Abstract
The purpose of this study is to evaluate whether premium services airlines in Asia offer better returns to investors as compared to normal services airlines. To accomplish this, portfolios are created for each airline group and compared against benchmarks in monthly assessments over a sixty two month period ending in October 2017. The benchmarks include the global market and the oil market. The global market offers a comparison to a baseline expectation while the oil market represents a major cost component for the airline industry. The findings point to the premium services airlines as being the superior performing group in relation to the normal services airlines as judged in six cases using various configurations of the benchmarks. These results are further confirmation that in some industry segments, service quality matters. Included is literature pertaining to service quality, loyalty, and profitability. Each of these topics is expanded to show the link between various facets of customer satisfaction and implications on overall company profitability.
Highlights
This study evaluates airlines in Asia to determine if the airlines which offer premium service perform better in the stock market than airlines which provide normal services
Case 1 was at a statistical significance of 0.10 while case 2 was at a 0.01 statistical significance. Both groups performed inferior to the combination of the two markets, the Premium Service Airlines performed better than the Normal Service Airlines when the results for each are compared against each other
In all six comparative cases, the three cases for the Premium Service Airlines performed superior to the Normal Service Airlines even though not all case results were at statistically significant levels
Summary
This study evaluates airlines in Asia to determine if the airlines which offer premium service perform better in the stock market than airlines which provide normal services. The study arranges two airline portfolios based on these characteristics retrieves total return stock data for comparison to various benchmarks using the strategy of comparing long-run returns against an appropriate benchmark (Barber & Lyon, 1997). The global market provides a basis for comparison which can be utilized when comparing alternative investments. The oil market provides a basis as one of the primary costs affecting the airline industry (Yashodha, Hamid, & Habibullah, 2016). The study fills a research gap on airline quality and its effect on airline stock market performance in the Asia sphere using the Fama and French three-factor model (Fama et al, 1993), and utilizes benchmarks to determine the existence of long-run abnormal returns (Barber et al, 1997)
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