Commercial aviation industry was already struggling at the turn of the 21st century when it was devastated by the terrorist attacks of September 11, 2001. In response, the U.S. government has implemented a number of security initiatives designed to make air travel safer, but these programs have all been at the expense of the convenience of the air traveling public. Furthermore, the impact of deregulation on airlines has resulted in less rather than more competition, causing some carriers to focus less on customer satisfaction than on their profitability. As a result, many air travelers today are increasingly voicing concerns that while the nation absolutely needs an airline industry, their wants and needs are not be taken into account. Clearly, the invisible hand will ultimately come into play as these issues come to the forefront of the debate over how much security is enough, and what airlines must do to remain competitive in the future. Therefore, the purpose of this study is to identify cost-effective initiatives that can be used by the commercial aviation industry to help promote customer satisfaction among the air traveling public. A critical review of the peer-reviewed and scholarly literature is used for this purpose, with a discussion, results and a summary of the research and salient recommendations provided as well.

Abstract

Chapter I: Introduction

Chapter II: Review of Relevant Literature and Research

Chapter III: Methodology

Chapter IV: Results

Chapter V: Discussion

Chapter VI: Conclusion

Chapter VII: Recommendations

Identifying Cost-Effective Customer Satisfaction Techniques in Commercial Aviation Today

Chapter I: Introduction

Customer satisfaction is not a mysterious or complicated issue, but it has emerged as an important point among air travelers in recent years. In his essay, “Legal Turbulence: The Courts’s Misconstrual of the Airline Deregulation Act’s Preemption Clause and the Effect on Passengers’ Rights,” Rosenthal (2002) advises that in early 2001, following two years of increasingly vehement dissatisfaction, the public’s opinion of the commercial aviation industry reached a historic low point. In response, the U.S. Congress conducted a series of hearings and threatened to approve a robust passenger rights bill despite industry lobbying efforts; however, on September 11, terrorists used airplanes to attack the World Trade Center and the Pentagon, and the debate in Congress changed directions entirely to issues of airport security and a wide range of safety concerns. At the time, Congress also acted to indemnify the airline industry from any civil liability for personal and property damages resulting from the violence and approved legislation to assist the airline industry, which had been devastated by the attacks, with a comprehensive package of financial compensation and loan guarantees (Rosenthal, 2002). This comprehensive package was contained in the Air Transportation System Stabilization Act (also called the “Airline Bailout Act”), designed to provide financial relief to the commercial aviation industry after the September 11 terrorist attacks (Wallace, 2001, p. 15). This legislation was clearly needed: “It can’t be stated strongly enough that the magnitude of the problem we face as an industry is absolutely staggering,” American Airlines Chairman Donald Carty advised the U.S. Senate Commerce, Science and Transportation Committee; indeed, the airline industry lost a record $9 billion in 2002 (Ramstack, 2003). At the time, Carty requested that the federal government pay for the additional security costs incurred by the aviation industry since the September 11 terrorist attacks and reduce taxes that now comprise approximately 26% of the cost of a typical economy-class airline ticket. By sharp contrast, taxes only accounted for 7% of an average airline fare in 1972 (Ramstack, 2003). Carty reported that American Airlines, the nation’s largest air carrier, was implementing about $2 billion in cost-saving measures; however, these initiatives involved laying off more than 27,000 employees since the September 11 attacks; in this regard, Carty pointed out that, “Labor is our company’s single greatest expense and, with the exception of taxes, our fastest-growing expense” (Ramstack, 2003, p. 8). Notwithstanding these enormous expenses, the research clearly shows that investment in a carrier’s employees is one of the best ways to improve customer satisfaction as discussed further below.

Today, more than four years after these terrorist attacks, the airlines have managed to substantively alter their business plans and reduce flights in an effort to reorganize profitably; however, the general lack of satisfaction among airline passengers with the quality of service has once again emerged as a serious problem. According to Petrick (2002), from a marketing perspective, it just makes good business sense to try to achieve the highest customer satisfaction possible since the construct of perceived value has long been recognized as one of the most important measures for gaining competitive edge; it has also been maintain that this perception of value represents the most important indicator of a consumer’s intention to continue doing business with one provider over another. “Yet, in regards to leisure and tourism services,” they note, “repurchase intentions and consumer loyalty are often predicted solely by measures of consumer satisfaction, and/or service quality” (p. 119). In this regard, Woodruff (1997) points out that, “If consumer satisfaction measurement is not backed up with in-depth learning about customer value and related problems that underlie their evaluations, it may not provide enough of the customer’s voice to guide managers where to respond” (p. 139). In addition, simply because a consumer is currently “satisfied” with a product or service, this does not necessarily mean the product or service represents a significant value. Indeed, it is entirely possible a consumer who is very satisfied with a product or service, may consider it a poor value if the costs for obtaining it are perceived to inordinately excessive; by contrast, a consumer who is moderately satisfied with a product or service may believe it to have substantive value if it is perceived the there was good utility received for the price paid (Petrick, 2002).

Taken together, these considerations represent both a challenge and an opportunity for commercial aviation providers today, and, notwithstanding the inherent security issues involved, the extent to which one company achieves a high level of customer satisfaction while balancing the need to remain profitable will likely be the extent to which that airline emerges as an industry leader in the future. Therefore, this paper seeks to identify those aspects of commercial aviation that are perceived as contributing to consumers’ sense of value and satisfaction; to this end, a review of the relevant and peer-reviewed literature in Chapter II is followed by a description of the research methodology employed in Chapter III, the salient results of the research in Chapter IV, and a discussion of the research in Chapter V. A summary of the research findings is presented in Chapter VI and relevant recommendations are provided in Chapter VII.

Chapter II: Review of Relevant Literature and Research

Background and Overview. The commercial aviation industry is vital to the nation’s interests, and it has come to be widely regarded as an important part of American culture. In this regard, O’Connor (2001) points out that, “Transportation is a basic part of the economic/social / cultural infrastructure, which affects the efficiency of all other business activities in a community and the quality of life of its residents and the ability to travel is prized by most people” (p. 4). According to Rosenthal (2002), though, anyone who has ever flown on a commercial flight in recent years has experienced the following reactions to air travel: “That moment when the blood starts to boil, the lungs start to choke on recycled air, and movement is restricted because the unpleasant individual in the next seat starts to occupy more than his fair space. Such is life on an airplane these days” (p. 1858). Today, airline-passenger relations have been seriously affected by both deregulation, resulting in less rather than more competition among providers, as well as the wide array of security policies that have been implemented following September 11, 2001. In fact, one recent survey placed customer satisfaction with airlines on the same low level as satisfaction with trial lawyers, ahead of only satisfaction with cable television companies and commercial diet programs (Asker, 1999).

These problems are certainly not new though. According to Federal Aviation Administration (FAA) statistics, between 1995 and 1999, flight delays increased by a troubling 58% and cancellations increased by 68% (Mann, 2000). During this same period, total flight operations grew by a mere 8.3% (Rosenthal, 2002). In response, Congress reacted to rising passenger complaints in the fall of 1999. Initially, Congress chose simply to include passenger rights elements in its funding bill for the Department of Transportation (DOT). In an effort to postpone or avoid more expansive passenger rights legislation, the major airlines voluntarily agreed to submit customer service initiatives to Congress and the DOT. “Each airline proposed a series of areas in which they would work to improve services for their customers” (Rosenthal, 2002, p. 1858).

Unfortunately, none of these initiatives had any real opportunity to provide significant changes in the industry; for example, both United Airlines and U.S. Airways included language in their plans promising to “provide on-time baggage delivery,” but failed to follow through in a meaningful way (Study Finds Airline Service in Decline, 2000, cited in Rosenthal). The combination of such broad language and the paucity of any significant enforcement tools meant that these initiatives were largely ineffective.

Not surprisingly, complaints from passengers increased by 200% within the year; furthermore, flight delays continued to increase 12% faster in the first five months of 2000 than in the same period in 1999. “Indeed, in the twelve months following the airlines’ voluntary promises, flight delays cost business travelers 5 billion dollars and 1.5 million hours” (Rosenthal, 2002, p. 1859). The number of delays caused National Business Travel Association Executive Director Marianne McInerney to conclude that “[w]e are at a point where our nation’s airline system is in need of triage” (Rosenthal, 2002, p. 1859). Some observers would suggest that radical surgery is required rather than triage, and these issues are discussed further below.

Security Issues and Passenger Satisfaction. When people travel on an airline, they have a legitimate right to expect that they will arrive at their destinations in a safe and timely manner; however, the various security initiatives implemented post-September 11 have adversely affected the commercial airlines’ ability to deliver on the latter, while some are questioning the efficacy of these approaches as to the former. According to Gips (2004) “Passenger profiling is not merely a response to 9-11. Northwest Airlines began developing a system for assessing passenger risk in the early 1990s, receiving funding from the Federal Aviation Administration (FAA) for the project in 1994” (p. 63). This system operates by comparing data that is collected in the reservation system to established parameters, such as whether a passenger paid for a ticket with cash; the system also cross references such information with a government-supplied terrorist watch list. According to Doug Laird, an aviation security consultant who helped Northwest develop its system, the prescreening helps airlines determine how many “slices,” or views, the x-ray system would take of a carry-on bag. As a result, all carry-on luggage is still imaged; however, the luggage associated with passengers considered higher risk is subjected to more views (Gips, 2004).

The program was noted and its expansion was recommended by the White House Commission on Aviation Safety and Security (otherwise known as the Gore Commission) in a 1998 report; in response to that report, the FAA mandated that all airlines must adopt the program (known then as CAPPS, and now as CAPPS I and II), the following year. This author points out that CAPPS I assesses risk and categorizes passengers into two groups: 1) those who require further scrutiny (these travelers are called “selectees”), and 2) those who do not require such review. This system is still in place today (Gips, 2004, p. 63). Following the terrorists attacks of September 11, 2001, though, the U.S. Congress requested that the Transportation Security Administration assume responsibility for the CAPPS program and improve it. “That was the impetus for CAPPS II, which was first officially announced as a concept on January 15, 2003, through a proposed rule that was published in the Federal Register (Gips, 2004). Following a period for public comment, the concept was then refined to its current form as presented in the interim rule issued in August 2003 (Gips, 2004, p. 63). The author notes that the program was scheduled for implementation in November 2004 (Gips, 2004). The recent targeting of an infant by the CAPPS II system because of a similar name with that of a terrorist on the watch list highlights the constraints inherent in this system though. While the need for improved security procedures was highlighted by the terrorist attacks on September 11 and the further attempts that were thwarted, the fact remains that these procedures have all adversely affected the airlines’ ability to deliver their services in a manner perceived by many travelers as efficient and customer oriented; these issues are discussed further below.

Industry Responses to Customer Satisfaction Issues. While the foregoing issues remain a sore point with many travelers today, and security analysts expect this and comparable systems to remain in place in the foreseeable future, there are some indications that some carriers are taking note of the increasing dissatisfaction among their passengers concerning other aspects of air travel and have taken steps to address them.

In this regard, Kundu and Vora note that consumers’ perceptions of service quality are influenced by five distinct gaps in organizations; these so-called gaps describe differences in:

1. Consumer expectations and management perceptions of consumer expectations;

2. Management perceptions of consumer expectations and service quality specifications;

3. Service quality specifications and the service actually delivered;

4. Service delivery and what is communicated about the service to consumers;

5. Consumer expectations and perceptions of delivered services (p. 42).

The authors add that the fifth gap is related to the size and direction of the first four gaps, and that it should be to narrow these gaps to the maximum extent possible; however, quality service is not delivered by aircraft or tarmacs or terminals, but rather by people (employees) to people (customers) (Kundu & Vora, 2004). Therefore, the human resource function has a critical role to play in satisfying the expectations of shareholders, employees, and customers alike (Kaplan & Norton, 1996). For airlines today, the human resource function can contribute to improved economic performance by building organizational capabilities, improving employee satisfaction, and improving customer satisfaction (Kundu & Vora, 2004). This point is also made by Neff (2002) who advises that “customer satisfaction is inherently dependent on employee satisfaction. Employee attitudes can mean the difference between a repeat customer, and one who discourages their friends and family from going back” (p. 386).

This advice has clearly been taken to heart by Delta Air Lines, Inc. For instance, Salopek (2003) reports that Delta has implemented a number of initiatives designed to improve the perception of value among their passengers, including a “Business Elite” class. “Business Elite was Delta’s U.S.$100 million move to meet customer demand in merging first-class and business-class service on international routes into an upgraded business class called Business Elite. The new product missed cost and quality targets but became the leading business-class product on Atlantic routes” (p. 24). The author also points out that many of these initiatives predate September 11, 2001, but the impetus has gained momentum in recent years. For example, in May 2002, Delta announced its award-winning, “Our Airline, Our Business” campaign in response to the September 11 attacks; this campaign served to fuel a fundamental shift in the entire aviation industry in the United States (Salopek, 2003).

The program has since enjoyed wide recognition from Training magazine and SHRM, and has been featured on CNN and in USA Today (Salopek, 2003). According to Kundu and Vora (2004), while the aviation industry attempts to reconcile the need for security with their profitability, customer satisfaction must also be taken into account if these companies are to survive in the long-term. “Service quality has become essential for the survival of service companies in the emerging world without borders,” they advise. “Effective delivery of quality services involves finding customers, identifying their needs, and meeting or exceeding their expectations” (p. 41). To achieve these goals, airlines must address traveler expectations and perceptions as being fundamental components of excellent service.

Likewise, Southwest Airlines, the self-named “symbol of freedom,” has enjoyed significant successes where other carriers are struggling because of its emphasis on employee satisfaction. According to Neff (2002), Southwest was founded in 1969 by Herb Kelleher with only 195 employees and 3 planes. Today, Southwest has grown to 29,000 employees and 332 jets. In 1998 Southwest reached number one on Fortune magazine’s ‘100 Best Companies to Work for'” (p. 387). The emphasis on employees at Southwest has focused on improving teamwork because of the “high demands of service work” in the airline industry today; in addition, Southwest believes that “teamwork helps employees to better support each other to continually provide high quality service in an otherwise stressful job” (Neff, p. 387). Furthermore, Southwest allows its front-line employees to make their own decisions concerning customer wants and needs. Southwest Airlines’ Manager of Culture Activities, Sunny Stone, reports that many of the positions at Southwest require employees to work in unsupervised areas, which “gives people more of a sense of ownership and pride in what they are doing. They feel that they are entitled to make a decision, even to step outside the boundaries, if necessary, to help someone” (Neff, p. 387). This emphasis on providing employees with the tools and authority they need to deliver quality service has paid off in major ways; Neff reports that turnover has been drastically reduced, and Southwest has the lowest number of customer complaints in the industry, with 0.47 complaints per 100,000 customers carried. “Southwest Airlines is a leader in the airline industry in part because of its emphasis on employee satisfaction and motivation. The executives at Southwest know that satisfied employees translate into better customer service and happier customers” (Neff, p. 388). In fact, Southwest’s employee turnover rate is just 7% (the lowest in the entire industry) and for the four-year period (1993-1996) the U.S. Department of Transportation determined that Southwest had the most on-time flights, the best baggage handling rating, and the highest customer satisfaction ratings (Neff, 2002).

These high customer satisfaction and on-time ratings have not come without effort or expense though. For example, the company uses a six-person ground crew to ready an aircraft in just 15 minutes compared with the industry average of one hour; in addition, Southwest has created a workplace with few rigid rules, it rewards employees through a profit sharing plan, and performance appraisals and communications emphasize customer service. Moreover, the company provides extensive training to the entire workforce. “The mechanics; customer service, operations, and reservations staff; and others all provide their own technical training. Beyond the technical training, all employees participate in courses that include customer service, decision making, safety, and career development” (Galpin, 1998, p. 39). Beyond the foregoing initiatives, one final feature of Southwest appears to distinguish it from its counterparts in the rest of the aviation industry: Southwest is a “fun” place to work, a feature that translates into increased customer satisfaction. In fact, Southwest Airlines’ CEO Herb Kelleher calls himself the “High Priest of Ha-Ha,” and strongly endorses the importance of fun. According to Newstrom (2002):

Southwest Airlines looks for a sense of humor in their new recruits, paints company airplanes in wild designs such as Shamu the whale, hides flight attendants in luggage racks to surprise customers, sends new hires on a scavenger hunt to uncover corporate history and culture, and produces rap music videos to communicate organizational results. In an industry where thousands of lives are at stake every day, Southwest Airlines wants its employees to take their jobs seriously but not themselves. (p. 5).

Some of the past attempts to facilitate such labor-management cooperation in the aviation industry have not met with such success, though, most notably at Eastern Airlines where a strike, in spite the existence of employee stock ownership and union representation on the board of directors, resulted in the self-proclaimed “Wings of Man” being forced into liquidation (Guzda, 2002). Aristotle Onassis once observed that the secret to success was in “knowing something tha the other fellow didn’t know,” and clearly, Southwest and Delta know something that their counterparts in the industry either do not know, or are ignoring in favor of bottom-line results in the short-term; these competitors will undoubtedly come to regret their lack of emphasis on customer satisfaction and will likely follow Eastern’s demise unless they take steps today to bring their level of service up to the standards being established by these industry leaders.

Chapter III: Research Methodology literature review can increase the information yield for a given cost or, conversely, it can provide the same amount of information at less expense that other research methodologies (Scott & Wertheimer, 1962). According to Wood and Ellis (2003), there are a number of valuable outcomes that can be achieved through a well-conducted literature review, including the following:

It helps describe a topic of interest and refine either research questions or directions in which to look;

It presents a clear description and evaluation of the theories and concepts that have informed research into the topic of interest;

It clarifies the relationship to previous research and highlights where new research may contribute by identifying research possibilities which have been overlooked so far in the literature;

It provides insights into the topic of interest that are both methodological and substantive;

It demonstrates powers of critical analysis by, for instance, exposing taken for granted assumptions underpinning previous research and identifying the possibilities of replacing them with alternative assumptions;

It justifies any new research through a coherent critique of what has gone before and demonstrates why new research is both timely and important.

Chapter IV: Results

The results of the critical review of the refereed and scholarly literature clearly showed that there are some profound and troubling issues adversely affecting the commercial aviation industry today. In an effort to remain profitable, many airlines have engaged in an almost continuous process of consolidations, mergers, divestitures, and international joint ventures and partnerships; in spite of these approaches, all airlines have been affected to some extent by the following developments:

1. The ever-increasing costs of producing complex new aircraft;

2. The globalization of the economy; and, 3. The state of commercial air travel and its needs (Weiss & Amir, 2005).

Other carriers, such as American, have responded to these issues by laying off skilled and trained employees who will be difficult or impossible to replace in the short-term. For those companies that have managed to weather the storm, though, and even prosper in these troubled times, some commonalities emerged including an emphasis on their employees and how they are able to respond to customer satisfaction issues in a real-time basis. Other commonalities involved an emphasis on streamlining operations without sacrificing those components of an airline’s operations that customers tend to perceive as adding to the quality they receive for they money, such as meals and other amenities that many travelers simply took for granted in years past.

Chapter V: Discussion

There are two opposing viewpoints concerning the ongoing trend toward outsourcing some aspects of commercial aviation to third-party providers. On the one hand, Friedhem suggests that such outsourcing can help an airline concentrate on its core competencies and improve customer satisfaction in the process. “In the commercial aviation industry,” he advises, “alliances are quickly turning into networks as economics and customer service drive airlines to become global providers. The number of potential partners is limited, and most countries have only one good airline candidate. The spark to a true relationship enterprise will be a breakthrough in union relations that will enable sharing flight crews and maintenance work” (Freidhem, 1998, p. 118).

On the other hand, though, Shalla (2002) maintains that outsourcing airline customer sales and service agents’ work to travel agencies is a “specific form of work externalization or distancing that has contributed to the degradation of the employment relationship and thus to the degradation of the job of customer sales and service agents” (p. 2). Clearly, air carriers have a dilemma of sorts facing them as they attempt to balance the need to improve their operations through increased efficiencies while maintaining a safe and reliable transportation system, all of which is further exacerbated by the recent security mandates in response to September 11, 2001 and the war on terrorism at home and abroad.

Chapter VI: Conclusions

Successful companies in the aviation industry in the future will need to be able to identify their customers by their tastes, likely behaviors and potential profitability that will result. This will require the ability to turn these observations and insights into the appropriate set of solutions to fit customer interests. The research showed that because of their sheer size, some air carriers such as American Airlines have attempted to achieve these goals through downsizing and outsourcing important components of their operations to third-party providers; however, other carriers such as Delta and Southwest have managed to persevere in the face of these challenges by focusing on their employee relations and customer satisfaction initiatives which have tended to more than offset the expenses involved.

Chapter VII: Recommendations

Customer satisfaction was shown to be an important metric in the commercial aviation industry because many airlines need to overcome their old images and develop new images that appeal to both domestic and international travelers, particularly in the business market. Clearly, many of these initiatives are not going to be inexpensive; however, in terms of their cost-effectiveness, the research showed that those companies that are committed to maintaining and improving their customer satisfaction ratings among leisure and business travelers have reaped significant rewards, not only in terms of the accolades they have received from industry observers, but also in terms of their bottom-line profitability. Therefore, it is recommended that the nation’s air carriers assume a new sense of urgency in developing programs that will provide their customers with services that match their expectations and the bottom-line will likely take care of itself. Those carriers who ignore customer satisfaction in favor of their short-term profitability will do so only at their peril.

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