Customer retention in the South African domestic passenger airline industry

Abstract

While domestic passenger airlines in South Africa continue to conduct their business in a very competitive environment, their passengers are becoming more consciously aware of competitor offerings and are thus beginning to demand and expect higher standards of service delivery. It is for this reason that domestic passenger airlines need to identify those service elements which are important to passengers and to satisfy their needs through the medium of high-quality service delivery. Customers need to be convinced that they are receiving high-quality service delivery before a business can hope to start forming relationships with them. Businesses also need to build relationships with such customers before they can expect these customers to become loyal and so be retained as customers. In order to establish good relationships and create loyal customers, businesses can make use of the techniques of customer relationship management (CRM) and loyalty programmes such as frequent flier mile programmes. The primary objective of the study was to investigate customer retention through customer loyalty in the South African domestic passenger airline industry. The study therefore aimed to determine whether the customer service elements provided by the domestic passenger airline influenced respondent satisfaction, whether this satisfaction influenced the respondents' formation of a relationship, and whether respondents who had already formed a relationship had remained loyal to the airline. If all these factors could be proved, it would indicate that respondents could be retained. The study included a literature review in which all these constructs were reviewed and described. A quantitative research method was then undertaken by means of questionnaires that were distributed to passengers flying with domestic airlines and who were departing from OR Tambo International Airport. Only those passengers who had travelled twice or more with the domestic airline in the twelve months prior to the survey were asked to complete the questionnaire. This was done so that loyalty and retention could be measured. The results obtained from the 324 respondents who participated in the study were then discussed in terms of each of the constructs. By means of a factor analysis, four factors were identified that were important to respondents in the services that the domestic passenger airline offered them. Further analysis of the data indicated that respondents who had suffered a service failure with the domestic airline indicated that their relationship with the domestic airline had been either weakened or broken. Respondents who stated that they were satisfied by the airlines' service offerings indicated that they had formed a long-term relationship with the domestic airline. Those respondents who had formed a long-term relationship with the airline indicated they had remained loyal to the domestic passenger airline on which they travelled most of the time. It was also determined that respondents would not remain unconditionally loyal to the domestic airline. Respondents indicated that they would not remain loyal to the domestic airline if other airlines were to offer better service, better loyalty programmes or significantly lower prices. By taking these results into consideration, a framework for customer retention that can be used by the South African domestic passenger airline industry was proposed. This framework suggests what domestic airlines should do or should avoid doing in order to develop relationships with their passengers and so enhance the kind of passenger loyalty that is the ultimate cause of passenger retention. Recommendations for future research include the possibility of extending such research to international studies so as to determine whether or not there are similarities or differences between how these factors affect domestic and international airlines. It was also suggested that a separate study should focus only on the CRM strategies implemented by domestic passenger airlines, and that a study should be undertaken to determine the influence of CRM on customer retention by domestic passenger airlines.