Air Asia – Guaranteeing service quality

1. Introduction
For every service provider, it is of utmost importance to find ways to deliver the quality
service. One of the best strategies to improve the quality level is to offer guarantees.
Guaranteeing the service levels has potential to bring unbelievable benefits (Meyer,
Gremler & Hogreve, 2014). The purpose of this report is to examine the importance of
guaranteeing the service level of Air Asia. Air Asia is a Malaysian low cost airline which
has its headquarters in Kuala Lumpur, Malaysia. In terms of number of destinations
served and fleet size, it is known as the largest airline. It schedules both international
and international flights where it is serving more than 165 destinations of 25 countries
(Air Asia, 2018). The analysis of its existing service level shows that customers are
not satisfied with the existing service delivery. Their quality problems are not always
fully resolved and they are concerned about the service quality level before selecting
Air Asia. One of the customer reviews says that they did not refund the cancelled ticket
price and they also refused to refund all extra service charges, they should have had
given some credits to be used in future and it was also mentioned by that customer
that he will never use the service of Air Asia again in life. Such reviews tell how
important it is for Air Asia to guarantee service quality (Trip Advisor, 2018). Another
customer was concerned about the hassle to track his luggage and ineffective
communication about delays and cancellation (Airline Quality, 2018). In this report,
literature is discussed about the guaranteeing service quality level and
recommendations are provided for practice.

2. Literature Review
Service guarantee is a marketing tool which is used by service firms to reduce the
consumer risk perceptions, differentiate offerings from competitors, signal quality and
institutionalising and professionalising the internal management of service recovery
and customer complaint. By guaranteeing the service quality, customers are provided
with numerous forms of compensation namely refund, easy to claim replacement or
credit points in case of the service delivery failure. Though, few organisations do put
conditions of compensation forms and other organisations provide them without any
condition (Cox & Dale, 2001).

To guarantee the service quality is known as the extension of product warranties

where the perceived risks of customers is reduced. There are many studies which are
carried out on service guarantee and there are three categories of this concept namely
time guarantee (Ray and Jewkes, 2004), price guarantee (Carvell & Quan, 2008) and
returns of goods guarantee (Suwelack et al. 2011). As marketers have started to pay
more attention to quality, the researcher studies about the guaranteeing service quality
has also started to increase in the recent years. Authors have used theoretical model
analysis, experimental designs and industry investigation to study service quality
guaranteeing (Hays & Hill, 2006; Hays & Hill, 2001; Wirtz et al. 2000; Wu et al. 2012).
For example, the study of Hays and Hill (2006) has presented a framework for the
service guarantee and it is asserted that when firms start offering the service quality
guarantee, the probability of improve service quality, customer loyalty and customer
satisfaction increases, significantly. Hays and Hill (2001) carried out a longitudinal
study where it has been posited that the service guarantee improves the employees’
vision and motivation level and this has positive influence on the service quality. Wirtz
et al. (2000) has carried out an experimental study where before and after guarantee
of service quality situation was observed and it was found that service quality level
and customer satisfaction improves after guaranteeing the service quality. Wu et al.
(2012) considered the context of hotel customers in Taipei and sample size of 222
was considered for survey questionnaire. It was concluded that the service guarantee
has positive impact on the perceived quality and perceived risk of customers.

There are numerous ways through which the guaranteeing service quality contributes
to the success of service organisations. As said by Hsieh, Lin and Lin (2008), when
customers are offered the guarantees on the service quality level, there are obliged to
pay attention to expectations, wants and desires of customers about the service
delivery. With guarantees, there is a clear image which is created in the mind of
customers and employees about the standard of the quality that is offered by any
organisation. Through this, managers also become more inclined towards managing
the service level at delivery stage because they know that this is related with the
financial expenditure of quality failures and can increase the cost of doing business
(Ho & Lin, 2010). When the system of guarantees are implemented, it becomes
imperative for organisations to generate such systems that meaningful customer
feedback could be taken hence corresponding actions could be developed. This also
requires the organisations to become able to understand failure reasons and these
are also motivated for identification and management of potential failure points
(Bennett & Barkensjo, 2005).
The risks which are encountered to customers while making purchase decision for the
service are also reduced with the quality service guarantees. Therefore, as said by
Zhu, Wymer and Chen (2002), the importance of guarantees is higher for the
customers as majority of their perceived risks are alleviated with this. They also know
that in case of any problem, there is an easier process to register complaint and they
also know that staff and service employees are ready to provide the appropriate
solutions or compensations of the service delivery failure (Hsu, Xu & Jukic, 2009).
From the perspective of service organisations, providing guarantees is helpful and
useful because it helps them understand what is needed by customers and what
makes them satisfied. Hence, instead of focusing on what they think important is;
organisations become able to emphasise on what customers think important is
(Hogreve & Gremler, 2009).

There are numerous ways to offer these guarantees for the service quality. According
to Suwelack, Hogreve and Hoyer (2011), the companies that are encountering the
problem of poorer quality can offer the guarantees on those aspects where quality
gaps are found while companies which already have satisfied customers due to their
high quality standards may want to emphasis on guarantees because they want to
transform potential customers into loyal customers. The study of Wu et al., (2012) has
also found that when guarantees are provided by the good quality provider, this has
influence on the purchase intention while it brings no change on the purchase intention
for those service providers which are outstanding service quality provider. This tells
that careful analysis is needed for offering guarantees about the service quality level.

3. Recommendations
Airline industry is based on numerous external factors and the delays, cancellations
and diversions of flight is a common thing. However, only those service providers can
be successful which are able to do the proper and effective communication with the
customers. Currently, Air Asia customers are anxious due to miscommunication. As
suggested by Hernon and Altman (2010), it is recommended to Air Asia that it needs
to ensure that timely information is provided to customers, before they arrive the
airport. This should be accessible on website, through text message / phone call and
emails. It should provide the guarantee that customers will get the timely information,
otherwise, they are eligible to claim a free ticket from Air Asia. This will help in
communicating the importance of information for Asia to both customers and
employees (Jin & He, 2013).

In all airline service providers, one of the important challenge is about helping
customers to track their luggage. Almost every passenger of airlines is concerned to
get their luggage from the airport in the hassle free manner and many of the airlines
including Air Asia is unable to do so. It is recommended to Air Asia that it should solve
this problem of its customers by making the process more transparent for customers.
The customers should be able to track their luggage in the real time so as it is going
through the system of Air Asia, customers should be able to track it (Liu & Xie, 2013).
As told by Meyer, Gremler and Hogreve (2014), this will provide them peace of mind
during the service delivery process i.e. flight. It can introduce any web based
application which should also be compatible for mobile phones. Using this service, it
should provide the guarantee to get the luggage within 15 minutes of boarding off from
the flight. Currently, none of the Malaysian competitors are doing this, hence, it will
provide a first move advantage as well. However, it also needs major improvements
in the service delivery process about luggage handling and management.

Airline services are alike that they might need cancellation or diversion from the
customers’ end as well and all renowned companies are already offering refund policy
for this. It is recommended to Air Asia that it should also guarantee this flexibility. It
should provide the reusable credits to customers so they could use their cancelled
flight fare in future. This will not only satisfy them; but their loyalty will also be obtained
(McQuilken & Robertson, 2011).

To summarise, it is said that it has become imperative for Air Asia to implement the
guaranteeing service quality level for being sustainable in this industry which is highly
competitive. Many of its competitors have already introduced guarantees about their
service delivery, so it is imperative for it to introduce these, otherwise, it will bring
adverse consequences for it. Considering the nature of this industry and complaints
of Air Asia, certain recommendations are provided to its management regarding
guaranteeing service quality and it must implement these.
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