Service quality and productivity in the U.S. airline industry: a service quality-adjusted DEA model

The airline industry faces economic challenges making it paramount that they provide satisfactory service to customers relative to their expectations. This study uses a service quality-adjusted data envelopment analysis (SQ-adjusted DEA) to study US-based airline carrier operational efficiency. We found that airlines can overcome the traditional tradeoff between quality and productivity. Using SQ-adjusted DEA, we were able to find how airlines could set service levels in accordance with their strategic purpose or operational characteristics. Low-cost airlines were found to benefit by marginal improvements in service, often unexpected by their clientele. Network carriers, however, tended to have a harder time meeting service expectations. While there were short-term tradeoffs between service quality and productivity, in the long term a focus on service quality may help increase customer satisfaction, thus improving service productivity and overall organizational performance. SQ-adjusted DEA was found to be better suited to explore service productivity than the standard DEA.