Operational slack, service disruptions, and service quality: Empirical evidence from the US airline industry

Abstract

The competitive strategy of U.S. airlines has been characterized as either cost-focused, like Southwest Airlines, or full-service (legacy), such as United Airlines. This study investigates the impact of each strategy on customers’ expectations and their inclination to file a complaint when flights are canceled. It also explores whether slack resources would moderate the number of flight cancellations and thus reduce the number of customer complaints. At the same time, the study examines the degree to which moderation would be different for the two prevailing strategies. By combining the perspectives of multiple research streams from the strategic management and service operations literature, the study argues and empirically shows why airlines with a cost-focused strategy have an inherent advantage in receiving fewer customer complaints when flights are canceled. Confirming the theoretical expectations, the results also support the role of slack resources in mitigating the impact of service failure—in the form of flight cancellations—on passengers’ perceived service quality. Finally, a noteworthy finding is that the moderating role of slack resources in reducing customer complaints when flights are canceled is quadratic in nature, with different inflection points for the two competitive strategies. We also examine the robustness of our result using a machine learning technique.