Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
Antecedents of Loyalty in the Airline Industry of Malaysia:
An Examination of Higher-Order Measurement Model
Muhammad Tahir Jan1, Kalthom Abdullah2 and Mustapha Hadj Smail3
Purpose – This study aims to propose a model of loyalty of
airlines passengers in Malaysia. Further, it confirms various
constructs extracted from the extensive review of literature.
Design/methodology/approach – A structured questionnaire
was used to collected data from airline passengers at the KLIA
(Kuala Lumpur International Airport). The items of this
questionnaire were adopted from previous studies but modified
accordingly. A total of 400 questionnaires were distributed and
finally 327 usable cases were selected for analysis. Data analysis
encompasses reliability tests, exploratory factor analysis (EFA),
and confirmatory factor analysis (CFA).
Findings – The data resulted in acceptably high reliability during
the reliability tests. Five factors were extracted during EFA with
one factor (service quality) resulting in three dimensions. The
extracted factors were confirmed during CFA which indicated a
good fit of the measurement model. In this case, a normed chisquare of 2.623, comparative fit index (CFI) of 0.918 , TuckerLewis index (TLI) of 0.908, and root mean square of
approximation (RMSEA) of 0.071 indicating the same.
Originality/value – This paper attempts to validate a higherorder measurement model of loyalty in the airline industry of
Malaysia. Many new constructs were introduced and confirmed
during this research.
Keywords: Service quality, brand loyalty, customer satisfaction, airline industry,
Malaysia.
1. Introduction
Airline companies, particularly conventional airlines are experiencing aggressive
competition due to the emergence of low cost carriers. In their struggle to attract and
retain more customers, these airlines employ a wide array of strategies. Although
price is the primary weapon of choice, airlines realise that competing solely on price
is a no-win proposition (Tseng & Chiu, 2008). The service industry, including airlines,
has been forced to find out new ways of generating competitive advantage. In the
1
Dr. Muhammad Tahir Jan: Assistant Professor, Department of Business Administration, Kulliyyah (Faculty) of
Economics and Management Sciences, International Islamic University Malaysia, P. O. Box 10, Jalan Gombak,
50728 Kuala Lumpur, Malaysia.
Email: tahirjan@iium.edu.my
2
Dr. Kalthom Abdullah: Associate Professor, Department of Business Administration, Kulliyyah (Faculty) of
Economics and Management Sciences, International Islamic University Malaysia, P. O. Box 10, Jalan Gombak,
50728 Kuala Lumpur, Malaysia.
Email: Kalthom@iium.edu.my
3
Mr. Mustapha Hadj Smail: Masters student, Department of Business Administration, Kulliyyah (Faculty) of
Economics and Management Sciences, International Islamic University Malaysia, P. O. Box 10, Jalan Gombak,
50728 Kuala Lumpur, Malaysia
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
current atmosphere of increased global competition, there is a continuous increase
in customers‟ expectations and subsequent demands for improved service quality
(Chou, Liu, Huang, Yih, & Han, 2011; Kim & Lee, 2011; Lin, Chan, & Tsai, 2009).
Contemporary marketing thought acknowledges that gaining and sustaining
customer loyalty as the ultimate goal may be more important than achieving
customer satisfaction (Agustin & Singh, 2005) .In addition, creating and maintaining
brand loyalty with existing customers is critical for the survival of a company in a
competitive environment (Heskett, 2002; McMullan & Gilmore, 2008; Mellens,
Dekimpe, & Steenkamp, 1996). Besides being difficult to duplicate, brand loyalty
programs based on underlying emotional attitude can increase business
performance (Keiningham, Aksoy, & Cooil, 2008). Consequently, loyal consumers
have fewer reasons to engage in an extended information search among
alternatives, thus reducing the probability of switching to other brands(Gounaris &
Stathakopoulos, 2004). Loyal customers are highly attractive to businesses because
they are less price sensitive and require a lower effort to communicate with (Gómez,
Arranz, & Cillán, 2006).
Delivering a high service quality may be a competitive strategy in addition to
enhancing customer satisfaction and improving airline image in minds of customers.
Through providing passengers with superior service, companies can succeed in
gaining a competitive advantage over competitors. Since, high-quality of service
results in increased customer patronage, retention, market share, and increased
profitability(Morash & Ozment, 1994) .While service quality is an important factor for
airlines, the research related to service quality and customer satisfaction in the
airline industry has been growing in interest. Several researchers have applied
service quality theories and methods in the airline setting (Park, Robertson, & Wu,
2006; Sultan & Simpson, 2000; Tsaur, Chang, & Yen, 2002).
This article aims to improve our understanding of passenger loyalty and identify the
role of customer satisfaction, service quality, perceived value and brand image in
building customer loyalty. In this article, we develop a structural equation model to
study the effect of customer satisfaction, service quality, perceived value and brand
image on brand loyalty and examine a research measurement model suggested in
this study.
This article is organized as follows. A review of the research literature related to
brand loyalty, customer satisfaction, service quality; perceived value and corporate
image. In addition, the development of related hypotheses is discussed in the
second section. The research methodology is described in the third section while the
results from the data analysis are discussed in the fourth section. Managerial
implications and conclusions are discussed in the fifth section.
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
2. Literature review
Customer loyalty has become a key element in the development and implementation
of airlines‟ strategies in the competitive milieu in which they operate (Forgas,
Moliner, Sánchez, & Palau, 2010).According to Oliver (1999), brand loyalty is a
deeply held psychological commitment to re-buy or re-patronize a preferred
product/service consistently in the future, thereby causing repetitive same-brand or
same brand-set purchasing . Oliver (1999) claimed that there are three conditions
where true loyalty will occur: (1) “The brand attribute ratings (beliefs) must be
preferable to competitive offering; (2) this „‟information‟ (point 1) must coincide with
an affective preference (attitude) for the brand, and; (3) the consumer must have a
higher intention (conation) to buy the brand compared with that for alternatives”.
Further, the author suggested that the loyalty-building process starts from some
cognitive beliefs (cognitive loyalty), followed by affective loyalty (i.e., “I buy it
because I like it”), to conative loyalty (i.e., “I‟m committed to buying it”), and finally
actual purchase behaviours (action loyalty, or “action inertia”).
Satisfying customers is an important element in marketing theory (Kotler &
Armstrong, 2004) as customer satisfaction affects future consumer purchase
behaviour (Yoo & Park, 2007) , profitability (Chitty, Ward, & Chua, 2007), and
shareholder value (Anderson, Fornell, & Mazvancheryl, 2004). According to (Tse &
Wilton, 1988), customer satisfaction is the consumer‟s response to evaluation of the
perceived discrepancy between prior expectation and actual performance of the
product as perceived after its consumption. Furthermore, studies in the airline
context provide evidence of the positive relationship between customer satisfaction
and loyalty, strong link between these two constructs is commonly discussed in
airline studies. A number of researchers have attempted to understand the
relationship between customer satisfaction and service quality and their impact on
brand loyalty (Lee, Graefe, & Burns, 2004; Tian-Cole, Crompton, & Wilson, 2002).
Zins (2001) investigated the antecedents of future passenger loyalty in the
commercial airline industry , his results indicate that customer satisfaction along with
brand image and service quality is a significant and illustrative component for
explaining future passengers loyalty toward an airline brand. More recently,Forgas,
Palau, Sánchez, and Huertas-García (2012)
examined the impact of user
satisfaction on users loyalty to airlines‟ websites (E-loyalty), their findings revealed
that the main antecedents of E- loyalty to airline website is customer satisfaction .
Overall, based on the literature discussed previously, there is a consensus among
researchers regarding the impact of customer satisfaction on brand loyalty.
Moreover, customer satisfaction not only determines brand loyalty but also mediates
the relationships between service quality, perceived value and brand loyalty.
Accordingly, the following hypothesis is proposed:
H01: Customer satisfaction has a significant positive effect on brand loyalty
Service quality is a critical factor for developing and sustaining relationship with
customer (Park et al., 2006). Since it has a significant impact on customer
satisfaction and customer loyalty to service firms, this construct became a major
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
determinant of firm‟s success or failure in a competitive environment (Lin et al.,
2009). Service quality is the discrepancy between consumer‟s perceptions of service
offered by a particular firm and their expectations about firms offering such services
(Chou et al., 2011).It is widely acknowledged as one of the important determinants of
brand loyalty(Chen & Hu, 2012) .
Passenger perception of airline service quality is one of the key drivers of passenger
satisfaction and perceived value (Park et al., 2006). This finding suggests that airline
service quality influences passenger repurchase intentions and the intention to
recommend the airline to others indirectly by means of perceived value and
passenger satisfaction. Likewise, P.-T. Chen and Hu (2012) provide additional
evidence of this significant effect and argued that service quality has positive impacts
on customer loyalty in the context of airline industry. Accordingly, the following
hypotheses are proposed:
H03: Service quality has a positive effect on customer satisfaction.
H04: Service quality has a positive direct effect on brand loyalty.
Customers choose one product or service over another because they believe it
provides better value (Zeithaml, Bitner, & Gremler, 2006). Customer perceived value
is the difference between the benefits and the cost of obtaining a product or services
(Kotler, Bowen, & Makens, 2010).
Providing superior customer value is identified as having a positive effect on both
customers and employees(Nasution & Mavondo, 2008) with high customer value
being linked to strong customer orientation (Gowan, Seymour, Ibarreche, & Lackey,
2001) , customer satisfaction and customer loyalty(Chitty et al., 2007), and is
therefore a key factor determinant of purchase intention(An & Noh, 2009) .
According to Park et al. (2006), offering good service to passengers may not be
sufficient to attract and retain passengers because passengers seek value as a
combination of fares and quality.
Several services marketing studies have identified corporate image as a key
determinant of brand loyalty(Zins, 2001). Perceived value significantly and directly
influences customer satisfaction (Kuo, Chang, Cheng, & Lai, 2012). Furthermore,
Forgas et al. (2010) argued that perceived value directly influences customer loyalty.
Since perceived value is an important factor that influences passengers‟ choice of
airline and passenger loyalty, the role and the effect of this factor should be
investigated more in the context of airline industry. As a result, the following
hypotheses are proposed:
H6: Perceived value has a positive effect on customer satisfaction.
H7: Perceived value has a positive effect on brand loyalty.
Brand image has been recognized as one of the central tenets of marketing
research, not only because of its role as a foundation for tactical marketing-mix but
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
also its role in building long-term brand equity (Keller, 1993).Brand image is defined
as the Perception about a brand as reflected by the brand associations held in
consumer memory. The purpose of image for airlines , is to reveal a distinctive
identity in order to allow the airline name, symbol and logo to differentiate the airline
brand from those of competitors (Park et al., 2006).Thus, having a strong and
positive brand image will strengthen perceived quality and assist in the development
of brand loyalty (Cretu & Brodie, 2007). Moreover, according to Signalling Theory, a
brand becomes a signal by symbolising a firm„s past and present marketing
strategies (Cretu & Brodie, 2007). This signal transmits information to customers
mind depending on the clarity of the message and the credibility of the product and
the provider. Gronroos (2007) suggested that if image is good then it shelters the
delivery of services.
A review of empirical service literatures demonstrates that brand image has a
positive effect on customer satisfaction (Faullant, Matzler, & Füller, 2008; Hart &
Rosenberger III, 2004). While others (Bloemer, Ruyter, & Peeters, 1998; Clemes, D.,
H., & Gan, 2009) indicated insignificant relationships between brand image and
customer satisfaction. More recently,C.-F. Chen and Tseng (2010) maintained that
airline image in comparison with passenger satisfaction, has more significant
influence on passenger loyalty. To gain a competitive advantage, airlines should
investigate the role and the effect of image perceived by passengers. As a result, the
following hypotheses are proposed:
H9: Airline image has a positive effect on customer satisfaction.
H10: Airline image has a positive direct effect on brand loyalty.
3. Conceptual framework
Figure 1: The proposed conceptual Framework
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
4. Methodology
Based on the review of the research literature with regard to brand loyalty, customer
satisfaction service quality, perceived value, and airline image, a structural equation
model has been developed to examine the measurement model in this study. The
structural equation model, measurements, and samples used in this article are
discussed below.
4.1 Measures
The design of the survey questionnaire was based on multiple item measurement
scales adopted from previous researches. The measurement items were designed
for the airline setting and used a seven-point Likert scale. Five marketing constructs
were included in the measurement model are tested: brand loyalty, customer
satisfaction, service quality, perceived value and airline image.
Service quality was measured using 12 measurement items adopted from Park et
al. (2006). Based on SERVQUAL (Parasuraman et al., 1988) ,Park et al. (2006) has
developed specific dimensions for airlines by modifying and adding new items to the
SERVQUAL measure. This measurement consists of three sub- dimensions which
are: (1) reliability and customer service, (2) convenience and accessibility and (3) inflight service. The questionnaire also included five items on customer satisfaction
adopted from Park et al. (2006) and Han, Kwortnik, and Wang (2008). Brand loyalty
section draws on Han et al. (2008), Forgas et al. (2010) and Li and Petrick (2008b),
this scale measurement includes 11 items reflecting both attitudinal and behavioural
dimensions. Furthermore, four items for measuring Perceived value were adopted
from Park et al. (2006) and Kuo et al. (2012). Finally, airline image was measured by
five observed variables adopted from Chen and Tseng (2010).
4.2 Sample
In order to achieve the aim of this paper, we performed a quantitative analysis
through personal survey of passengers. The survey was conducted at the KLIA
airport in November and December 2012. The data were gathered from international
passengers who had admitted to having been on at least one international flight in
the previous three years.
Of the total 400 questionnaires distributed to airline passengers, 327useable
samples were obtained with 81% response rate after excluding the incomplete
surveys. The passenger profiles are presented in Table 1.
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
5. Data analysis and results
To identify the factors influencing brand loyalty and identify the relationships between
these constructs, various statistical tools were employed. First descriptive analysis
was used to get the demographic information about the sample as shown in Table 1.
Second, reliability and exploratory factor analyses (EFA) were performed to identify
the factors that influence brand loyalty and finally, confirmatory factor (CFA) analysis
was used to test the measurement research model.
From the 327 useable questionnaires collected, only 18.3% of respondents were
subscribers in airline frequent flyer programs, while 81.7% were not participants in
FFPs. In addition, 51.7% of responses were from male respondents, while 48 %
were from females. A substantial majority of the respondents were below 35 years
of age (82.6%). The majority of the respondents were students (77.1%) and more
than half of sample respondents hold at least a bachelor degree (55%). The detailed
demographic profile is shown in Table 1.
Table 1. Passengers’ profiles
Attributes
Membership in
FFP
Gender
Age
Occupation
Nationality
Education Level
Distribution
Sample
number
Frequency (%)
Yes
No
60
267
18.3
81.7
Male
Female
Missing
Under 25
25-35
36-45
46-55
Over 55
Missing
Professional
Student
Company employee
169
157
1
172
98
35
18
3
1
24
252
21
51.7
48.0
.3
52.6
30.0
10.7
5.5
.9
0.3
7.3
77.1
6.4
Government employee
Business owner
Housewife
Retired
Others
Malaysian
Foreigner
High school
14
8
3
2
3
145
182
21
4.3
2.4
.9
.6
.9
44.3
55.7
6.4
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
Diploma
Bachelor
Master
PhD
Others
28
180
71
21
6
8.6
55.0
21.7
6.4
1.8
5.1 Reliability
Reliability refers to the extent to which a scale produces consistent results if
repeated measurements are made (Malhotra & Birks, 2007). To assess reliability,
internal consistency methods are widely used and generally Cronbach‟s alpha is
used to assess internal consistency. The Cronbach‟s alpha of each measure is
presented in Table 2. The internal consistency reliability of each measure was more
than .80 which indicates the reliability of the instruments used in this study is very
high.
Kaiser-Meyer-Olkin (KMO) and Bartlett's test of sphericity were conducted prior to
exploratory factor analysis. The KMO test resulted in values exceeding 0.76. This
values were above the cut-off level of 0.6 (Tabachnick & Fidell, 2007), indicating that
the sample was adequate to test exploratory factor analysis. The result of Bartlett's
test of Sphericity was significant at less than 1% and the coefficient correlation
between items were significant at above the recommended level of 0.30 (McMullan &
Gilmore, 2003). The satisfied results of these tests indicated that the data was
suitable for conducting exploratory factor analysis (EFA) (Pallant, 2007).
Exploratory factor analysis was used for all measures included in this study. In the
factor analysis, principal components analysis with VARIMAX rotation was utilized as
suggested by Malhotra (2007). Only factors with eigenvalues greater than 1 were
retained. The overall pattern of rotated factor loadings suggested three subdimensions were extracted for the construct of airline service quality. The
dimensions were labelled as follows: (1) Reliability and customer service, (2)
Convenience and accessibility and (3) in-flight service. The results of exploratory
factor analysis are given in Table 2.
Kline (2005) maintains that testing the measurement model needs to be conducted
because all of the correlations between constructs must be estimated before testing
the structural model. In addition, the measurement model can assess whether the
constructs meet the requirements of validity and reliability (Byrne, 2010). The
measurement of proposed research model was assessed using confirmatory factor
analysis (CFA), where all constructs involved were assumed to covariate with each
other (Kline, 2005).The measurement of proposed research model, including brand
loyalty, customer satisfaction, service quality, perceived value, and brand image was
conducted by using CFA. Figure 2 presents the result of testing the CFA on the
measurement research model.
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
Table 2. Exploratory Factor Analysis
Constructs
Reliability and
customer service
Convenience and
accessibility
In-flight service
Customer satisfaction
Brand Loyalty
Perceived value
Airline image
Items
SQ02
SQ04
SQ01
Cumulative
Loadings
%
0.901
0.871
0.87 51.673
KMO
Cronbach’s
alpha
SQ03
SQ05
SQ06
SQ07
SQ08
SQ09
SQ10
SQ12
SQ11
0.863
.833
.832 62.189
.798
.772
.845
.822 71.113
.818
.806
0.902 0.912
Sat04
Sat03
Sat02
Sat01
0.891
0.89
0.826
0.805
88.517
0.87
Sat05
BL07
BL08
BL05
BL04
BL06
BL02
BL01
BL03
BL09
BL10
PV03
PV02
PV04
PV01
BI03
BI01
BI02
BI05
BI04
0.728
.875
.862
.833
.825
.819
.734
.727
.692
.669
.622
.881
.838
.790
.723
.897
.868
.867
.840
.740
65.604
0.905
0.885
65.604
0.762
0.823
71.228
0.886
0.891
0.881
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Proceedings of 3rd Asia-Pacific Business Research Conference
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Figure 2. Hypothesised Measurement Model
Figure 2 demonstrates that the goodness-of-fit indices of the model were misfit
although the normed Chi-square index =2.88 and RMSEA=0.076 which indicate
that cmin/df and RMSEA were relatively fit, as it is shown in figure 2, CFI and TLI
indices were below the threshold of 0. 90. In addition, some of the coefficient
correlations between constructs such as between service quality and brand image
was very high (>0.85), indicating a lack of discriminant validity and the presence of
multicollinearity. Thus, the measurement model requires revision due to lack of fit
indices and the presence of multicollinearity.
Improvement of the measurement model fit was conducted based on the
standardized residuals, modification index (MI), and insignificant paths (Byrne, 2010;
Schumacker & Lomax, 2004). The conceptual appropriateness, goodness-of-fit of
the model, reliability and validity, and the number of items in the constructs were also
considered during this process. The revised measurement model is shown in figure
3.
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Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
Figure 3. Revised Model.
The results indicate that the revised measurement model was consistent with the
data. The overall goodness-of-fit of the model was adequate, the normed Chisquare = 2.62; RMSEA = 0.071; CFI =0.918; TLI = 0.908. Further, the
measurement model criteria did produce the observed covariance matrix; there
was no evidence that the measurement model is incorrect. Moreover, the
direction and magnitude of factor loadings were substantial and statistically
significant. The interrelationships among the constructs were statistically significant,
except the relationship between service quality and brand image which is 0.89 as it
is shown in Figure3.
6. Discussion and conclusion
The findings of this research are very interesting because multiple variables were
confirmed at the same time in a higher-order measurement model. Further, a unique
attempt has been made to test three dimensions of service quality along with other
extracted constructs simultaneously.
The validation of measurement model is a step closer to coming up with a full
structural model. This model indicates that the identified constructs play a vital role in
the customer loyalty, particularly in the airline industry of Malaysia.
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Proceedings of 3rd Asia-Pacific Business Research Conference
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7. Limitations and suggestions for further research
The main limitation of this study is the generalizability of the findings. As evident from
the finding section that the study was conducted in Malaysia only, applicability of the
results in other countries and cultures may result differently. Further, as the study is
conducted in the airlines industry, application of the same in other industries, like;
education, financial, and health may not come up with the same findings. Moreover,
this confirmatory model should be taken a step further by testing it fully, i.e., in a full
fledge structural model. A promising research would be to see the impact of airlines
passengers‟ loyalty on their repurchase intention. Lastly, if the future researchers
explore the same concept qualitatively, it may result in very fruitful findings.
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