Successful businesses are increasingly aware of the importance of service delivery in generating competitive advantages, loyal customers, and long-term economic success (Wagner 1994; Jones and Sasser 1995; Liu et al., 2000). It is widely acknowledged that well-designed customer-service programs enhance customer satisfaction, customer retention, market share, revenue, and profits (Reichheld and Sasser, 1990; Rust and Zahorik, 1993, 1995; Anderson et al., 1994; Jones and Sasser, 1995; Anderson et al., 1997; Loveman, 1998; Hoffman and Kelley, 2000; Johnston, 2001). These issues are of particular importance in the airline industry, in which the delivery of high-quality service to passengers has been shown to be essential (Sultan and Simpson, 2000; Aksoy et al., 2003; Park et al., 2004; Chen and Chang, 2005; Chen, 2008). However, although the link between airline service quality and passenger satisfaction has been established empirically, the exact nature of the relationships that exist among the constructs of airline service quality, passenger satisfaction, and loyalty remains unclear (Park et al., 2004). The role of value in the airline industry is also unclear. Because service failures can occur in airline services as they can occur in the best-run companies in any business setting, improved complaint management and service recovery are obviously important (Boshoff, 1997, 1999; Johnston, 1995). The providers of airline services, like all service providers, need to implement effective complaint-management and service-recovery strategies to ensure (or at least enhance) consumer retention (Liu et al., 2000). However, there is lack of a reliable measurement tool to capture the impact of particular airline service-quality attributes and service-recovery actions on passengers’ behavioural intentions. The purposes of this study are, therefore: (i) to develop an integrated model of customer satisfaction and loyalty in the context of airline service failure; (ii) to undertake empirical testing of the position and effect of perceived value in such a model; (iii) to identify a set of pertinent service-quality dimensions for airline services; and (iv) to provide evidence for the causal relationships among the constructs of service quality, perceived value, overall customer satisfaction, and loyalty. The questionnaire contained items extracted from the existing literature on airline service quality (Park et al., 2004; Chen, 2008; Chen and Chang, 2005).