The Customer Satisfaction In The Airlines Industry Tourism Essay

The Customer Satisfaction In The Airlines Industry Tourism Essay The main aim of this chapter is to review the theories and previous research papers which are mainly concentrated on the evaluation of customer satisfaction in the airlines industry. Shaw, S. (2004) has defined the consumers are those people who actually travel. They make existence clear by reporting for flights and their requirements. They are therefore usually given a great deal of attention by marketers in the airlines business. However, the consumers may not be the decision-makers about the things that matter. In the marketing theories, such decision makers are defined as Customers. Furthermore, there are three customer decisions which must be analyzed: This decision is mainly aimed to the business travelers. For many firms today, the cost of travel is a major item of cooperate expense. Especially, in the recessionary period, most of the firms will attempt to reduce expenditure in order to minimize the effect of recession. In such situation, the business trips will be replaced by other methods such as the phone, video-conferencing or email. There are different choices for passengers to select for their air ticket class in the cabin with different kinds of services and price such as First Class (mostly selected for the long-haul flights), Business Class, Economy Class or Coach Class. Additionally, the business travelers will have a little or no say in the decision as to which class will be purchased. Because most of the firms have their travel policy whereby very senior executives are allowed to take First Class, those in the middle rank in Business Class, and the junior employees have to be satisfied with Economy Class. Interestingly, during recessionary periods, most of the firms have to be downgraded their travel policy in order to save money so that the First Class and Business Class travel being eliminated. The question of the choice of the airline is obviously a crucial one. In the leisure air travel, many airlines focus on selling the blocks of seats to tour operators and travel agencies so that the individual travelers will have very little say in the airlines that they fly with. Otherwise, in the business air travel, during the time 1990s, more and more companies centralized travel purchasing in order to gain access to cooperate discounts from airlines. Such policies narrowed the choice which the individual travelers could exercise, even if they were not restricted to using a single airline. Finally, the choice of airlines still depends on the person who has to travel and the airline schedule as well. If the airline schedule is suitable, the passengers will choose to fly with the airline as their choice. The comprehensive definition of customer satisfaction is given by Oliver (1997); Customer satisfaction is the consumers fulfillment judgment that a product or service itself, provided (or is providing) a pleasurable level of consumption- related fulfillment, included level of under-or over fulfillment. Today, the airlines have to face with the significant competition within the industry so that level of customer satisfaction becomes more important. Besides that, the passenger satisfaction includes the various types of services which are related to the airlines industry such as the satisfaction of the online check-in service, ground handling service and the quality of food on board as well. Next, the customer satisfaction factor plays a major role in the airlines industry and it also impacts directly to the profit of an airline company. At the same time, according to Yi (1991), customer satisfaction may be defined into two basic ways: either as an outcome or as a process (table 1.1) Definition The buyers cognitive state of being adequately or in-adequately rewarded for the sacrifices he has under gone An emotional response to the experience provided by (or associated with) particular products or services purchased, retailed outlets, or even molar patterns of behavior, as well as the overall marketplace An outcome of purchase and use resulting from the buyers comparison of the rewards and the costs of the purchase in relation to the anticipated consequences An evaluation rendered that the experience was at least as good as it was supposed to be An evaluation that the chosen alternative consistent with prior beliefs with respect to that alternative The consumers respond to the evaluation of the perceived discrepancy between prior expectations and the actual performance of the products as perceived after its consumption Approach Satisfaction as an outcome Satisfaction as a process Figure 1.1: Definition of customer satisfaction (Yi, 1991) Source: Adopted from Grigoroudis Siskos (2010, p.4) Otherwise, losing customers would mean that the airline organizations would have to win new customers to keep the business going, by doing so, the cost of promotions and attracting new customers would cost the airline organizations more money, Hill, N. and Alexander, J. (2000). The report by Kazim, S, K. (2005), starts with the introduction to Emirate Airlines and its innovation in the in-flight products to achieve the high level of customer satisfaction. Next, Emirate Airlines has mainly focused to develop the onboard connectivity for ultra long haul flights (8-14 hours). This is important especially for in the cases of business travelers and cooperate travelers as these ultra long haul flights can be a very attractive proposition for them because of the accessibility and fast connection from one end of the world to another. The reports result is that Emirate Airlines has a successfully innovated to build up their market positioning and achieve the high level of customer satisfaction through the onboard connectivity. 3.2) Measuring the customer satisfaction in the airlines industry: This part is mainly focused on the measurement of customer satisfaction in the airlines industry which is based on the tangibles of service and the intangibles of product. Besides that, these important elements will be used in the questionnaires and will be analyzed as a part of this research papers objective to indentify customer satisfaction motivating factors in the aviation industry. 3.2.1) Why is customer satisfaction measured? Hill, N. Brierley, J. and MacDougall, R. (1999), explains the reasons why the customer satisfaction factor needs to be measured. A customer satisfaction measurement (CSM) programme will therefore enable us to understand how customers perceive your organization and whether your performance meets their expectations. Furthermore, the airline organizations are able to understand their passenger expectations so that they will have their own strategies and methods to achieve those passengers requirement. At the same time, if the airline companies manage the customer satisfaction measurement well, they will be able to set the goals for their service improvement and monitor progress against a passenger satisfaction index. Likewise, the airlines can increase their profits through improved the customer satisfaction, customer loyalty and retention. Business Success Customer Loyalty Customer Satisfaction Figure 1.2: Business performing modeling Source: Adopted from Hill, Brierley MacDougall (1999, p.7) There are many airline organizations and especially the in the USA have recognized the significance of CSM so that they have developed the business performance model (see figure 1.2), enabling them to forecast financial performance from shift in their CSM data. Some can even take the model back as far as employee satisfaction. Based on the figure 1.2 above, it shows us the relation between customer satisfaction and customer loyalty and then both factors are linked closely to the success of business. Next, the diagram above would mean that the airline organizations should achieve the high level of passenger satisfaction and therefore they will also be able to maintain effectively the passenger loyalty and it will lead to the success in business of those airline organizations. Additionally, these elements would contribute to add up to a customer satisfaction level and retention. By understanding the non-traditional customer satisfaction elements such as the below could allow the airline organizations to adopt and improve on their customer retention methods. 3.2.2) Elements of service require for satisfaction: This portion shall be based on the theory of Parasuraman, Zeithaml and Berrys (1988) which is presented the five elements of reliability, assurance, responsiveness and empathy which makes up service quality. The SERVQUAL model above (see figure 1.3) is essentially an instrument for measuring how customer perceived the quality of service they receive. Furthermore, the evaluation is based mainly on the five elements of services which are expected from the air passengers. The Reliability: The airlines services must be dependable and consistent in their performance, it includes accurate in their performance. Besides that, it also means the airline companys employees should perform the desired services correctly in the first time round. For example: providing the check-in service for passengers effectively. The Responsiveness: It means the airlines services should deliver the services such as the on-board services and services at the airport promptly to passenger (rather than ignores the passengers and leaves them waiting). Besides that, the airlines employees are always willing and ready to serve and help the passengers. E.g. the air hostess should be always ready to serve quickly when the passengers query has been made. The assurance: The air service staffs have to assure that they have the knowledge, skills, abilities and courtesy to perform their duties. E.g. knowledge of the air hostess about the destinations, reputation of the airline organizations and security. Staff empathy: This service element is related to the airlines staffs ability to provide passengers with individual attention. Next, the airlines employees need to treat individually and need to show their concern, caring to passengers as well. E.g. recognize the regular passengers name, learning passengers specific requirement. Tangibles: This element is considered as the physical evidence of service. For example: appearance of personnel, the equipment used to provide the service. 3.2.3) Elements of product require for satisfaction: In this portion, I would like to mention to the five elements of product which associate with customer satisfaction within the aviation industry. Moreover, I would include these elements into my questionnaires later to ask the respondents rank accordingly for their satisfaction level. Quality of services: The quality of airlines services such as check-in service, food and beverage on board and ground handling service impacts directly to the passengers decision making. Especially, some passengers will select the airline for its good services even though the air fare is higher than other airlines? Location: The location of airline offices and its authorized agencies should be convenient and easy to access for passengers. Airfares price: The airfares price is considered as the most important factors for a specific airline to compete with their competitors. Next, the airfare should offer with reasonable price. Layout, decoration and entertainment service: This portion is to mention to the interior design of the air craft and the uniform of air hostess which are considered as the cultural factors for an airline company. Next, some additional on-board entertainment services (videos, music and games) are also the competitive elements in the aviation industry. Loyalty program: This part is to emphasis the functions of VIP cards or other methods that are used by the airline organizations to bring back passengers through discount, vouchers, higher priority and free gift. For example: the Golden Lotus Program of Vietnam Airlines and SIAs Kris Flyers program. 3.3) Understanding the passenger requirements: This part is concentrated to understand the passenger requirements in the business travel market so that the airline organizations will be easier to achieve the higher level of customer satisfaction and also to improve the service quality efficiently. Shaw, S (2004), airlines do not just have to be indentify the passengers needs but they also have to prioritize. Below is are the options to the nature of passengers needs and the discussion shall be divided between the corporate and independent sub-segments of business travel demand, and between short and long hauls routes. 3.3.1) Short-haul and long-haul routes: 3.3.1.1) Frequency and Timings: In the airlines industry, the frequency and timings factors are very important to the air passengers, especially for the short-haul markets. Today all the business travelers are extremely busy and their plan is rescheduled often at the short notice. And therefore, an airline offering them a high frequency will have crucial advantages. Besides that, frequency will ensure that business travelers can fly out for the meeting shortly before it is due to begin and return to their offices or homes very soon after it has been completed. Moreover, the flights timings are also a vital consideration and there should be extensive opportunities on short-haul routes for business travelers to make day-return trips. And therefore most of the flights need to be concentrated in the early morning and evening periods. 3.3.1.2) Punctuality: The flights punctuality is a crucial importance to the business travelers and there is no airline dare to hope to obtain a big number of passengers if they perform a poor punctuality reputation. Likewise, the flight delays meaning inconvenience, missed appointment and perhaps the loss of customers. Especially, almost of the long-haul passengers are the connecting passengers and they are usually taking the transit or stop-over flights so that this factor becomes extremely significant for them. Once delay, it will annoy the point-to-point travelers and may destroy their entire flight itinerary. 3.3.1.3) Ticket flexibility: Seat accessibility is considered as a piece of aviation jargon which refers to the probability of passengers who are being able to grab a seat shortly before the flight is due to depart. Next, it is a crucial product need for business travelers. The short-haul passengers requirement about ticket flexibility is a little bit unfair for the airlines because many business travelers expect the right to no-show for the flight, and then to be re-booked on the next flights out later without any penalty being charged. Of course, because of this, airlines have to face with so many difficulties and issues. Nonetheless, these factors are lower importance on the long-haul routes and the last minute availability of seat is less important on the long-haul flights. Normally, the long-haul passengers will take note carefully for their flights three days before the departure date due to the its lower frequencies and high cost of penalty when missing the flight. 3.3.1.4) Frequent flyer benefits: Today, almost of the airlines operate their own frequent flyer programme or the passenger loyalty schemes to gain the re-support of their regular passengers. At the same time, the frequent flyers will have chance to accumulate the number of mileage points and then they can use those points to exchange to some kinds of benefit such as rewards, hotel or restaurant vouchers, free gifts or free air ticket for the next time travelling. Nevertheless, there is a difference of the attitudes to frequent flyer points between short and long-haul markets. On the long-haul route, substantial numbers of points are stake. In fact, for many programmes, the passengers are taking the long-haul flights with a particular airlines (at least in the First or Business Class), they could earn sufficiency mileage for a short-haul flight on that airlines network with free of charge. Because of this issue, so many long-haul passengers have selected the airlines whose frequent flyer points they are supporting; even they are not really satisfied with the flight timing or frequency. 3.3.1.5) Ground service: It is not surprising that the airport service should be a significant factor in select of airline decisions. Of course, all the business travelers will wish to spend as less time as possible in the airport. Besides that, they wish to check-in very late for the flight, by using the separately check-in counters as well. And so that, the airport service provided should be very effective and helpful to satisfy the demand of air passengers. However, the offer of very late check-in time for the long-haul passengers is less important. Besides that, most of the long-haul passengers prefer to check-in earlier than those in the short trips because of the greater penalty of missing flight and lower frequencies as well. 3.3.1.6) In-flight service: On the short-haul routes, the fact that the flight duration is short so that in-flight service often assumes a lower priority than frequency, punctuality and airport service in selection of airline decisions. However, it still can extremely important and directly influent to the passengers in-flight experiences. On the other hand, there are differences between the expectations for in-flight service on long and short haul flights. On the long-haul routes, the seating comfort on board, a separate cabin to allow for sleep and work, meal quality and in-flight entertainment are taken more concern from the passengers. 3.3.1.7) Direct flights for long-haul routes: Especially, a significant consideration alongside the frequency is often that there should be direct and non-stop flights available for the long-haul routes. In the competitive aviation industry, that is no longer the impossible expectations, as aircrafts manufactures have innovated with aircraft having longer and longer ranges so it has become possible to fly greater and greater number of the worlds air routes on a non-stop basic. Today, there is really no way for an airline operating a stopping service to compete for the high-yielding traffic with the competitors which are able to offer the direct, non-stop flights. 3.3.2) The differences between cooperate and independent travelers: This portion would differentiate the requirements of cooperate business travels and independent travelers. First of all, for the independent business travelers, the terms of frequency, timings, safety, punctuality, seat accessibility and ticket flexibility need to remain the same. Moreover, the independent travelers are more concern about the airfares cost than other factors such as standard of seating comfort and quality of in-flight meals. Next, the independent travelers will normally trade off the cheaper airfare because the tickets cost is coming out from their own pocket. Secondly, for the cooperate travelers, the attractive perk of the job and providing opportunities to enjoy free leisure flights are considered more important than the benefits of frequent flyer points. 3.4) Form the alliances to enhance customer satisfaction: In this part, it mainly concentrates on the airlines alliance which is the important factors to improve the customer satisfaction and develop the airlines business. Otherwise, the theories are based on the explanations of reliable authors and other academic articles on the same researchs topic. 3.4.1) Introduce to airlines alliances: Shaw, S (2004), the air carriers have usually preferred the comfort of co-operative rather than competitive relationships. In 1993, KLM and Northwest Airlines announced their desire to create a strategic partnership. Then, the United States government gave them immunity from the US Anti-Trust laws, which it did following the signing of an Open Skies agreement between the US and Netherlands governments. After that, the two national airways, Lufthansa and United Airlines proposed to join hand with KLM and Northwest Airlines to become the Star Alliance in 1995. Again, the Anti-Trust was available between US and Germany governments. In additional, Star Alliance grew rapidly in terms of the number of members it had, with it currently consisting of 27 member airlines in 2010. Alongside the available of Star Alliance, there were other formations of airlines alliance such as One World alliance and Skyteam alliance. Likewise, the formation of One World alliance by British Airways (BA), American Airlines (UA) and Cathay Pacific (CX) was announced in one year after the establishment of Star Alliance. Besides that, the evaluation of the modern alliance was completed in 1999 when Air France and Delta Airlines formed the Skyteam Alliance. Otherwise, Thompson, A. and Strickland, A, J. (2004) stated that airlines which enter alliances to gain competitive advantage. These are the following main motivations to make the airline companies enter alliances. To gain the technology knowledge and experience To enter a new markets To better exploit economies of scale Having said this, it is quite obvious that airlines which enter into co-operative alliance relationships are seeking cost reductions. Next, if the alliance members can negotiate together, this may help to increase their power to bargain with the suppliers of airport services. Next, According to Chareonsup, N. (2006), the strategic alliances become increasingly important in the very competitive aviation industry. This study mainly focuses on key success factors in managing strategic alliances for Thai Airways International as member of Star Alliance. Particularly in the global airlines industry, the strategic alliances enable the small firms to face with the difficulties, while also the large firms are still able to obtain their benefits, while remaining small. As the small airline carrier of the Star Alliance, Thai Airways is considered as an available opportunity to understand and investigate strategic alliances in clearer picture. Lastly, upon the result of this research, it can be concluded that Thai Airways has a high potential to adapt itself in a big alliances. 3.4.2) Definition of airlines alliances: According to Yoshino, M, Y. and Rangan, U, S. (1995), alliances are defined as the long-term beneficial relationship between two or more airline organizations. Besides that, these airline companies have agreed upon achievement to meet a critical business need while staying independent of each other. Next, it is a synergistic agreement between two or more airline organizations agree to cooperate in carrying out of business activity where each brings different strengths and abilities to the agreement. Moreover, Sawler, J, H. (2000), has tried to define of strategic alliances in a clearer picture. It is defined as the relationship between two or more airline firms that involves the sharing of resources: capital, technology, experience, distribution network, etc., in which is involved with cooperative activities which go beyond ordinary arms length transaction, but fall short of mergers. 3.4.3) The benefits of customer from airlines alliances: Kleymann, B. and Seristo, H. (2004), this part will get an idea of the Alliance Markers views and analyze how the airlines alliances bring more benefits to their customers. Besides that, this portion is based on the interviews with senior airline executive (Vice-president up to Deputy CEO Levels) involved in alliancing. Bob Ayling, Chief Executive of British Airways, said: his customers have shared with him they prefer airlines to work together to increase the standard of services across the world. Furthermore, alliances bring together leading airlines to maximize the benefits for customers, employees and shareholders. Don Carty, Chief Executive of American Airlines, said: the purposes that they started the alliance are to enhance the travel experience for the customers, improve the competitive position of their respective airlines and thus provide opportunities for their employees, as well as create value for their shareholders by building the worlds premier airline network. Kevin Benson, Chief Executive of Canadian Airlines, said: One world alliance will deliver unrivalled benefits across our partner airlines, ensuring that the customers are recognized across all airlines as if they were their own. David Turnbull, Chief Executive of Cathay Pacific Airways, said: This alliance is superb news for Cathay Pacifics customers and those of our partner alliances. Customers travelling on Oneworld will receive the highest levels of services and product available. James Strong, Chief Executive of Qantas Airways, said: Oneworld alliance will provide each of them with a great opportunity to provide worldwide high quality service to customers through airline partners acknowledged as world leaders in the airlines industry. In additional, Doganis, R. (2001), stated that the airlines alliances produce more benefits for the air-passengers such as arise from higher frequencies, offer more available destinations with on-line connections with airlines in the same alliance, improve the transfer times and levels of in-flight and ground service, as well as more attractive of loyalty schemes. As so far, alliance may lead to lower operating cost for the airlines through the realization of cost synergies, so that customers will likely have chance to grab the lower airfare easier if any cost saving are reflected in the lower fare. This portion is ended with the case study of Airlines industry partnership which also analyzed the customers benefits from airlines alliances clearly. Customer benefits from partnership include seamless travel with association between connections, sharing of airport lounges, and cross-use of frequent flyer programmes where customers will have chance to enjoy the lower average airfares from airlines within the alliances due to the power of partnership as well. Besides that, the latter open-skies model of partnership has facilitated the reduction in fares through cooperative pricing which gives a certain amount of benefit to each partner. At the same time, most of the partnership shares routes and operates the code-share routes (passengers could buy a ticket for one airline and end up on a plane of the other partners) so that customers may have chances to enjoy travel experiences with different airlines in the same alliance. (Donaldson, B. and Toole, T, O. 2007). 3.5) Competition leads to the development of service quality: 3.5.1) Definite the competition: Pride, W, M. Hughes, R, J. and Kapoor, J, R. (2008), business competition is essential a rivalry among businesses for sales to potential customers. Moreover, competition also ensure that the airlines will survive only if it is able to serve and satisfy customers well by providing products and services that meet needs. 3.5.2) Porters Five Forces framework: Porter, (1998), the five forces comprises threat of new entrance, bargaining power of suppliers and buyers, threat of substitute as well as competitive rivalry, as show in the figure 1.4. Furthermore, the framework helps to identify the sources of competition in the airlines industry as to facilitate the development of service quality for the airlines to serve passengers better. New Entrants Deregulation of airlines More airlines serving the region Emergence of budget carriers Bargaining Power of Supplier Aircraft Manufacturers Travel Agent Internet Fuel suppliers Buyers Power Wide choice of airlines (low switching costs for passengers) Customers have stronger bargaining power Rivalry in the Industry Increasing number of international flights Load factors utilization Price wars due to load factors Advertising campaigns Substitutes Teleconferencing and video conferencing Email Interstate transportation modes for domestic carriers rail, bus, car Figure 1.4: Porters Five Forces Framework Industrial Analysis Source: Adopted from Porter, M, E., Competitive strategy: Techniques for analyzing industries and competitors. 3.5.2.1) Threat of new entrants: In the airlines industry, the threat of new entrants is low due to the barriers to entry such as high capital, costs of training and differentiated products. On the other hand, opening sky policy contributes to stimulate the potential cross passenger service between the airlines and the new entrants. 3.5.2.2) Bargaining power of supplier: Buyers are more willing to switch suppliers due to low switching cost and diverse source of supply that is available (Grant, 2005). Today, airlines are willing to switch between two giant suppliers, Airbus and Boeing due to the expectation in modern aircrafts in term of high load factor, less fuel consumption, CO2 emission and quieter engines. 3.5.2.3) Bargaining power of buyers: Although customers are able to book the air-tickets online due to the high technology systems, travel agencies constitute a major portion of the customer base to the industry. Besides that, these travel agencies have the strong chances to influent customers who have no strong brand preferences as to what travel decision they should make. Next, travel agencies understand their advantage position in the industry therefore they use their high bargaining power with airlines to get the better deals in area such as extra commission. Moreover, due to the bargaining power, travel agencies have the authorization to offer some special kinds of fare which customers are unable to book by other ways. Like, for a group of travelers, customers will have chance to book the GV2 tickets (from 2 passengers and above take the same return flight and date) or GV10 tickets which is offered specially by Singapore Airlines (from 10 passengers and above take the exactly same return flight and date). And of course, the airfares cost should so much be cheaper compare with the basic single air ticket. Finally, travel agencies are using their bargaining power effectively to earn extra commission and help the travelers to get better deals with airlines as well. 3.5.2.4) Threat of substitute: The improvement of technology is also one of the threats to the airlines industry today. Likewise, the online business communication technologies are considered as an alternative to travel. Next, the high usages of international calls lead to the reduction in business travel as well. 3.5.2.5) Competitive rivalry: The rivalry among existing players in the market is the dominant force in the framework. The intensity of rivalry which is the most obvious of the five forces in t