Customer Analysis of the Airline Industry

Customer Analysis of the Airline Industry Introduction: In the highly competitive airline industry, customers become the most important factor of the whole producing process. Besides flight safety, enhancing service quality, and therefore customer satisfaction, is the most crucial strategies of the airlines (Fried, 1989; Gardner, 2004; Zaid, 1995). Customer complaints serve as a critical dimension of service quality and customer satisfaction. Both the great affect that complaint handling has on customer retention and the beneficial usage of complaint information for service quality improvements have been widely recognized by the airlines and evaluative institutions (Strauss Schoeler, 2004). Complaint management continues to be a focal point of research as more companies have become convinced that defensive marketing is a highly profitable endeavor (Davidow, 2003). Customer complaints provide organizations with an opportunity to rectify their mistakes, retain dissatisfied consumers, and influence consumers’ future attitudes and behavior (Estelami, 1999). There is much empirical evidence showing that the complaint satisfaction with a company’s response has an enormous impact on customers’ future behavior (Stauss, 2002). Therefore if the customer relation department is doing the job effectively and getting complains from customers it can be used a tool to make improvements in the company as their feedback will tell the airlines where there are lacking and how they can improve. So it will just not increase customer satisfaction but also the loyalty and the profit for airline as customers will like to use the services again and again. These days Airlines are in fierce competition with each other and they are trying to gain each others market share by using different strategies some are giving cheap tickets some are giving extra weight and so forth. The point here is no matter what strategies airlines are using the thing that matters is if they are satisfying the customers or not. Getting market share from other airlines might be easy but retaining that share is very difficult to retain. Nowadays people are highly price sensitive and they will switch the airlines for a minor difference too. So now the airlines really have to work on something so that they can retain the customer while satisfying them too. In Pakistan there wasn’t any survey which was precisely on Airline industry. So that is why this topic was chosen so as to provide better insight in this industry regarding the customer satisfaction. The Airlines really have to do something extra to attract more and more customers as the biggest problem airlines are facing are the economic problems like fuel prices and very tough competition from other carriers and getting very strict regulations from governments. The airlines have to develop new ways to attract the customers those days are long gone when airlines could charge as much as they want because of many new competitors now they can’t do that. After 9/11 the whole industry saw a major sets backs and increased fuel prices and security conditions were totally changed since then. The industry was facing setback economically and viably. They had to improve their operations so as to reduce as much costs as they can as they fixed costs were going sky high and it was getting very hard for the airlines to operate in such environment. While reducing costs they cannot ignore customers as they are the one who are getting them revenues. The Airlines have made their operations better so they were able to reduce operational costs and can give better fares with respect to other airlines. Airlines have started customer relationship programs so as to have better relations with customers so they can travel on the same airline again and again. But there were many airlines that went bankrupt because of high operational costs and low revenues even majors airlines were failed to make profits after 9/11. During the last eight years there were many airlines who ceased there operations mainly due to revenues and there were many airlines who are going in loss or hardly on break up. Due to this there were many mergers in the airlines too. All this happened due to the economic conditions across the world. It is worth mentioning here that air traffic has increase many times but still airlines are not making very high profits. It is all due to very high operating costs and due to security conditions. The losses faced by airline industry is also caused by many low cost carriers which are not giving other benefits and just taking from places to places and many travelers prefer to save on tickets. The security conditions has forced many airlines to step up their operations and make sure of the safety of passengers which has ultimately increased the fixed costs but in return they are giving complete satisfaction to passenger while providing safe journey. The passenger’s satisfaction differs from person to person some want more off board facilities some want onboard some like extra luggage some are satisfied with good food. Now the question arises here how an airline can satisfy so many people. This is the reason this research has been conducted to get a better insight of the customers that what customers are expecting and what airlines are giving them. The gap will tell us where airlines are lacking and how they can give better services to customers with better fares. The Main Hypothesis for the thesis is: Airlines with higher satisfied customers are getting more passengers. The Sub hypotheses are following. 1. Reliability Airlines with higher Reliability are getting more passengers. 2. Responsiveness Airlines with higher Responsiveness are getting more passengers. 3. Assurance Airlines with higher Assurance are getting more passengers. 4. Empathy Airlines with higher Empathy are getting more passengers. 5. Tangibility Airlines with higher Tangibility are getting more passengers. Literature Review Everyone knows what satisfaction is, until asked to give a definition. Then it seems nobody knows [Richard Oliver 1997]. He is expert and long time research writer and researcher on customer satisfaction. The definition of customer satisfaction is â€Å"Satisfaction is the consumer’s fulfillment response. It is a judgment that a product or services feature, or the product or service itself, provides a pleasurable level of consumption-related fulfillment† [Richard Oliver 1997]. Customer satisfaction can differ from person to person and product to product. But generally if the product has at least met the needs of the consumer then it will be customer satisfaction. Incase it failed to meet the minimum expectation then it will be turned into dissatisfaction. Tolman (1932) was the first person to use the term expectation in the context of behaviour. In general terms, expectations borrow from Tolman’s expectancy theory whereby, subsequent to learning, people actualize or ward off potential consequences of their actions. Pretrial beliefs about a product (Olson Dover, 1979) that serve as standards or reference points against which product performance is judged (Zeithaml, 1993) is a commonly used definition of expectations that draws from Tolmans original conceptualization. Customer satisfaction is measured in a given reference of time. So with due respect of time even it changes so as the satisfaction level. It changes from time to time and factor to factor as it is a dynamic process. In highly involvement decisions it is very important to meet the satisfaction level. If it failed to meet the expected level then the companies will loose the customer. As there won’t be any second chance. The key to provide the excellent service is in understanding the customer expectation [Parasuraman, Berry, Zeithaml, 1991b, p. 39). Expectations play a role in the formation of satisfaction and service quality through the expectancy disconfirmation paradigm (Oliver, 1980, 1993, 1997; Tse Wilton. 1988), and the gap model (Parasuraman, Zeithaml, Berry, 1985) respectively.  Satisfaction and perceived quality result from a comparison of the level of performance perceived and the level of performance expected by the consumer. In this so competitive industry such as airline industry nowadays the airlines are meeting with very harsh realities first of fuel prices going sky high making there fixed costs sky high as well. Then due to high fares passengers are switching the airlines for any extra favors. Due to this many airlines went bankrupt as they couldn’t even have breakeven. That is why nowadays low budget airlines are making more profits then big airlines because of low fares. But it is just not fare which makes them change the airline. There are many other factors involved other then just fare. They need to even meet certain level of expectations. In the customer satisfaction, expectations are treated as predictions made by customers about what is likely to happen during a service encounter. Such expectations correspond to what the service will be like (Oliver, 1997; Zeithaml et al, 1993). Oliver defines expectations as predictions, sometimes stated as probabilities or likelihoods, of attribute or product performance at a specific performance level. Miller (1977) called this standard the expected standard, which is the result of a probability estimate. American Society for Quality told in a report that recently the troubles that airline industry are facing are, flights are getting delayed, overbooked and sometimes even cancel and due to that passengers are getting worked up are losing patience. The level of satisfaction is on the decrease and will continue to decrease. The airline industry analysts are expecting that the situation is going to get bad or even worst before it will get better. The American Customer Satisfaction Index score for industry in the first three months of 2007 was about three percent lower to 2006 score and it is 63 on 100 scale.   Satisfaction with constituent elements is particularly important in a service setting because customers are involved in the service process. Thus services are necessarily experiences, and as a result, customers rely on multiple indicators of service quality to evaluate overall satisfaction with the service (Bitner, 1990; Zeithamel 1990; Mittal, V., P. Kumar, and M. Tsirors 1989). Peripheral attributes are further distinguished as physical attributes, the choice of features and amenities that are included in the service concept, and interaction attributes, the way that service employees Interact with customers in the service delivery system. The importance of a particular attribute in the service concept is derived from the sensitivity of overall satisfaction to changes in satisfaction with the particular element (Kamakura et al. 2002). Customer satisfaction is desired because of its role in the service value profit chain in producing a stream of revenues that is resilient to competition and obtained at lower long run cost (Heskett et al., 1997). Research shows that irrespective of the outcome of the service encounter i.e., performance on core attributes, peripheral attributes both physical and interactional can independently affect customer satisfaction (Bitner, 1990) Taking quality and customer satisfaction into consideration, the airlines can improve their customer service and airline operations in a lot of ways. It will take sometime to apply better strategies to make the daily operations run smoothers and more effectively, but if you start implementing the better strategies and user friendly processes to improve passenger assistance and customer service it will give you a very good idea and plan what are the possible problems customers are facing and through which strategies can be adopted to prevent such problems in future. The service marketing literature discriminates among elements of the service concept. Some elements core attributes define the basic service being provided, while other elements, termed peripheral attributes specify the distinctive manner in which the service is delivered (Gronroos, 1990; Booms and Bitner, 1990). One of the leading reasons for customers loosing patience and showing dissatisfaction with the airlines is late departures or cancellations of flights. Customers just want to go from origin to destination on time but they are unable to trust the airlines with this issue. People are pointing fingers to different issues but no one is ready to accept the responsibility for flights late departure or arrival. It is because of number of reasons like bad weather; Aircrafts have to wait in sky to land at airports due to heavy traffic. Then maintenance problems of engines and fuselage, airport operations and ATC problems are some of the examples which make the flight difficult to depart or arrive on time. Even though all these arguments are valid and legitimate but still customers are not ready to relax. It has been found that airlines have no reason to improve the effectiveness and quality of their operations, since all airlines think and believe that they all are facing the same problems and no one is worst then anyone else. So when customers feel dissatisfied with a certain airline. They will travel on a different airline next time it will happen again and then again they will retry a new but how long they will keep on changing and ultimately they will feel all airlines are handling the customers in a same manner and eventually they will travel on same airline on which they traveled for first time. This is not necessarily true. TARP research indicates a passenger who files complain is thirty percent more loyal than a noncompliant and fifty percent more loyal than a dissatisfied complainant. Nowadays customers are not complaining much than they did a decade ago when half of the passengers will complain least once. Today, the rates of complaints even for big problems with serious consequences are not much and it is about 20%. Now hardly one percent customer’s complaints to the airline that too which are serious in nature. This is one of the major problems for airlines because when passengers will not file complaints then airlines will not know the problems which are faced by passengers during flight or even before or after flight. The fault here is not entirely on customers but on airlines more then customers but they are so hopeless that they think it is more of wastage of time. So airlines need to assure people that their complaints will be solved as soon as possible and it will not happen again. They need to inform the customers after it is resolved but how many airlines do that? Hardly a few, When customers will feel that airline wants to work on the problems and their problems will be solved only then they will start complaining and it is just not that problem they tell it is a whole new gateway to success because solving the complains means better satisfactions that will result in more revenue with good will. Airline Managers should not assume that if the customers are not reporting the problems or complaints it means they are not having any problems and customers are satisfied with the service. In fact it is the total opposite which is passengers are now so hopeless that they have assumed that even complaining wont help them either, so they don’t care to file a complaint. The expectations of the passengers have been decreased to such a point that they don’t expect the airlines will do anything to satisfy there customers. The airline staff that comes in direct contact with passengers on daily basis must understand and try to solve their problem as soon as they can. This is especially true for the channels in service industry and point where customers interact with employees working in customer relation department who are there to resolve customer complaints. In the situation which we are discussing, empathy has these things to be friendly, understand customer’s feelings,, Showing care to solve the problems and making sure to meet his needs, Make the customers feel that their concern is valid, and when in problem, solve the problem or at least try to find a solution. Handling the customers in airline industry is very much different and much personalized. It is not like dealing with lots of super market customers or like dealing them like they are dealing with loose cattle’s. How can an airline get its staff to show and have empathy? One way is to show staff videos of service experiences they can be real or staged in which empathy is there but is not expressed. A video is better instead of written description because a lot of times communication between staff and customer is nonverbal like body language, expressions, voice tone and even eye contact and consistency is part of quality. Consistency is vital for customers because consistency is an experience taken as reliability by the customer. So if there is a lack of reliability it will not only affect the customer’s trust in the company but will create bad image. This is an important issue to be addressed because trust is a essential condition for customer loyalty.   Passengers are not dissatisfied with all airlines. There are many airlines like Emirates, Cathay Pacific, Etihad and Qatar etc especially Emirates has constantly topped in customer satisfaction for consecutive four years according to Skytrax. Airline industry researchers find it very interesting that some airlines continue to satisfy the customers in most efficient manner and making huge profits in such industry where there rivals are not even having break even. In north America Southwest is one of the best airlines and in their ads they make it a joke that they are not giving you any special service but they’re doing what is precisely they are saying that is they get you on the destination on time without troubles. What they have done what so many other companies have failed to do. The secret of there recipe is they have met the most basic thing for a effective and quality airline operation that is consistently meeting expectations. This has enabled them to earn good profits with better customer’s satisfaction. The flights of reputed airlines arrived on time eighty percent of the time, they are able to set standards for even other airline and there operations are now used as benchmarks for other airlines. They are departing on time and getting to their destinations on time just because of effective management and quality tools. They have a proper and consistent process and they have documented their workloads properly. Their turnaround times are a lot better than other rivals in the industry because they use standardized operations. They know the more time plan will be parked at apron it is there loss the sooner the aircraft will be in air and is flying it is there profit so they land the plane, get new passengers and get the aircraft back in the air as soon as they can because that is only way airlines make money. Booming airlines are putting the aircrafts back in the air at much higher rate then other airlines because of the fact the more time the aircraft is parked at apron it is there loss and the more time it will be in air it will generate revenue for them thus making more profits. This makes customers at ease too as they don’t have to wait for hours to get to their destination. That means no long waits at airport thus no frustration for passengers. Reputed airlines set the expectations and then will meet the expectations. Airlines are thinking their problems are not much different from other airlines and everything is going smoothly even if not everyone is facing same situations. As they blame on weather and acts of God. Which everyone else is facing as well. Immense financial pressures, then with fuel prices going sky high and struggle in the low-fare market, is making the airlines believe that they are unable to afford to put all the resources together  to resolve their customer satisfaction problems. The most effective and cost efficient way to improve the complaint managing process is to prevent the problem by anticipating the problems instead of not acting on the complaint. It is better to take notice of the complaint than have the customer go away. The loyalty of customers who have experienced troubles is about 20% lesser than those of non-complainants customers. This 20% reduction includes both non-complainants and those who have filed the complaints. To prevent a problem the first thing one has to do is understand what is causing the troubles or problems for customers. In a recent it was found that most of the companies think if they have a customer who is dissatisfied for some reason, it is due to a worker who caused the dissatisfaction by doing wrong. The TARP’s study has found that most of the employees did a good job and hardly 20% of dissatisfaction was caused by staff’s bad attitude or by doing something wrong. Most of the problems which were between fourty to sixty percent are due to substandard processes, and the remaining are because of either customer mistake or confusion in either the kind of the product or service purchased. (Goodman 2006.) A satisfied customer can even get dissatisfied due to differences in current satisfaction level and previously measured one. Consider the following scenario. In 2008, a customer flies on a flight to Europe in Economy Class on an Airbus A380. She is happy to have her own personal TV screen, in which she can choose any channel, watch movies or listens to songs or even play video games. In 2009 she flies the same flight but in Boeing 777 to her dismay that her plane is not equipped with personal visual in-flight entertainment but it has movie projected on central screen. Even though the specific service of transportation did not change. This customer had increased her expectations about the service. Even though the airline provided the same transportation service in 2009 as in 2008, the customer was dissatisfied because her increased expectations were not met. While this customer may not file an actual complaint, the takeaway from this example is that customer dissatisfaction is a function of the gap between pre and post customer expectations about a product or service [Zeithaml, 1990]. So, the more perceptions fall short of expectations, the higher customer dissatisfaction will be. As customers can change their expectations over time, dissatisfaction can change even if the product or service remains the same. Therefore, customer dissatisfaction will be different from previous experience. Even if an organization delivers identical results over time, customer dissatisfaction may increase as customers increase their expectations. So it is imperative for airlines to manage the balance of customer pre and post expectations. Sasser (1978) originally coined the term â€Å"service concept† in reference to the bundle of elements packaged as a complete service for sale to the customer. In services marketing, research on customer satisfaction parallels Sasser’s concept, positing that satisfaction with elements of the service concept combine to create overall satisfaction with the service encounter (LaTour and Peat, 1979; Mitall et al. 1989; Oliver 1997). Managers may think that the company’s complaint handling is fine, but if customers disagree, then the company still has a problem. Attribution research on consumer behavior suggests that customers’ attribution plays a pivotal role in shaping their attitudes and responses (Folkes, 1988), and it may mediate the relationship between complaint handling and post-complaint behaviors, such as negative word-of-mouth, future patronage etc. (Au, Hui, Leung, 2001). Customer satisfaction is desired because of its role in the service value profit chain in producing a stream of revenues that is resilient to competition and obtained at lower long run cost (Heskett et al., 1997). There are many areas in the airlines itself where faulty processes are leading to customer complaints and displeasure. Some are infrastructure problems, then the heavy air traffic issues specially high season, but these reasons affect an airline just as they affect every other airline. So why some airlines are consistently better? It is because they have designed their own skills to handle problems and their own operating measures to operate within the resources that they have. With reasons which are not in their control, they must do something to improve their systems. The Airlines need to utilize their resources in most effective way so as to operate effectively and best possible manner. Then they must exert influence on the people who have got power to control the infrastructure. Flight delays and cancellation is one of the leading factors in dissatisfaction among the passengers. The airlines needs to continuously improve their processes and systems, as it is vital for any other industry too. What use to happen doesn’t mean it can happen now too because previously customers were not aware much and companies couldn’t charm them with their advertising? The days are long gone now the customers are very well aware of situations and they ask question when they get to know something so as to know it better. What was satisfying the customers that time will now make them highly dissatisfied because times have changed so as the customers. The performance of airlines will decrease over time until unless something is done to improve it or sustain it. To sustain the current standards of performance, it is highly important to perform high level of maintenance. Then to have a better and improved operations airline need a lot more then just maintenance to have an effective flight operation. Weather is one of the major factors which is beyond the control of an airline and is one of the leading cause of flight delays and even cancellations and it is just not causing great deal of dissatisfaction to customers it is also costing airlines huge sum of money as then they have to give them accommodation as well. Some customers don’t care about the weather and they just want to reach to the destination as soon as they can, which is not possible as it can be very dangerous to fly in such weather. Even a highly sophisticated aircraft can not fight with the forces of nature. If due to bad weather flights are delaying or canceling the airline must provide the actual cause of delay instead of saying delayed due to technical fault. The Bureau of Transportation Statistics (BTS) compiled figures on weather-caused delays, free of the other categories. Weather caused the flights to be delayed approximately 9.5% of the time during the 2006 for seven airlines. Then 13% of the flights were delayed for different reasons which were in control of airline like fueling, aircraft cleaning, loading, crew problems, maintenance and baggage handling Then if a flight will depart will late that means it will arrive late at next airport and then again depart late for next leg of journey as it is a chain which will effect the chain until it makes up for that time. It will be just not delay but the passengers who got to catch a connecting flight will also miss their flight because of late departure. There are many reasons of dissatisfaction among the customers and just not food and check in problems. It is just not the dissatisfaction of customers but the airline will have to bear additional costs as well. There are some delays which are not due to weather but not also in control of airlines like heavy traffic volume at airport, ATC, Holding pattern of aircrafts due to runway not available even Airport operations too. Last but definelt not least the security reasons cause hardly 1 percent of flight delays. It is because of extra security check at the airport that at the end hardly flight gets . Communicating with customers when a problem occurs is a better way to improve the satisfaction. In this high – tech fast moving world due information and technology, everyone is now used to get instant information and communication. Passengers want to be instantly informed about the current status of their flights as if they are delayed or canceled. Industry experts said, the airlines cant change the weather in there favour, but what they can do is give customers better information. Several airlines have improved their communication processes by cross training and moving employees who aren’t busy due to a flight cancellation (baggage handlers, porters, etc.) and putting them in areas where other employees are overwhelmed at the gate and ticket counters. Rather than having two gate agents handling 200 unhappy passengers, there are now 10-12 employees helping. Lines move faster, and people feel like they’re making progress. Airlines have so many cancelled flights and weather problems, so how does one can make your work force that much efficient so that you can decrease the customers’ concern level? They can easily do that with updated information, empathy, and assistance, even if you can’t get them from origin to destination any faster. Now the question is should expectations are seen as the level of desired service. Desired and adequate services are two more service level expectations conceptualized by researchers (Parasuraman, 1991, 1994; Zeithaml, 1993). Desired is what consumer wanted; it represents the level of service performance consumers believe an excellent service provider can and should deliver. Adequate service is what consumers accept and is partly influenced by consumers predicted level of service (i.e., will expectations). Separating these two types of expectations is a zone of tolerance, which can vary from consumer to consumer and from situation to situation (Parasuraman 1991). The zone of tolerance will be higher for the outcome than for the process dimensions of expectations since the single outcome dimension, namely reliability, is the most important. Thus, it will be easier for managers to exceed the process dimensions of expectations (i.e., responsiveness, assurance, tangibles, and empathy) than the outcome dimension (i.e., reliability). The adequate level of Service performance is similar to the minimum tolerable expectation defined by Miller (1977). Deserved expectations, another level of desired service derived from Adams (1963) theory of inequity, are a consumers subjective evaluations of her/his own investment. A consumer who, for example, has invested much in ticket feels that he/she deserves a high level of performance or a reward. The leading Airlines try to identify the specific flights where customers experience a high level of inconvenience or trouble. So when it happens, the airline will send them a letter to explain the cause and apologize for the inconvenience caused. They don’t want the customer to feel that they should not go back to the same airline again. Industry analysts have said that enhanced customer services will help settle the passengers, but only for the short term. They think no matter what airlines can do but people are going to be annoyed because of the fact that customers are not getting to the destination on time. Some airlines are reworking. If they can they do it better next time. Sure, but the purpose is not to do rework in the first place. You will get to know that it is not a value-added practice. You don’t want to have such process or people when they will end up in customers disatisfaction because it will be a rework that you shouldn’t have to do in the first place. Federal Aviation Administration the regulating authority for aviation in United States is testing the new technologies and latest satellites technologies so as to replace the aging and old Air Traffic Controller radars systems. So they can  overcome the problems and short comings of the current air traffic network and want to implement the Global positions system in the country for all the phases of flights. (Carr, J. 2001) Currently the airports are