key determinants
of service quality, which impact both expected and perceived services, and through those,
perceived service quality (Figure 1). Expected service is also influenced by word of
mouth, personal needs as well as past experience.

Figure 1: Determinants of perceived service quality (Parasumaran et al., 1985)

2.6 Managing Customer Satisfaction and Expectations

The key aspect of customer satisfaction is to know customer expectations. Thus,
Parasumaran et al. (1991) claim that all the customers expect is the basic service that
service provider is promising to deliver, i.e. fundamental service. For example, hotel
visitors expect a clean and secure room and polite staff. Airline customers want to travel
to their destination safely and without delays. Price often raises customer expectations,
and if the customers pay more than average price, they want more and better services, so
as the authors discuss, the price should match the level of service that is delivered.
Furthermore, Parasumaran et al. (1991) categorize customer service expectations into five
service dimensions: reliability, tangibles, responsiveness, assurance and empathy.
Reliability is concerned with an outcome of a service, whereas the rest of dimensions are
concerned with service process. The authors note that while reliability is a key in meeting
customer expectations (i.e. deliver the result as promised, such as clean hotel room or
timely flight to destination), process dimensions are a key in exceeding customer
expectations.

Service experience is perception of reality, with prior experiences being essential (Chang
& Yeh, 2002, also Gronroos, 1982 and Parasumaran et al., 1985). Thus, customer attitude
towards the services depends on the following (Chang & Yeh, 2002):

 Their beliefs about the features (or attributes) that they associate with the
service (previous experiences, beliefs),
 Weight of attributes (relative importance of each attribute).
 In addition, Jones & Sasser (1995) identify the following service quality
elements:
 basic elements of a product or a service (core element, what customers expect
to be delivered from all service providers),
 basic support services (e.g. customer assistance or tracking of an order),
 a recovery process from bad experiences (such as compensations after
cancelled orover booked flight, lost baggage),
 extraordinary services (services that excel in meeting customer preferences or
solving the problems so that the service seems customized).

This classification could help understanding a service in question to see its core elements,
and finding out where customer satisfaction may be created. For example, customers
expect that basic elements and basic support processes work on continuously good basis,
and excelling in them will not increase customer satisfaction, but will keep it as it is.
Extraordinary services would put customer satisfaction on completely new level, adding
value in meeting customer needs and expectations. Recovery processes could be most
important as even if all other services have been provided on superior level, bad
experience can destroy customer satisfaction if not handled properly.
Another way to handle customer satisfaction and service quality is to find out where
customer satisfaction lays. Silvestro & Johnston (1990) identified the following service
quality factors:

 hygiene factors, or dissatisfiers (what is expected by customer, but will not be a

source of satisfaction, e.g. clean service facilities)
 enhancing factors, or satisfiers – (factors that leads to customer satisfaction but failure
to deliver does not cause dissatisfaction)
 dual threshold factors (if such factors are failed to deliver, will cause customer
dissatisfaction. However, if delivered above the specific level will cause satisfaction)

Cadotte and Turgeon (1988) also added neutral factors, factors that are least sensitive to
changes in performance, i.e. have no impact on service quality perception. Also,
Gummesson (1991) adds the factor that he considers to be missing from all service
quality research: love factor. It constitutes the willingness to serve the customer, genuine
empathy, caring personality.

According to Gummesson (1991), emotional ties can appear e.g. between a nurse and a
patient, a teacher and a student, thus adding to quality of interaction. Jones & Sasser
(1995) argue that only full customer satisfaction secures customer loyalty as well as
ensures long-term profitability. Especially it is important on markets with intense
competition.

However, there is a difference between true long-term loyalty and false loyalty. The
authors argue that false loyalty is empowered by such factors as governmental regulations
on competition, high switching costs, proprietary technology or strong loyalty promotion
programs such as frequent flyer programs. They say that the customers remain loyal only
when they are completely satisfied. Therefore, when the customer uses up his frequent
flyer miles, he or she may not remain loyal and switch to another carrier, in case loyalty is
false. However, if the carrier keeps the customer happy not by only frequent flyer miles
program, but by providing superior services consistently, the loyalty is true, and customer
will stay with the carrier. The authors conclude that it is crucial for a company to excel in
defining its target customers, and deliver exactly the product that corresponds to their
needs. Heskett et al. (1994) argued the same.

According to them, profit and growth are simulated by customer loyalty and loyalty in its
turn is driven by customer satisfaction, and customer satisfaction depends on the value
customers receive from the service.

Understanding importance and sources of customer satisfaction is important for any

company in any industry to grow and remain profitable, but in airline industry customers
are carriers’ only assets (Carlzon, 1987). Hence understanding and managing satisfaction
through service quality is essential, and requires greater attention from carriers nowadays,
in struggling and challenging environment.

2.7 Safety and Security

Safety has always been a critical element to the business success of the passenger airline
industry. Although fatal air accidents are extremely rare as compared to other transport
modes, the rapid growth in the number of commercial aviation flights has resulted in
aviation’s increasing exposure to risk (Chang and Yeh, 2004).

As noted by Brown (1996), there are numerous reasons why air safety is an operating
priority for airlines including total quality management movement, costing, regulations,
technological change and customer expectation. Although air safety comprises several
difficult elements, air safety analysis has tended to be based on aggregate statistics of
accident and incident rates over a period of time (Lioua, Yenb, and Tzeng, 2008). These
rates can provide useful insights. Nonetheless, there are issues relating to their use.
Moreover, three different ideas of safety are suggested by (Lioua et al.; 2008). In the first
place, modern aircraft are reliable. Accidents are also infrequent making it hard to detect
problem quickly using accident rates. In the second place, airline accident rates may not
be useful in predicting the occurrence of future accidents. In the third place, a safety
system based on accident rates is one that has to wait for an accident to happen before it
can react; this is not acceptable by today's safety standards.

McFadden and Towell (1999); Chang and Yeh (2004) suggest that in order to find airline
safety issues, some ‘proactive’ safety measurements need to be developed, especially in
monitoring human-related safety factors. It is also suggested that organizations have
therefore been shifting from reactive to proactive approaches to safety (Santos-Reyes and
Beard, 2002). They suggest that in order to avoid the issues with regard to safety, the
organization should conduct risk assessment, as well as identifying legal requirements
and any other requirements applicable to it.

Previously, safety was defined as “an absence of accidents”. As a result, the traditional
approach to studying aviation safety followed on analyzing accident data. But the absence
of an accident does not reveal that safety has been achieved. Recently, safety was defined
as “a judgment of the acceptability of risk”. Likewise, we should quantify risk and
balance it with appropriate safety measures in order to achieve safety (McFadden, and
Towell, 1999).
2.8 Comfort Zone
Comfort plays an increasingly important role in airplane tickets. The definition of comfort
is as a state or feeling of having relief, encouragement and enjoyment. Further, it is
defined as a pleasant state of physiological, psychological and physical harmony between
a human being and its environment. Moreover, it is defined as a state of a person
involving a sense of subjective well-being, in reaction to an environment or situation. It
must be considered in the design process, as numerous studies on airline comfort, vehicle
comfort, and hand tool comfort demonstrate the positive effects of this attention (Vink,
and De Looze, 2008). In Figure 5, there are different factors underlying sitting discomfort
and comfort, which are described, as well as the relationships among these factors. The
left side of the theoretical model concerns discomforts. The physical processes that
underlie discomfort incorporate model parameters on the etiology of work-related
physical complaints that consider exposure, dose, response and capacity. Exposure
describes the external factors producing a disturbance of the internal state (dose) of an
individual.

The extent to which external exposure leads to an internal dose and response relies on the
physical capacity of the individual. With regard to seating, the physical characteristics of
the product level, the environment and the task expose a seated person to loading factors
that may involve forces, joint angles and pressure from the seat on the body (Vink, and
Hallbeck, 2012). On the other hand, the right side of the theoretical model concerns
comfort. It is feelings of relaxation and well-being, using the seating example from above,
the influential factors are presented on human, seat, and context levels. At the context
level, the physical features are not only assumed to play a role, but also psychosocial
factors are such as job satisfaction and social support. At the seat level, the aesthetic
design of a seat and the seat’s physical features may affect the feelings of comfort. The
influential factors are assumed to be individual expectations and other individual feelings
or emotions at the human level (Vink, and Hallbeck, 2012).

2.9 Luggage allowance

Checked baggage describes items of luggage delivered to an airline for transportation in
the hold of an aircraft of a passenger airline. It means it is inaccessible to the passenger
during the flight. This baggage is limited by airlines with regard to size, weight and
number that often depend on the fare paid or class of ticket. Baggage exceeding the limits
is regarding excess baggage. Further, the baggage allowance is the amount of checked or
carry-on luggage the airline will allow per passenger in airlines. It is the amount that is
allowed free of charge in some airlines. It is the firm limit, and carrying additional weight
for an extra payment is not an option in other cases. (http://en.wikipedia.org/wiki/
Baggage_allowance).

Waguespack and Rhoades (2014) found one of the highest levels of satisfaction with
airline service since 2006. Nevertheless, passengers who reported paying baggage fees
reported overall lower levels of satisfaction. In airline, there is an effective unbundling of
services including the free baggage allowance (Buttona and Isonb, 2008).

2.10 Proposed Theoretical / Conceptual Framework

Based on the review of previous research, the following model was generated.

Figure 2: A study of customer satisfaction toward service quality of NAC.

 SCHEDULE

CUSTOMER
ONLINE GROUND STAFF
SATISFACTION
SERVICES SERVICES

IN-FLIGHT
SERVICES

Fig:2 Developed for the Study

The model above illustrates the proposed theoretical framework that serves as the basis
for this study. It is used to focus on the relationship among the six independent variables
which consist of schedule, ground staff services, in-flight services and online services of
CS.
 CHAPTER 3
RESEARCH METHODOLOGY
3.1 Introduction
This topic included on how the research is carried out in terms of research design, data
collection methods, sampling design, research instrument, and constructs measurement,
data processing and data analysis.

3.2 Research Design

Quantitative research method was adopted in this study. Quantitative research is the
numerical representation and manipulation of observations for the purpose of describing
and explaining the phenomena that those observations reflect (Sukamolson,n.d).This
study outlines the study of customer satisfaction (CS) towards service quality (SQ) of
Nepal Airlines. It is appropriate to categorize this research as exploratory research and
causal research.

Exploratory research is conducted to clarify ambiguous situations or discover ideas that

may be potential business opportunities (Zikmund, Babin, Carr, & Griffin, 2010).

Conversely, causal research is the seeking to identify cause-and-effect relationships

among variables when the research problem has already been narrowly defined (Zikmund
et al., 2010).

This study focuses on investigating and examining the factors that affect CS. Besides,
there are four basic categories of techniques for obtaining insights and gaining a clearer
picture of a problem: secondary data analysis, pilot studies, case studies and
questionnaires. Survey questionnaire is chosen to examine the SQ factors that affect CS
regarding Nepal Airlines.

3.3 Data Collection Method

Data collection method is significant for study and it is effective in assisting researchers
greatly in their quest of success (“Researchers have studied,” 2009).

Besides, the information collected by researchers should be reliable and valid to the study
because inaccurate data collection can impact the outcome of the study and ultimately
lead to invalid results (“Data Collection Method,” n.d.). Thus, primary and secondary
methods are used to analyze the data in order to provide a clearer and in depth
understanding.
3.4 Primary Data
Primary data is the data that has been collected from first hand-experience. Hence, it is
more reliable, authentic and objective in data collection (Gulnazahmad, 2011).

For current study, self-administered questionnaire is chosen due to its convenience,

inexpensive, reduction of biases and greater anonymity (Data-Collection Tools,” n.d.).
The purpose of the questionnaire is to generalize from a sample to a population to make
inferences about the characteristics of the population. Therefore, 30 questionnaires were
distributed to the respondents who have been travelling by air, particularly with Nepal
Airlines in order to capture the level of passengers’ satisfaction.

3.5 Secondary Data

Secondary data is known as data that has been collected by previous researchers and
readily available. The purpose of collecting secondary data helps to make primary data
collection more specific and allow researchers to figure out what are the deficiencies and
what additional information which is needed to be collected for study (“Secondary Data,”
2012).

ProQuest, Wikipedia; the free encyclopedia, Emerald, Nepal Airlines online databases
and Harvard Business Review are primarily used due to the nature of easily accessibility,
time saving and inexpensive to obtain data. Besides, reference books, journals and in-
house manuals are used to further support the terminologies and theories that have been
used for this study.

3.6 Sampling Design

Sampling design is ultimate for researchers to collect accurate information from the right
people, right time and right location for research questions. Sampling process comprises
of five steps that define target population, determine sampling frame and sampling
location, select appropriate sampling technique, determine sampling size and execute
sampling process (“Sampling in Marketing,” n.d .)

3.7 Target Population

Target population is defined as the entire group that researcher is interested in and wishes
to draw a conclusion (Hitzig, 2009). Business and/or leisure travelers who have been
flying with Nepal Airlines will be the target population. This particular population is
chosen because they have been making frequent interaction with airlines staffs and have
better understanding and evaluations on the SQ delivered by airlines companies.

The age range of target population is 18 years old and above, in which they possess
sufficient spending power on travelling. Hence, they are the best respondents to collect
information.

3.8 Sampling Frame and Sampling Location

Sampling frame is “actual set of units from which a sample has been drawn”. In other
words, all units that have been included in the sampling frame have an equal chance to
get selected as respondents (“Sampling Frames,” 2012). Nevertheless, there is no
sampling frames for this study due to limited resources, thus this study cannot be
generalized.

For sampling location, 30 questionnaires were randomly distributed in Tribhuwan

International Airport (TIA) because there are large amount of potential respondents and
able to provide reliable information about airlines’ SQ for a thorough representation about
the levels of passengers’ satisfaction.

3.9 Sampling Element

The elements which have been selected in this study are the travelers who fall in the age
category of 18 years old and above because they are able to make decision by themselves
and possess the ability to rate on the quality of service. The selected respondents must
heavily rely on the services provided by airlines companies and at least travel once in a
year. Travelers below 18 years old are not entitled to take part.

3.10 Sampling Technique

Sampling techniques can be divided into two types which are probability and non
probability sampling. It is impossible for researchers to collect data from all travelers,
thus non-probability technique is chosen in which the respondents are selected from the
population in some non-random manners (Saunders, Lewis, & Thornhill, 2009).

Specifically, purposive sampling method is chosen whereby researcher has selected the
respondents who are relevant and compatible to the purpose of study. In other words, it
can be categorized by the use of judgment and deliberate effort to acquire representative
samples (James, 1997). Besides, purposive sampling does not produce a sample to
represent a large population but it can meet the purpose of the study (“Sample and
Sampling,” n.d.). It may be sufficient for understanding human perceptions, needs,
behaviors and contexts (“Sampling,” n.d.). Thus, purposive sampling method can be truly
applied in this study. An advantage of using purposive sampling method is that unsuitable
candidates will be eliminated and suitable candidates will be remained in this study for
better accuracy and reliability in accordance to the purpose of study.

3.11 Sampling Size

The larger of the sample’ size, the lower the likely errors to generalize the population of
study (Saunders, Lewis, & Thornhill, 2009). 30 questionnaires were distributed to
travelers in TIA randomly in order to identity the level of CS towards SQ of Nepal
Airlines. Due to time and resources constraints, this number of sample size is appropriate
in generalizing targeted population. However, 24 questionnaires are collected while
remaining of 6 questionnaires cannot be used due to incompleteness which will lead to
biasness.

3.12 Research Instrument

For this study, self-administered questionnaires have been applied. Self-administered
questionnaire defines the method in which the respondents answer the questionnaire by
their own, either on the questionnaire papers or via Internet. (“Self-administered
Questionnaire”, n.d.).

Undeniably, the questionnaires serve as a very important tool for this study.
Questionnaire is inexpensive to collect data and the results can be consistently used to
compare and contrast. Besides, it can be distributed to a large number of potential
respondents, increase the speed and accuracy, facilitating data processing (William,
2006).However, extra caution must be taken in designing the questionnaires for better
clarification of each question. Evaluation is done upon gathering of data from the
questionnaires. Basically, the questions in the questionnaire were adopted from previous
researchers and modified based upon the necessity to fit into this study (O’Brien, 1997).

The structure of the questionnaire is carried out in simple English for better understanding
of question descriptions to prompt critical thinking and analytical behavior of the
respondents. This encourages higher degree of accuracy in the respondents’ answers due
to the prevention of confusion in answering the questions.
Brief introduction and the purpose for study are stated in the cover page of the
questionnaire. Generally, the questionnaires are divided into three sections which are
Section A for the demographic profile, Section B for the general information and Section
C for general opinion.

In Section A, it consists of six questions which are closely related to the demographic
data namely gender, age, race, marital status, work status, and the educational level of the
respondents. It is recorded to classify the group of flight passengers for the results.

In Section B, it consists of seven questions. This section prompts for the basic
information regarding the travelling by flight from the respondents.

In Section C, the general opinion relates to the construct measurement of the study in the
six independent variables such as schedules, services provided by the ground staffs (GS),
in-flight services and online services (OS) and one dependent variable; CS. These
variables are used to investigate the relationship between each of the independent
variables with the dependent variable upon data collection from the answer given from
the respondents.

Lastly, the 30 questionnaires were distributed to the target respondents. To increase the
validity and reliability of the information gathered, the respondents are asked on their
willingness to participate in the questionnaire prior to the questionnaire.

The questionnaire was distributed and collected in two weeks time. The date was from the
23rd of Jun 2015 to the 8th of Jul 2015. The questionnaire was carried out smoothly.

3.13 Reliability Test

Reliability test is used to determine whether the measurement items in the questionnaire
are highly related to each other. Reliability refers to the extent to which a scale produces
consistent results if repeated measurements are free from random (Malhotra & Peterson,
2006).

In order to test the reliability, Cronbach’s Coefficient Alpha was adopted. According to
Malhotra (2007), Cronbach’s alpha coefficient provides the most is ranging from 0 to 1.
The higher the coefficient, the more reliable are the items in measuring the constructs. A
value of 0.6 or less generally indicates unsatisfactory internal consistency and reliability.
3.14 Scale Measurement
Basically in Section A and Section B which are aimed to obtain the general information
and demographic data of the respective respondents. Nominal scale is used to measure the
most appropriate answers for the respective respondents. Meanwhile, the nominal scales
are the lowest scale for all the measurement. Furthermore, the comparisons for more and
less can be made (“Scale of Measurement”, n.d.).

In Section C, the interval scale was used as the main scale of measurement. The 5-points
of Likert scale were used for the questions in Section C which allow the respondents to
identify whether they are (1) Strongly Agree, (2) Agree, (3) Neutral, (4) Disagree and (5)
Strongly Disagree with the statements of TF, schedules, services provided by the GS, IF
services , OS and one dependent variable, CS. Hence, the Likert scale was used to
enabling the researchers to tap into the cognitive and affecting components of the
respondents' attitudes (McLeod, 2008).

3.15 Data Processing

Data processing is a procedure that converts data into information. Data processing
begins with a preliminary check of questionnaires and analysis of the data (Malhotra &
Peterson, 2006).The information will be transferred from the questionnaires or coding
sheets onto disks or directly into computers by keypunching and analyzed by the SPSS
Version 17.

3.16 Questionnaire Checking

Questionnaire checking consists of completeness and interviewing quality. This will be
checked after the first set of questionnaires was returned to detect any problems earlier on
and corrective action can be taken before conducting the actual questionnaire (Malhotra
& Pearson, 2006). Any mistake found is carried forward in the data editing process.
 CHAPTER 4:

DATA ANALYSIS

4.1 Introduction
This chapter represents the patterns and analysis of results which are relevant to the
research questions and hypotheses.

According to Sekaran (2003), the objectives of data analysis include checking on the
dispersion of the respondents (descriptive analysis), test the reliability and validity of the
measures (scale measurement) and testing the hypotheses developed for the research
(inferential analysis). The data analysis process, consisting of interrelated procedures,
would transform data into useful information (Zikmund, 2003). Thus, SPSS software was
utilized for obtaining the tested result by completely analyzing the data.

4.2 Descriptive Analysis

Descriptive analysis refers to the information of raw data into a form that will make
researchers easy to understand and interpret. Descriptive statistics are provided by
frequencies, measures of central tendency and dispersion. Frequencies procedure provides
statistics which are useful in presenting many types of variables. The purpose of
frequency is to demonstrate the values such as the numbers and percentages for the
different categories of a single categorical variable.

Frequencies are generally obtained from nominal variables such as gender and working
status. In the questionnaire of study, frequencies analyses were used in Section A and B.
Finally, a frequency division for a variable would generate a table of frequency counts,
percentages and cumulative percentages for all the values allied with that variable
(Malhotra & Peterson, 2006).

According to Zikmund (2003), mean is a measure of central tendency which was used to
analyze data collected in Section C of the questionnaire because mean is commonly used
to estimate the average when the data are collected using an interval scale.

4.2.1 Respondent’s Demographic profile

The Demographic profile of the respondents has been identified in Section A of the
questionnaire. A total of five questions were asked to collect data regarding to the
respondents’ gender, age, race, marital status and occupation.
Table 4.1 Gender of respondents
Category Frequency (N) Percentage (%)
Gender
Male 74 42.6
Female 100 57.5
As shown in Table 4.1, the analysis of respondents’ gender has revealed that 42.6% of the
respondents were male while female consisted of 57.5% of the total sample size.

Table 4.2 Age of respondents

Category Frequency(N) Percentage

Age
18-20 13 7.5
21-30 123 70.7
31-40 31 17.8
41-50 4 2.3
Above 50 3 1.7

Based on Table 4.2, there were 7.50% of the respondents falling into category of between
18 to 20 years old and below, 70.70% for between 21 to 30 years old, 17.8% for between
31 to 40 years old, and 2.30% for between 41 to 50 years old and only 1.70% of
respondents for above 50 years old.

Table 4.3 Race of respondents

Category Frequency(N) Percentage(%)

Race
Nepalese 105 60.3
Indian 36 20.7
Chinese 20 11.5
Others 13 7.5

Based on Table 4.3, majority of the respondents were Nepalese which represented 60.3%
of the sample size. Meanwhile, Indian respondents represented 20.70% and Chinese
respondents represented 11.50%. Lastly, other races represented 7.50%.
Table 4.4 Marital Status of respondents

Category Frequency(N) Percentage(%)

Marital Status
Single 127 73.0
Married 45 25.9
Others 2 1.1

As shown in Table 4.4, there are 73% of the respondents were singleand 25.9% of the
respondents were married. Meanwhile, 1.10% of respondents were in other status.
Table 4.5 Work status of respondents

Category Frequency(N) Percentage(%)

Work Status
Student 77 44.3
Full-time 85 48.9
Part-time 9 5.2
Retired 2 1.1
Others 1 0.6
Referring to Table 4.5, it has shown that the full-time respondents constituted the highest
frequency which was 48.90%, followed by students for 44.30%, part-time employees for
5.20% and retired citizens for 1.10%. Lastly, others category has shown the lowest
frequency which was 0.60%.

4.6 Pilot Test

Before the conduct of the actual questionnaire, a pilot test has been done to find out the
possible errors done in the questionnaires such as the ambiguous questions. Meanwhile,
pilot testing provides the opportunities for the researchers to find out and remedies a wide
range of the potential problems that will occur in preparing the questionnaire and correct
it before the actual questionnaire is conducted (Pratt, 2008). For the pilot test, 20
questionnaires were distributed and the feedback gathered was used to improve the clarity
of the question. After the questionnaires were collected, the reliability test was conducted
by using the Statistical Project for Social Science (SPSS) Version 17. In order to test the
reliability, Cronbach’s Coefficient Alpha was adopted. Table 3.1 show the result of the
pilot test conducted.
Table 4.6.1 Result of Pilot Test
Variable Total Number of Cronbach’s Outcome
Questions Alpha
Tangible Features 4 0.680 Acceptable

Schedules 5 0.802 Very Good

Services Provided by 4 0.695 Acceptable

Ground Staff

Online Services 4 0.498 Poor

In-flight Services 5 0.697 Acceptable

Level of Passenger 4 0.563 Poor

Satisfaction

4.7 Reliability Test

Table 4.7.1 Reliability Statistics for each of the variable
No. Constructs Alpha Coefficient No. of items

1. Tangible Features .714 4

2. Schedules .736 5

3. Services Provided by Ground Staff 721 4

4. Online Services .231 4

5. In-flight Services .662 5

6. Level of Passenger Satisfaction .687 4

According to Malhotra (2002), the alpha coefficient below 0.6 portrays weak reliability of
the variables. If the alpha coefficient ranges from 0.6 to 0.8, they are considered to be
moderate strong. If the alpha coefficient is in the range of 0.8 to1.0, they are considered to
be very strong.

In this study, it illustrates the reliability of six variables. Cronbach’s alpha was employed
to examine the internal reliability of the 26 items and used to measure the six constructs.
Based on Table, the results have revealed that the internal reliability of each construct has
ranged from 0.231 to 0.736. Alpha Coefficient of 0.6 was set as the minimum criterion.
Construct of online services did not fulfill the minimum criterion as it portrayed an alpha
 coefficient of 0.231. Thus the result of the reliability test has indicated that overall except
the online service satisfactory internal consistency reliability for each construct. The
result has shown that the schedules of the flights developed by the airline had the highest
coefficient (0.736) while the online services had the lowest coefficient (0.231).

4.8 Conclusion
In conclusion, research methodologies were used in collecting, analyzing, and
interpreting data. Computer software, SPSS 17 was used to assist in analysis and
interpretation. First, questionnaire was used to obtain more accurate information from the
large group of respondents. But primary data, secondary data likes journals and reference
books were used to help researchers to better understand the topic which was being
investigated. Target population, sampling frame and location, sampling elements,
sampling techniques and sample size were discussed in the earlier part. Scales used in
constructing the measurement were also explained.

4.9 Analysis of Tangible Features

Table 4.9.1 Summary of Response on Analysis of Tangible Features
Factor Strongly Agree Neutral Disagree Strongly
Agree Disagree
Tangible Features
1. 1. Airline has new planes 07 110 34 23
(4.02%) (65.51%) (19.5%) (13.2%) 08(4.59%)
2. 2.The air conditioners in the 04 38 80 44
planes were comfortable. (2.29%) (21.8%) (45.97%) (25.28%) 06(3.45%)
3. 3. The seats in the planes were
comfortable. 13 47 86 22 38(21.83%)
4. 4. Remedial procedures for (7.47%) (27.01%) (49.42%) (12.64%)
delayed or missing baggage 04 26 107
(2.29%) (14.94%) (61.49%)
Tangible product refers to a physical item that can be perceived by the sense of
touch. Examples of a tangible product include cars, food items, computers, telephones,
etc. In the airlines industry tangible features includes infrastructures of the aeroplanes like
air conditioner of the aircraft, seats of the aircraft, restrooms, etc. These kinds of internal
features also affect a lot in passenger or customer satisfaction.
 Table 4.9.1 shows the summary of response on tangible features of the airlines. The
highest majority of respondents i.e. 110 (65.51%) customers found that the aircraft are
new in the airlines. Among 174 respondents 84 (45.97%) respondents neither agreed nor
disagreed about the air conditioners in the planes were comfortable. Likewise 86
respondents remained neutral about the comfortability of the seats in the planes.
Regarding remedial procedures for delayed or missing baggage, 107 out of 174
respondents disagreed. They were very dissatisfied that the airline does not handle the
passengers with missing baggage in a proper manner. The airline is really negiligible in
the case of missing or delayed baggage of the passengers.

4.10 Analysis of Schedules

Table 4.7 Summary of Response on Analysis of Schedules
Factor Strongly Agree Neutral Disagree Strongly
Agree Disagree
Schedules
1. 1.Convenient flight 37 130 05 02 17
schedule. (21.26%) (74.71%) (2.87%l) (1.15%) (9.7%)
2. 2. On-time departure and 27 90 56
15.51%) 11 (51.72%) (32.18%) 34
arrival (6.3%)
3. 3. The airline did not (19.5%)
cancel the flight 16 08 07 125
4. 4. Well-organized flight (9.19%) (4.59%) (4.02%) (71.84%)
information 14
109 24 (8.04%)
5. 5. Flight’s schedule highly (13.79%) 05
155 (62.64%) (2.87%)
reliable 30 05
6. 6. Compensation while (89.08%)
118 (17.2%) (2.87%)
encountering a long delay (67.81%)
07(4.02%)
12 (6.8%)

In airlines industry schedule refers to a procedural plan that indicates the time and
sequence of each operation. Schedule helps us to know the departure and arrival date,
time, city, aircraft type,etc. Schedule is normally updated two times in a year i.e. Summer
Schedule and Winter Schedule. But as per the requirement of the airlines it can be
changed in between these timealso.Schedule is considered as one of the main factor to
 increase customer satisfaction. If the flight time is well arranged as per the passenger's
need and comfort airlines can attract more number of paasengers.

Table 4.7 analyses customers' perception regarding the schedule of Nepal Airlines
Corporation. 130 respondents agreed that the flight schedule is really convenient. Most of
the passengers are satisfied with the flight time that Nepal Airlines operate. Passengers
gave neutral answers to the on time departure and arrival of the aircraft for any flight. 90
respondents neither agreed nor disagreed about the departures and arrivals timing. But
most of the passengers i.e. 125 (71.84%) passengers disagree regarding the cancellation
of the flight of different sectors. Similarly, most of the passengers i.e 109 (62.64%)
agreed that though there are a lot of flight cancellation from the airlines side, the
information regarding the cancellation, delayed or prepond is provided on time to the
passengers. 118 (67.81%) out of 174 respondents agrees that the flight timing or schedule
of the airlines is reliable to almost all kind of passengers, be it leisure or business
passengers. Likely, 155 (89.08%) of the respondents strongly agreed that the airlines
provides good compensation if the flight is delayed due to various technical reasons. The
airlines provide lunch or even hotel if encountered a long delay or any cancellation of the
flight.
4.11 Analysis of Ground Staff Services
Table 4.8 Summary of Response on Services provided by Ground Staff
Factor Strongly Agree Neutral Disagree Strongly
Agree Disagree
Ground Staff Services
1. 1. Well dressed and neat 16 43 94 13 08
appearance. (9.19%) (24.71%) (54.02%) (7.47%) (4.59%)

2. 2. Easy to Contact 04 31 101 38

(2.29%) (17.81%) (58.04%) (21.83%)
30
3. 3. Willing to help passengers (17.24%) 74 09
36 (42.52%) 25 (5.17%)
48 (20.68%) (14.36%)
4. 4. Smoothly handling the (27.58%) 27 08
check-in counter 91 (15.51%) (4.59%)
41
(52.29%)
(23.56%) 39 11
5. 5. Knowledge of the rules
(22.41%) (6.32%)
and regulations, visa,etc 83
(47.70%)
 Ground staff at airport perform several important duties to ensure the safety and comfort
of airline passengers and crew members, including checking baggage, stocking aircraft
with refreshments, and cleaning the plane and runway between flights. They do not fly
the planes themselves but are responsible for creating a positive experience for passengers
in both the aircraft and the terminal. The ground staffs need to be well dressed, well
behaved and should be able to solve the problems and queries of the passenger. They
need to be well trained to fulfil the expectation of the customers.

Table 4.8 summarizes the responses on the services provided by ground staff of the
airlines. The services provided to the customers from the enquiry about a flight to the
services in the airport are provided by the ground staff. These ground staffs are the major
people who give the first and last impression to the customers. Therefore, they need to b
well trained about the services provided to the target customers to attract a lot of
passengers.

Regarding the dressing and the appearance of the ground staff, most of the passengers
remained neutral. 94(54.02%) respondents neither agreed nor disagreed about the
dressing sense and appearance of the staffs on duty. Most of the passengers were not
satisfied about the easy contact of the staffs on duty. 101(58.04%) of the passengers failed
to easily contact the airlines staff while in need. According to the survey, the respondents
remained neutral i.e.74 (42.52%) on the factor willingness to help passengers. 91 out of
174 respondents agreed that the airlines staffs handles the check-in counter smoothly and
efficiently. Likewise, 83 respondents agreed that the airlines staff obtain good knowledge
of the visa and the rules and regulation of the organization.

4.12 Analysis of Online Services

Table 4.9 Summary of Response on Online Services
Factor Strongly Agree Neutral Disagree Strongly
Agree Disagree
Online Services
1. 1. Information is clearly 24 104
present on the website. 17 (13.79%) (59.77%) 29
2. (9.77%) 10 (16.66%)
3. 2. Easy to Access the page 21 81 (5.74%)
(12.06%) 62 (46.55%)
4. 3. Accurate information 12 56 98
(56.32%)
5. 4. Website is updated (35.63%) (6.89%) (32.18%) 119
(68.39%)
08 23 32
(4.59%) (13.21%) (18.39%)

An online service refers to any information and services provided over the Internet. These
services not only allow subscribers to communicate with each other, but they also provide
unlimited access to information. Online services can range from simple to complex. A
basic online service may help subscribers gain needed data through a search engine. In
aviation industry online services is one of the most important factor to attract a large
number of customers. The onlineapplication helps the aitlines industry support
reservation through the Internet. It helps consumers to book flights, hotels, holiday
packages, insurance and other services. This is a much needed application for the aviation
industry as it has become one of the fastest growing sales channels.

Table 4.6 analyse the summary of response on online serives provided by Nepal Airlines
Corporation. In this modern age, online services by any airlines helps to check the
schedules of any destination, see the availability of seats, purchase the ticket, book the
seats and web check-ins as well. Online system is considered as one of the most important
aspect of any airlines to attract a lot of customers through just clicking on the airlines
website. It helps to give the overall view of the concerned airlines from any corner of the
world.

104 respondents out of 174 disagree about the information clearly present on the website
of the airlines. The online system in Nepal Airlines is not developed efficiently which is a
major cause for the loss of many possible customers. 81 (46.55%) customers neither
agrees nor disagrees about the easy access of the web page. 98 (56.32%) out of 174
respondents strongly disagrees about the accurate information given by the website.
Similarly, 119 respondents strongly disagrees that the website is updated on timely basis.

4.13 Analysis of In-flight Services

Table 4.10 Summary of Response on In-flight Services
Factor Strongly Agree Neutral Disagree Strongly
Agree Disagree
In-flight Services
1. 1. Meal provided in the 23 25 77 39 10
 flight is tasty. (13.21%) (14.36%) (44.25%) (22.41%) (5.74%)
2. 2. Quality of food is good 09 22 29 51
3. 3.Behavour of FA is good (5.17%) (12.64%) (16.67%) 63 (29.31%)
4. 4. Availability of In-house (36.20%) 86
journals and magazines 10 21 57 (49.42%)
46 (5.74%) (12.06%) (32.75%)
5. 5. Quality of in-flight (24.43%) 81 05
entertainment facilities. (46.55%) 34 08 (2.87%)
18 (19.54%) (4.59%) 36
(10.34%) (20.68%)
28 92
(16.09%) (52.87%)

In flight services refers to those services that are provided on board an aeroplane. The
entertainment facilities like movies, television, meal service, beverages, journals,
magazines and other various items made available as per the rules and regulation of the
airlines during a flight for the convenience of the passengers.

Table 4.10 gives the detail description about the in-flight services provided by NAC.
More number of respondents remained neutral about the meals provided on board is tasty
or not.77 out of 174 respondents ie 44.25% said the meal is neither good nor bad.
Likewise 63 out of 174 i.e 36.20% of respondents disagrees with the quality of food is
good. This is one of the important factors for customer satisfaction as it is related with the
health of the customers. Regarding the behaviour of the flight attendant 86 out of 174 I.e
49.42% of respondents strongly disagrees about their good behaviour. The passengers
criticized about the rude voice, late response and poor communication skills of the FAs.

Similarly, 81 out of 174 respondents i.e. 46.55% agreed on the availability of in house
journals and magazines. The customers said that there is enough of the magazines for the
passengers to read during the flight. More number of customers disagrees on the quality
of in flight entertainment facility. Television is one of the most important aspect of in-
flightentertainment.92 out of 174 respondents disagreed on in flight entertainment facility
as it is incomplete with our television in these days.The customers complained that there
should be television for the customers to pass the time in the flight
 4.14 Analysis of Passenger Satisfaction Level
Table 4.11 Summary of Response on Level of Passenger Satisfaction
Factor Strongly Agree Neutral Disagree Strongly
Agree Disagree
Level of Passenger
Satisfaction 60 78 36 82 43
1. 1. Reasonable Air-fare (34.48%) (44.82%) (20.68%) (47.12%) (24.71%)
2. 20 29 38 86
3. 2. Satisfied with airlines’ (11.49%) (16.67%) (21.83%) (49.42%)
overall services
07 11 39
4. 3. Satisfaction compared (4.02%) (6.32%) (22.41%) 71 36
to other airlines (40.80%) (20.68%)
5. 4. Good choice of airline 15 45
(8.62%) (25.86%)

Customer satisfaction is an abstract concept and involves such factors as the quality of the
product, the quality of the service provided, the atmosphere of the location where the
product or service is purchased, and the price of the product or service. Businesses often
use customer satisfaction surveys to gauge customer satisfaction. These surveys are used
to gather information about customer satisfaction.

Table 4.11 analyse the passenger level of satisfaction from NAC. 78 (44.82%)
respondents agreed that the airlines Has the reasonable airfare. This shows that customers
are satisfied with the price of the airlines and it is reasonable for all kinds of travellers.
82 out of 174 respondents i.e. 47.12%disagreed on the factor overall services of the
airlines is satisfactory.

The customers strongly disagree with the satisfaction compared to other airlines. 86
respondents (49.42%) of respondents said that the airline has to improve from the
management level to compete with other airlines.

71 out of 174 i.e 40.80% of respondents disagrees that the choice of airline is good.