Key factors influencing customer satisfaction of jetstar pacific airline in case of delayed of canceled flights

BUSINESS RESEARCH METHODS 2015 Page 2 advancements of technologies, international regulations…to manage and enhance customer services, it has to change management philosophy in terms of

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KEY FACTORS INFLUENCING CUSTOMER

JETSTAR PACIFIC AIRLINE

IN CASE OF DELAYED OR CANCELED

KEY FACTORS INFLUENCING CUSTOMER

CANCELED

DR PHAN DINH NGUYEN

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Advisor’s assessment

Advisor’s signature

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Table of Contents

INTRODUCTION 1

1 Background 1

2 Purpose of research 3

3 Scope of research 3

4 Research Statement 3

5 Question of research 3

6 Data collection 4

7 Research Structure 4

CHAPTER I: LITERATURE REVIEW 6

1.1 Overview of passengers’ service in case of delay or cancellation 6

1.2 Overview of quality of air service in case of delays or cancellations 8

1.3 Research Model and Research Methodology 18

CHAPTER II: ANALYZING SERVICE QUALITY OF AIR SERVICE IN CASE OF DELAYS OR CANCELLATIONS OF FLIGHTS OF JETSTAR PACIFIC AIRLINE……… 23

2.1 Introduction of Jetstar Pacific Airline (JPA) 23

2.1.1 History and Development 23

2.1.2 Business Performance 24

2.1.3 Organization 25

2.1.4 Resources 25

2.1.5 Business Activities from 2011-2015 26

2.2 Review on delayed and cancelled flights of JPA 26

2.2.1 Review on recent delays and cancellations 26

2.2.2 Review on service quality of air service in case of delays and cancellations 27

2.2.3 Evaluation of service quality of air service in case of delays or cancellations 29

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2.3 Evaluating air service quality in case of delays and cancellations by using questionnaires 32

2.3.1 Sample 32

2.3.2 Initial analysis 32

2.3.4 Summary of research outcome 39

2.3.5 Conclusion of research 39

CHAPTER III: SOLUTIONS TO CUSTOMER SATISFACTION IN CASE OF DELAYED OR CANCELLED FLIGHTS OFJETSTAR PACIFIC AIRLINE………43

3.1 Some solutions aims to enhance customer satisfaction in case of delayed or cancelled flights of Jetstar Pacific Airline .43

3.2 Recommendations 47

CONCLUSION 48

REFERRENCES 49

APPENDIX 50

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BUSINESS RESEARCH METHODS 2015

Page 1

INTRODUCTION

1 Background Globalization brings both opportunities and challenges to developing countries especially for Vietnam Vietnam is promoting its economics effectively in all sectors, it is now focusing much on air transport sector and gaining some positive results Vietnam aviation market is entering an extensive competition in the context of establishment of new airlines as well as the penetration of foreign rivals It is predicted that Vietnam would become the world’s fastest growing airlines market

Together with the development of the nation, Vietnam aviation sector also accomplish some encouraging results, its innovation process is underway continuously, upgrade equipments with an aim to enhance customer services and launch new air routes, greatly contribute to state budget In 2013, Vietnam aviation market reaped impressive success (up 16.7% in terms of passengers and 19.6% in terms of cargo against 2012) Simultaneously, cooperation with other countries has contributed to the success of Vietnam aviation sector in general and Jetstar Pacific Airline in particular

Moreover, open policy has created favorable conditions for Vietnamese business to freely develop, but it also made huge challenges for domestic airlines with fiercer competition, higher demand of passengers and strictly follow to international regulations and terms

Under this situation, to perform all above commitments, Vietnamese airlines are forced to invest more in human resources, facilities, applications of

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advancements of technologies, international regulations…to manage and enhance customer services, it has to change management philosophy in terms

of air service to serve passengers, bringing high quality services to passengers

in the coming time

However, the growing need of air transport would require the improvement of service quality, and the top priority is customer satisfaction Meanwhile, the problems on cancelled and delayed flights always attract much attention from passengers and airline companies, is has a direct impact on prestige, competitive capability of airlines Therefore, it is important for the air services providers to take drastic measures to control, avoid or reduce the rate

of cancelled and delayed flights in order to prevent loss, satisfy customers and retain customer loyalty

As per Jetstar Pacific Airline- one of the best budget airline in Vietnam- it has developed strongly and attract much attention and sentiment from passengers The issue on cancelled and delayed flights has been controlled and gotten some positive outcomes

Consequently, to find out more about this research, I would like to

conduct a research on “Key factors influencing customer satisfaction of

Jetstar Pacific Airline in case of delayed or cancelled flights”

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2 Purpose of research

To build and evaluate factors affecting to customers satisfaction when cancelled or delayed flights occur, figure out the connection between service quality and customers satisfaction via criteria to find out strengths as well as weaknesses of customer services Propose some solutions in order to enhance customer service in case of cancelled or delayed flights From that, JPA could regulate its strategy to be in accordance with set target

3 Scope of research The research is conducted at Operation Center of JPA at Tan Son Nhat International Airport with some service elements which affects passengers’ satisfaction when delayed or cancelled flights take place

4 Research Statement JPA is becoming Vietnam’s leading budget airline To retain the first position, JPA should focus on improving customer satisfaction and services In the coming time, JPA targets these following objectives:

- Serve the best quality service for passengers in term of pre-flight and on-board services

- Promptly deal with complaints from air travelers

- Reduce the cancelled and delayed flight rate

5 Question of research

To become successful, JPA need to answer these following questions:

i) How to increase the service quality to compete with other rivals? ii) How to handle with customers feedbacks?

iii) What to be done with the rate of cancelled and delayed flights?

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i) Contacting to employees at Tan Son Nhat airport to get JPA customer’s information such as their email address and Facebook ii) Contacting the head office of JPA to deliver questionnaires to customers

iii) Entering forums where Vietnamese share their experience after their flights Visiting Facebook of Vietnamese and posting online questionnaires

iv) Utilizing relationship ‘’person to person’’ to send questionnaires to gain as many respondents as possible

b) Secondary Data:

The secondary data was selected from various literary sources in the field of marketing and internet resources such as articles, newspapers, online stories

7 Research Structure

This research is divided into 3 chapters:

Chapter I : Literature Review

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CHAPTER I: LITERATURE REVIEW

1.1 Overview of passengers’ service in case of delay or cancellation

1.1.1 Service and air service

b) Air service

 Definition of air service

Air service comprises all activities with an aim to satisfy the need of passengers during air transport service utilization process of an airline

 Components of air services

Air service is divided into 2 types: Ground services and On-Board Services However, this research only focuses on Ground Service Ground service includes:

 Check-in service: includes welcoming passengers at airports, performing check-in procedures for passengers and luggage service

 Airport service: is defined from the time passengers complete check-in procedures and wait for boarding Airport service includes: assisting passengers at border gate police, customs service, security, inform passengers the boarding time, giving assistance and hotel accommodations in case of delay or cancellation Moreover, it also comprises supply of waiting seats, free meals, shopping, telephone and free internet access

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 Boarding service: is determined from the time passengers informed to board to the time stay in their seats Boarding service mainly focuses on using buses to board passengers and other services for pregnant, disabled and elderly

1.1.2 Air service in case of delay or cancellation

a) Definition of delay and cancellation

 Definition

 Delayed flights: are flights which depart behind the planned schedule or already departed but have to fly back to departure airport

 Cancelled flights: are flights which scheduled but not performed

 Reasons of delay and cancellation

 Air traffic control supply: includes the effective co-operation among airport information, airport devices, objective errors of air traffic controllers, collision of animals into aircrafts (e.g birds) which is not forecasted will lead

to threat of flights and accordingly the flights have to be cancelled to ensure safety

 Weather: extremely bad weather conditions like hurricanes, storms etc

 Operational conditions: instability of on-board devices or technical errors happened at last minute, changes of aircraft status, re-regulation of cargo loading, lack of aircrafts, which will lead to unpredictable delay or cancellation

 Elements affecting the capacity of airports that lead to cancellation or delay: mainly due to overloading infrastructure and lack of apron

 Errors from air service: procedure process exceeds limit time which pushes aviation staffs must perform loading balance, Stagnation of in-flight services or long lasting pre-flight process, process of dealing with passengers’

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 Compulsory landing: the landing is out of prediction of the pilot due to engine error, system

b) Components of air service in case of delay or cancellation

 Inform passengers: If there are cases of delays or cancellations, the airline has responsibility to inform passengers timely in any forms such as: SMS, emails, sound system, flight information distribution system (FIDS)

 Change air routes and ticket refunds: the airline will change air routes and ticket refunds with an aim to facilitate passengers fly to their destinations quickly and conveniently

 Providing necessary service: includes meal services, hotels, transport passengers from airports and hotels, telephone services

1.2 Overview of quality of air service in case of delays or cancellations

1.2.1 Service quality and Model of service quality

a) Quality and service quality

 Quality

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 Service Quality

 Definition:

According to TCVN ISO 9000:2000: “Service Quality is the combination of given characteristics of service to satisfy the expect of customers and relevant parties”

 Components of service quality:

According to Prasuraman & partners (1985) believe that any service, the service quality which is determined by customers has 10 components:

reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customers, tangibles After prolong

research and recheck, scientists have concluded that service quality consist of 5 main components They are:

- Reliability: determined by the ability to perform appropriate service and

do right the first time

- Responsiveness: determined by the expect and willingness of staffs which provide timely service for customers

- Competence: determined by qualifications and attitude of staffs

- Empathy: determined by care to each customer

- Tangibles: determined by outlook, customs of staffs and other devices that serves customers

b) Service Quality Model

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 SERVQUAL service quality model

In 1985, Parasuraman and partners proposed a model called “5 gaps” together with SERVQUAL measurements which were supported by many researchers

Figure 1: SERVQUAL service model and 5 gaps of service quality This model measures service quality based on gaps between expectation and feel of customers for service They are:

- Gap 1: Gaps between expectation of customers and perceptions of organization

- Gap 2: the organization transmit either wrongly or impossible to transmit the expectation of customers and unable to convert it into quality standard

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 SERVPERF model

Model for measuring customer satisfaction of service quality SERVPERF created by Cronin and Taylor in 1992 The same as SERVQUAL, SERVPERF still uses 5 criteria and 22 components to measure service quality However, this measurement only requires customers to measure their satisfaction towards services after usage

1.2.2 Service quality of air service in case of delays or cancellations

a) Definition, characteristics

 Definition

Service quality of air service in case of delays or cancellation is the satisfactions of passengers towards air services in case of delays or cancellations

 Characteristics

Service quality of air service in case of delays or cancellations consist all characteristics of service quality of air service They are:

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- Service quality of air service is difficult to measure and evaluate, it is just evaluated through the feeling of passengers-the direct persons using service However, the feeling and satisfaction is determined by many objective factors,

it is unstable, unmeasurable, and changeable

- Service quality of air service is exactly evaluated by the satisfaction of passengers:

+ Service quality depends on satisfaction of direct customers

+ Customers who directly participate in service process are indispensable part They will evaluate correctly and objectively because they pay for the service

- Service quality of air service depends on service supply: passengers will evaluate service through convenience, facility… Hence, they will have evaluation towards air service though human factors

- Service quality depends on each type of passengers: To each different type of passengers like VIP, children, pregnant…the airlines will offer different service policy Accordingly, service quality is not the same as well

b) Components of service quality of air service

Service quality of air service consists of 5 main components as the same as service quality in general Specifically, in case of delays or cancellations, service quality of air service has some following components:

 Tangibles

- Infrastructure: convenience of area for passengers (information counters, seats in waiting hall) and restaurants, hotels, information board for service policy

- Airport devices: telephone customer service, flight information distribution system, sound system and other supporting devices

- Outlook, customs of staffs: mainly the staffs at airports

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 Credibility: is the ability of providing services exactly to passengers about flight status (delay time, new departure time, reasons of cancel), offer free meals, suitable compensation…and ability to provide timely service for passengers

 Responsiveness: is the effectiveness of procedures and dealing with problems, willingness to help passengers

 Competence: determined by the qualification, knowledge of policy, handling procedures of delays or cancellations, attitudes of staffs when communicating with passengers

 Sympathy: staffs must listen, understand and sympathize with the needs

of passengers From that, staffs must actively propose the best solutions to help passengers

After analyzing 5 components affecting service quality of air service in case of delays or cancellations based on SERVPERF model I have evaluated and proposed 4 main components that affect service quality of air service in case of delays or cancellations They consist:

 Facility: is the convenience of area for passengers and other devices that support or deliver service to customers

 Policy: is the diversity, transparency and suitability of policy applied by the airline to deal with delays or cancellations

 Competence: is the qualification and attitude of staffs This clearly describes when staffs directly communicate with passengers, deliver services and collect all necessary information to serve passengers

 Attitude: is the responsibility, calm, courtesy, willingness to help

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1.2.3 Relation between service quality and customers’ satisfaction

a) Relation between service quality and customers’ satisfaction

Service quality and satisfaction are something different but they are quite correlative in terms of service research (Parasuraman & partners, 1998) Reason is quality is relative to service, satisfaction is just measured only when

we used the service If the quality is improved but it does not base on the demand of customers, then customers will never satisfy the service Therefore, when using service, if customers satisfy high quality service, then they will satisfy the service as well Whereas, customers do not satisfy the service, then the dissatisfaction will appear

b) Relation between components of service quality of air service and satisfaction of passengers in case of delays or cancellations

As for aviation service, it is said that the satisfaction of passengers is extremely important to image, prestige and success of an airline In order to enhance the satisfaction, the airlines first improve their service quality Diversity, modernity and suitability of components directly affect satisfaction of passengers In case of delays or cancellations, passengers will be dissatisfied with this late, waiting so long will systematically affect their work, air service must be best and suitable Consequently, all components of service quality are equally important, especially those are human related components (e.g aviation staffs) Specifically:

 Facility

Facility is an indispensable part of a product, it plays an essential role in boosting labor productivity and enhancing service quality for customers (Mudrk, et al, 2004) Development of facility management increase perception

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- Convenience of area for passengers: when there are information relating

to delays, cancellations of flights, aviation staffs have responsibility to inform, explain reasons, as well as propose solutions to deal with passengers’ complaints at information desk However, the average number of passengers each flight ranges from 80 to 150 people, with such huge amount of passengers, the airline should place the information counter in a wide area to serve many people at a time to avoid congestion Moreover, there must be enough seats for passengers to wait for their boarding time

- Devices, machines supporting service delivery: the first thing an airline needs to do in case of delays or cancellations is to inform passengers through sound system, update flight information on directory board, send SMS or through customer service switchboard This is very important because it helps passengers manage their time, time for pre-flight procedures, eliminate the waiting time as well as potential risk According to Katz et al, 1991, he believed that “when waiting time increases, satisfaction decrease accordingly” Besides that, increasing the awareness of passengers on airline policy makes them easily to adapt to new changes

 Policy

Of components affecting service quality, policy clearly tells about goodwill of business and has a direct impact on satisfaction as well as purchasing habit manipulation of customers in the future (Dabholkar et al, 1996) The more

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policy proposed to handle customers’ complaints, the more goodwill the company has Today, airline works out basic policy such as flight information, offer free meals, no charge for overweigh luggage, change air routes or ticket refunds…However, it is not enough, the determinants of service quality or satisfaction of customers are the suitability or feasibility of policy Good policy does not guarantee good service For example, the airline compensates passengers with huge discounts voucher but limited conditions ( it could be the duration or places applied for the voucher); or policy offering free meals for passengers when they have to wait so long, but the point is about the hygiene

of food or whether it is tasty or not Hence, only when passengers feel good about policy, then they feel good about service

 Competence

Ability to understand, distinguish and adopt to new traits in a multicultural environment helps aviation staffs build up their communication skills effectively and flexibly deal with multiple situations from passengers, especially in aviation environment (Intercultural environment by Fredman and Antal, 2005) Competence of staffs contributes greatly to interpersonal communication, job satisfaction and customer satisfaction (Sizoo et al, 2005; Loyd and Luk, 2011) Existing the positive relation between competence of staffs and satisfaction of customers (Yu et al, 2001) Staffs of intercultural competence always gain respect from customers and timely response, ability to deal with special situations, they can use their own knowledge to predict other situations (Loyd & Luk, 2011) Well-trained staffs handle problems quickly and professionally, language competency, intercultural understanding creates mutual sympathy with customers Understanding the need of customers will help staffs flexibly respond to customers Ability to explain clearly and

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persuasively, passengers will have objective look about problems of airline, then eliminate difficulty for aviation staffs Passengers will satisfy both staffs and services because service is highly appreciated only when customers and staffs have connections and consensus in transferring service (Solomon et al, 1985)

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1.3 Research Model and Research Methodology

1.3.1 Research Model and Research Hypothesis:

Y= β0 + β1*Competence + β2*Facility + β3*Attitude + β4*Policy.

We have: βi: regression coefficient, i=0,1,2,3,4

b) Research Hypothesis

Policy

BUSINESS RESEARCH METHODS

Research Model and Research Methodology

Research Model and Research Hypothesis:

a) Research Model: after researching service quality measurement Servperf

and service perspective makes satisfaction I suggest research model as

Figure 2: Model for customers’ satisfaction of air service in case of delays or

cancellations of flights

Hypothesis Model:

Y= β0 + β1*Competence + β2*Facility + β3*Attitude + β4*Policy.

regression coefficient, i=0,1,2,3,4

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after researching service quality measurement Servperf and service perspective makes satisfaction I suggest research model as

customers’ satisfaction of air service in case of delays or

Y= β0 + β1*Competence + β2*Facility + β3*Attitude + β4*Policy

Attitude

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H1: Competency which is high, Customers’ satisfaction is high accordingly.H2: Facility which is high, Customers’ satisfaction is high accordingly.

H3: Attitude which is high, Customers’ satisfaction is high accordingly

H4: Policy which is high, Customers’ s

TOC Tan Son Nhat to collect information that passengers care

4 components from research model, set up contemporary measurement Afterwards, I hand over questionnaires and find out the responses from passengers to complete final measurement

Purpose of Research

Quantitative Research

Reliability Testing and model R2 value

BUSINESS RESEARCH METHODS

Competency which is high, Customers’ satisfaction is high accordingly.Facility which is high, Customers’ satisfaction is high accordingly

Attitude which is high, Customers’ satisfaction is high accordingly

Policy which is high, Customers’ satisfaction is high accordingly

Purpose of Research

Research Model

Quanlitative Research

Comtemporary Measurement

Official Measurement

Quantitative Research

Attitude which is high, Customers’ satisfaction is high accordingly

atisfaction is high accordingly

conducting direct interview 5 respondents from JPA at TOC Tan Son Nhat to collect information that passengers care the most within

4 components from research model, set up contemporary measurement Afterwards, I hand over questionnaires and find out the responses from

Quanlitative Research

Comtemporary Measurement

Research model testing

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COM1 Language competency

COM2 Know well about the policy and provide

service right the first time

COM3 Promptly respond to passengers’

FAC2 Good sound system

FAC3 Directory of compensation policy placed in

an easy to see place

ATT1 Calm and explain clearly

ATT2 Give support to elderly, disabled, children

and pregnants ATT3 Explain in detailed about pre-fight

procedures

ATT4 Responsible, flexile and nice staffs

ATT5 Respect passengers

Policy

POL1 Transparent policy

POL2 Offer quality meals and drinks

POL3 Easily change air routes and simple ticket

refunds

POL4 Terms and conditions of vouchers eligible

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for most passengers

 Measurement of customers’ satisfaction

Table 2: Measurement of customers’ satisfaction

3 observant variable of satisfaction (li-kert measurement) from 1 (very bad) to

To reach the target, 300 questionnaires have been used After collecting and testing, there are 200 complete and eligible questionnaires to be used

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Therefore, sample scale should be N=200 Data will be processed by SPSS software Data analysis process includes:

 Code observant variable: as shown in Table 1 and 2

 Evaluating Cronbach’s Alpha

If Cronbach’s Alpha ≥ 0.60: it is acceptable in terms of credibility (Nunally & Bernstein 1994) Variables with correlated coefficient are smaller than 0.3 will

be eliminated Generally, Cronbach’s Alpha ranges from 0.7 to 0.8 would be optimal

 Analyzing EFA

KMO which must range from 0.5 to 1 is eligible for analysis Whereas, KMO

< 0.5, EFA is ineligible to data

 Regression Analysis

The multiple regression was used to test hypothesis, to explore the relationship between four independent variables and 1 dependent variable and to consider whether control variables supported or not to dependent variable The generalized equation (Donald & Pamela, 2006) was:

Y = o+ 1X1 + 2X2 + 3X3 + … + nXn +

Where:

 0= constant, the value of Y when all X values are zero

 1= the slope of the regression surface (the represents the regression coefficient associated with each Xi)

 = an error term, normally distributed about a mean of 0

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CHAPTER II

ANALYZING SERVICE QUALITY OF AIR SERVICE IN CASE OF DELAYS OR

CANCELLATIONS OF FLIGHTS OF

2.1 Introduction of Jetstar Pacific Airline (JPA)

2.1.1 History and Development

Jetstar Pacific Airline was established in June 15, 1991 under the decision of Decree No 116/CT date April 13, 1991 and Decree No 188/CT date June 15,

1991 by the Government, and other Decree No 2355 QĐ/TCCB-LĐ date December 12, 1990 and Decree No 2016 QĐ/TCCB-LĐ date September 20,

1992 by Minister of Transport and Post At the beginning, JPA operated with chartered capital of 40 billion VNĐ with shareholders coming from 7 State Owned Enterprises Of which Civil Aviation Administration of Vietnam (CAAV) and its 4 member companies contributed most capital which take up 86.49% shares JPA became of Vietnam Airlines (1995) and a member of Vietnam Airlines Corporation (1996) In 2005, 86.49% of shares were transferred to Ministry of Finance for management and restructure JPA then was taken over by a new owner- State Capital Investment Corporation (SCIC)

in 2006 In 2008, JPA changed its brand identity and remained it until now In February 2012, VNA bought 66.93% shares of JPA and controls JPA which helps JPA to optimize Vietnam aviation market

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2.1.2 Business Performance

JPA is the first ever budget airline in Vietnam It is striving to provide best quality air service as committed which is in line with its mission and vision a) Vision: JPA will become Vietnam’s leading low cost airline

b) Mission: JPA aims to bring Vietnamese people travel all around the world through its fly network Also, it will open up an opportunity for everyone to travel by air

c) Network: Today, JPA operates more than 20 flights per day from Tan Son Nhat International Airport through its fly network

Domestic air routes:

+ Tp Hồ Chí Minh- Hà Nội/ Hải Phòng/ Vinh/ Đà Nẵng/ Buôn Mê Thuột/ Phú Quốc/ Nha Trang and vice versa

+ Buôn Mê Thuột- Vinh and vice versa

+ Hà Nội- Đà Nẵng and vice versa

+ Hà Nội- Nha Trang (seasonal operation)

International air routes:

+ HCMC- Bangkok (interline with Bangkok Airways)

+ HCMC-Singapore, Australia (interline network)

+ Hà Nội/ Đà Nẵng- Macau (China)

d) Distribution channel

Currently, JPA is Vietnam’s only airline using E-tickets, providing payment via credit cards on its website as well as booking system via telephone 24/24 for passengers through phone number 39.550.550 in HCMC and HN Together with more than 200 ticket offices all over Vietnam, in order to supply booking and ticket sale services

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2.1.3 Organization

Organization of JPA: Appendix 2

Management Board of JPA is organized by functional online organization The relation among departments is functional organization Meanwhile, relation among levels is online organization This is popular model which is widely used by most of the companies The advantage of this organization is to create strong connection between management board and departments From that, they can support each other to reduce mistakes and misunderstandings in making decisions

2.1.4 Resources

a) Facilities, technical equipments: like other airlines, JPA utilizes some of mutual facilities at airport such as: terminals, boarding gates, flight management system, taxi ways, runways… Besides that, JPA also signs a contract with Saigon Air Ground Services (SAGS) to enable to use many devices such as: special equipments for disabled people, loading and unloading vehicles, air conditioning stations, bumping vehicles

b) Fleet: As to January 1, 2014, JPA has been operating 6 Airbus A320 aircrafts and expected to increase this number to 10 at the end of 2014 to expand its flying network

c) Human resources: Up to now, JPA has employed 21 technicians, 36 engineers and 13 Vietnamese pilots working with foreign experts At Ground Service Center of JPA at TSN airport, team for handling luggage has 58 staffs

Of which 25% are university holders, the others graduated from College and Vocational school specializing in aviation Staffs of JPA are young, dynamic, highly- qualified and can work under pressure

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2.1.5 Business Activities from 2011-2015

In the beginning years of establishment, as it was a young company, doing business in new model and affected by state economy, JPA’s business results were continuously loss However, JPA decreased its loss by half in 2012 compared to 2011 (the year before being transferred to VNA, JPA’s loss was

up to 436 billion VNĐ) Specifically, the airline had the highest ever seat occupancy rate, up to 91% and carried nearly 1.9 million passengers, revenue increased 50% In 2013, JPA continued to improve and revise its operation policy, total passengers hiked 13%, seat occupancy rate remained high, stood

at 90%, which led to bring the revenue up 3.7%, down 9.3% cost and loss down to 113 billion VNĐ compared to 2012 Entering 2014, JPA had clear development orientation and strove to reach its target Also, the airline has determined to reach long term goals to 2030 (Appendix3)

2.2 Review on delayed and cancelled flights of JPA

2.2.1 Review on recent delays and cancellations

a) Statistics of Operation Activities

Detail statistics of operation activities of JPA in the beginning of 2014 as follows:

Table 3: Detail statistics of operation activities of JPA in the beginning of 2014 Week 27/01-

02/02/14

03/02- 09/02/14

10/02- 16/02/14

17/02- 23/02/14

24/02- 02/03/14

03/03- 09/03/14 Total

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delays 63 82 86 84 70 62

Rate of

delays 21% 27% 28% 28% 23% 21%

(Source: Jetstar Pacific Airline)

At the beginning of 2014, JPA ensured the operation as scheduled, the number

of on-time flights averaged at 75.3%, this was peak season (lunar new year), the demand of travelling by air was so high Accordingly, the rate of delayed and cancelled was rather high (about 24.6%) Yet, this rate was stable and did not fluctuate and remained the same compared to the year before This shows

us favorable year for JPA

b) Reasons of delays and cancellations:

The reasons are often abundant and unpredictable due to multiple situations Now we will consider the reasons of delays and cancellations of JPA at Tan Son Nhat airport from March 3rd to September 3rd, 2014 the number of late arrivals was 27 times, technical error: 1; lack of equipments at apron, congestion at runways, busy security gate: 16 times; lack of or breakdown of ground equipments: 1 time; boarding error: 1 time

2.2.2 Review on service quality of air service in case of delays and cancellations

a) Air service procedures in case of delays and cancellations

At present, JPA is applying air service procedures in case of delays and cancellations following the below model However, JPA applies different policies depend on each level of delays and cancellations (Prefix 4)

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 Change air routes or refund tickets for passengers

As regulated, the airline will re

the seats in next flights are still available The airline also supports to change the departure date for passengers, and JPA also has the interline contract with VNA It means JPA’s passengers will be transferred to VNA’s flights

available

As for ticket refund policy, JPA is applying compensation policy at 25% ticket price for flights delayed over 12 hours and 100% ticket price if passengers do not want to fly with those delayed or cancelled flights

 Providing air

Meal voucher (at airport): JPA is co

Son Nhat Airport to accept payment via vouchers

VND) for passengers whose flights are delayed or cancelled

1 • Inform passengers

2 • Change air routes or refund tickets for passengers.

3 • Provide air service.

as SMS, sound system…

Change air routes or refund tickets for passengers

As regulated, the airline will re-book seats in the next flights for passengers if the seats in next flights are still available The airline also supports to change the departure date for passengers, and JPA also has the interline contract with VNA It means JPA’s passengers will be transferred to VNA’s flights

As for ticket refund policy, JPA is applying compensation policy at 25% ticket price for flights delayed over 12 hours and 100% ticket price if passengers do not want to fly with those delayed or cancelled flights

Providing air service for passengers Meal voucher (at airport): JPA is co-operating with Hoa Mai restaurant at Tan Son Nhat Airport to accept payment via vouchers for meals and drinks (60.000 VND) for passengers whose flights are delayed or cancelled

Inform passengers

Provide air service

Compensate passengers

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Air service procedures in case of delays and cancellations

passengers is the first basic step that all airlines apply because it is

information quickly There are many forms of information for passengers depend on each level of delays or cancellation such

flights for passengers if the seats in next flights are still available The airline also supports to change the departure date for passengers, and JPA also has the interline contract with VNA It means JPA’s passengers will be transferred to VNA’s flights if seats

As for ticket refund policy, JPA is applying compensation policy at 25% ticket price for flights delayed over 12 hours and 100% ticket price if passengers do

operating with Hoa Mai restaurant at Tan

for meals and drinks (60.000 VND) for passengers whose flights are delayed or cancelled

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 Hotels

As for flights with delay or cancel time over 6 hours and over night, JPA will arrange hotel accommodation and meals for passengers including transport cost In case of no hotels available, JPA will offer accommodation service at airport If passengers can handle this problem by themselves, JPA will refund them the compensation amount of money In case of delays or cancellations due to bad weather conditions, JPA only applies compensation policy for passengers who have 2 round tickets

 Transport

JPA provide transport service between hotels and airports free of charge, or JPA will offer other road transport if required

 Meals and Telephone service

JPA offers vouchers for breakfirst and dinner valued at 100.000 VND and 200.000 VND respectively JPA also offer free of charge telephone service

 Compensate passengers

Currently, compensation policy of JPA in Vietnam market only applies for 1 round flights whose delayed time exceed 3 hours and interline flights whose delayed time exceed 6 hours Compensation policy has 2 forms: Vouchers or Cash as stipulated by the Government

2.2.3 Evaluation of service quality of air service in case of delays or cancellations

After much observation and analysis, we could evaluate service quality of air service of JPA in case of delays and cancellations with some pros and cons: a) Pros:

 For the airline:

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 Airline signs interline contracts with other airlines to transfer passengers

in case of delays or cancellations

 Regulations on delayed and cancelled flights are still vague and unclear

 Lack of consensus among functional departments in terms of information for passengers

 Lack of facilities and poor quality air service

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 Some of staffs are incapable of dealing with this problem

 Compensation policy does not meet the needs and expectation of passengers

 For passengers

 Number of passengers yet to care about their flights, incorporate, arrogant, impolite in communicating with staffs Besides that, they also require unreasonable asks which does not match the regulations

c) Compare with Vietjet Air in terms of service quality of air service in case

of delays and cancellations

 In terms of policy

In Vietnam, it is possible to say that Vietjet Air is fierce competitor of JPA To have an insight of this competitor, I suggest some comparisons in terms of policy of air service in case of delays or cancellations between JPA and Vietjet Air This is clearly defined in Prefix 3

Air service policy of JPA and Vietjet share some similarities However, JPA has some unique features such as:

- For compensation with vouchers or cash: Besides it is applied for flights whose delayed time exceeds over 6 hours like Vietjet, JPA also accept compensation for passengers who experience delayed time from 3 to 6 hours This shows us the compensation policy of JPA is quite flexible

- JPA also provides 2 additional services that Vietjet does not have, it is free of charge policy for overweighed luggage and free of charge transport policy It is obviously that JPA’s policy is more diverse

- Moreover, Vietjet has not yet signed interline contract with other airlines, which makes passengers wait very long at airport if delayed or cancelled flights take place Obviously, Vietjet does not take an upper hand on this problem, so JPA has more advantages

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 In terms of air service quality

After observations and analysis, air service quality policy of both JPA and Vietjet is quite similar Yet, Vietjet’s policy has some limitations which leads

to worse air service quality

To identify opportunities and threats of JPA, I propose SWOT matrix for analyzing air service in case of delays or cancellations, which is easier to make solutions to improve air service of JPA (Appendix 6)

2.3 Evaluating air service quality in case of delays and cancellations by using questionnaires

2.3.1 Sample

Survey results of passengers’ information as follows:

a) Gender: rate of male and female who using air as their means of transportation is the same, not much fluctuation Rate of male accounts for 52.2% and female takes up 47.5%

b) Age: Age of passengers mainly ranges from 21-40 yrs old (56%), next is age from 41-60 yrs old (22%), this group contributes the most in this survey The rest are 8.5% and 13.5% for age below 20 yrs old and over 60 yrs old respectively

2.3.2 Initial analysis

a) Cronbach’s Alpha credibility coefficient

Test of Cronbach Alpha is described in Appendix 6

 Cronbach Alpha’s test for independent factors

All components of independent factors with Cronbach Alpha coefficient >.60, which means this test is acceptable in terms of credibility Specifically, Cronbach Alpha’s test for the component Facility is 845, of Competency is

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.837, of Attitude is 813, of Policy is 777 Besides that, all variables are

acceptable because adjusted corrected item-total correlation larger than 5

 Cronbach Alpha’s test for dependent factor

Cronbach Alpha’s test for dependent factor =.804>.60, which is a high level of credibility All corrected item-total correlation higher than limitation (.30) Therefore, all variables are retained for exploratory factor analysis (EFA)

b) Exploratory Factor Analysis (EFA)

We use Principal Component Analysis (PCA) and Varimax method

 EFA for customer service in case of cancellations or delays

KMO and Bartlett’s test showed us that KMO coefficient is quite high 0.891(>0.5) with significance = 0.000, which means EFA is eligible

The first EFA showed that there were 4 components extracted at Eigenvalue stood at 1.162 and total variance explained is 62.491% However, variables FAC5, FAC6, COM6 which have ineligible loading factors smaller than 0.5, so

we eliminate these variables

Carrying out the second-time EFA, we have:

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(Source: processed by me)

After eliminating 3 variables FAC5, FAC6, COM6, EFA shows that there are 4 components extracted at eigenvalue equals to 1.155 and total variance explained is 63.846% We can say that variables COM5, ATT4, ATT5 belong to 2 different components However, these variables will be arranged to the group with higher loading factor, which means variable COM5 will be moved to component Competency, variable ATT4, ATT5 will be

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arranged to Attitude component Hence, latter customer service level comprises of 4 components and 18 observed

 EFA for dependent factor

KMO and Bartlett’s coefficient 0.073

(>0.5) with significance (sig=0.000), which

shows that EFA is good

EFA for dependent factor Satisfaction has

eigenvalue at 2.160, total variance

explained 71.984% Therefore, all variables

are good for analysis

Table 5: EFA for dependent factor

explained 71.984 Cronbach’s Alpha 981

(Source: processed by me)

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Regression Analysis

a) Correlation Analysis

Correlation Coefficient Matrix: Appendix 8

This matrix explains correlative relationship between dependent variable and

independent variables as well as the relationship among independent variables,

Pearson coefficient of variables higher than 0.1, which means independent

variables can explain the dependent ones

b) Regression Analysis

To evaluate the affect of customer service components to customer

satisfaction, I use linear regression method among 4 factors collected from

above EFA including (1) Competency COM, (2) Facility FAC, (3) Attitude

ATT, (4) Policy POL, with dependent factor Satisfaction SAS

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