An Overview of Vietnam Airlines:

INTRODUCTION

Vietnam Airlines is the flag carrier of Vietnam, the country with population of 85 million and 330 000 square meter. It was established in January 1956 by the Government and marked the birth of aviation industry in Vietnam, and served only domestic flights (Vietnam Airline, 2008). After the end of Vietnam War, from 1976, Vietnam Airlines started international flights, including South East Asian countries and China. Another turning point of Vietnam Airlines is year 1993 when this airline became the national flag Airlines of Vietnam. Nowadays, Vietnam Airlines connects 19 cities throughout the country and 42 international destinations (including code-sharing services) in Asia, Europe, US and Australia,.

Mission: As a flag carrier, Vietnam Airline wants to be the bridge between Vietnam and other countries in the world and “bring Vietnam cultural to the world” (Vietnam Airline, 2008).

The International Air Transport Association (as cited by Chan (2000)) predicts air travel in Asian Pacific will account for 40 % in 2010. The potential of this airline market increases due to the fact that the attractive of tourism, the emerging economies and the increase number of middle-class. Unlike in Western country, surface transportation, such as railways, highways in Asia is not good and therefore, it can create opportunities for airline transportation as the only and the faster way.

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Like other countries in Asia, the potential of Vietnam market is high and untapped. In 2007, 4.2 million foreign visitors travelled to Vietnam, 16 per cent more than in 2006 (Sydney Morning Herald, 2008). And according to Sydney Morning Herald (2008), Vietnam is ranked as number 4 by The World Travel and Tourism Council on its list of the world’s fastest growing travel destinations.

Vietnam’s domestic market is also highly potential due to the fact that surface transportation infrastructure is not competitive. It takes more than 30 hours to travel by train, from Hanoi to Ho Chi Minh City, much higher than nearly 2 hours of normal flight. Other alternative is coaches which also take time and inconvenient. Although average income per capita of Vietnamese is only 835 US Dollars (in 2007) (General Statistics Office of Vietnam, 2008), lower than other neighbour countries, such as Thailand, Malaysia, Singapore; the income increases gradually in the last few years increase 7% per annum, shows the tourism potential of this airline in Vietnam market. Moreover, due to high population density and business opportunities in two largest economic hubs of Vietnam: Hanoi and Ho Chi Minh City, travel demand for business purpose is very high.

However, aviation service quality in Vietnam is far behind the international standard. It is very easy to find tons of articles of customers’ complaints about all three domestic airlines in Vietnam: Vietnam Airlines, Indochina Airlines, Jetstar Pacific. Even in Vietnam Airlines, the national flag carrier and full service airline, service delivery is mainly product-oriented which has set the mind of management board to be far apart from customer-oriented. Customer dissatisfaction varies from booking services, poor catering, the temper of air crew to luggage delivery services.

Broad aim of the research

• Use SERVQUAL model to assess customer satisfaction and service quality of Vietnam Airlines.

Research questions

• How can the customer satisfaction with Vietnam Airlines be described?
• How satisfied of Vietnam Airlines customer with its services?
• How can Vietnam Airlines managers improve the service satisfaction among Vietnam Airlines customers?

The main purpose of this study is to investigate customer satisfaction in airline industry. In the chosen airline, Vietnam Airlines, the author aims to explore what customer satisfaction is in the perceptions of the airline passengers and find the solutions to improve customer satisfaction. By analyzing questionnaires and interview of customers, customer satisfaction degree will be examined and after that, new strategies and recommendations will be given for Vietnam Airlines to enhance service quality. This study aims to help Vietnam Airlines management to better diagnose the customers’ needs and expectations. It will also play a role in identifying the present situation of this flag carrier and suggest future strategies for better customers’ service.

Conceptual framework

To investigate the service quality and customer satisfaction of Vietnam Airlines, I will use the SERVQUAL model (Parasuraman et al, 1985, as cited by Chau and Kao (2009)) which the de

LITERATURE REVIEW

The importance of customer satisfaction

Thank to good services and customer satisfaction is met, behavioral acts of customer can affect the profitability and market share of a firm through three main behavior: word-of-mouth, repurchase intention and positive feedback.

The first customer behavior is “word of mouth”, defined by Saha and Theinge (2009) as a flow of information about products and services that passes from one customer to other and can be used as trustable source of information to evaluate recommendations (mouth to mouth marketing). In all case, customer satisfaction does not always create mouth-to-mouth marketing but it is a necessity that satisfaction is met for positive word-of-mouth. Research conducted by Babin (2005) shows that not only pleased customers generate world-of-mouth but also extremely dissatisfied customers causes negative feedback and controlling two flows of information is necessary for marketers.

Secondly, good services also lead to repurchase intention or customer loyalty. It is very necessary to gain loyalty because it is cheaper to keep old customers than lure new ones from other service providers. Airline carriers often use “frequent flyer scheme” but it is not often applied for budget airlines due to the high cost. Only by services and affordable price, low cost carriers can maintain the number of customers.

Another behavior of customers as mentioned above, customer behavior, refers to transmission of complaints and compliments to service suppliers. Soderlund (1998) shows that dissatisfied customers tends to generate negative feedback than positive one from satisfied customers. The number of feedback cannot be the most precise method for customer analysis but it is useful to forecast consumer trends and improve services.

Customer satisfaction in airline industry

Tai and Chan (2002) define service satisfaction as the post purchase evaluation of consumption experience. Unlike material products or pure services, airline service- like other hospitality services is combination of tangible products and quality of service offered to passengers. For example, satisfaction with hospitality service- such as a restaurant meal is amalgamation of the food or drink (material product), the behavior of waiters or waitresses, and the environment of the restaurant (decoration, lighting).

In aviation industry, the core products are only physically transport customers and their luggage between two destinations. Other services in a flight, such as making enquiry and booking, seat allocation, in-flight services and baggage handling are only secondary tasks but they can create dissatisfaction if it is performed badly.

Service quality and customer satisfaction becomes vital in the sustainability of aviation industry, basing on following criteria: financial data, fares, passenger load factors, service related issues (Sultan and Simpson, 2000). Sultan and Simpson (2000) suggest marketing strategies for airline industry focus on customer satisfaction, rather than company profit. Airline service can also be rated in terms of five dimensions: overall performance, comfort, service, food and website (Rhoades, 2006). On the other hand, Rhoades and Waguespack (2005) points out the operational measures of airline service qualities: the number of flight delays, mishandled baggage, overbooks flights and consumer complaints.

Only a few airlines (including Singapore Airlines, British Airways and American Airlines) can establish the reputation of high service quality (Chan, 2000). These airlines are successful in positioning themselves, not by offering the cheapest prices but delivering excellent service quality. Providing consistent service quality is a challenge for all companies in service sector, including airline industry. In these days, to keep the high level of quality standard, mega carriers and small airlines are cooperating rather than competing with others by sub-contracting, code sharing and global marketing network. (Nejati et al, 2008). The formation of these alliances increases the benefit of economies of scale by enhancing flight availability and yield from customers. However, to work in effective way, two airlines must offer similar service level and position themselves in the same way in the market.

Customer satisfaction Measurement

SERVQUAL -the gap model which is firstly proposed by Parasuraman (1985) (as cited by Nejati, 2008) is a widely used model and has been applied for plenty of service industries: public services (Bryland (2001) and Wisniewski (2001)), police services (Donnelly et al, 2006), heath care (Kilbourne, 2004), mobile communication (Lai et al, 2007), etc. SERVQUAL is based on the assumption that the service quality is measured by the gap between the customers’ needs and wants of service and the actual service quality that customers receive from service provider (Donnelly, 2006). If the service is over customers’ expectation, it is assessed as excellent service; otherwise, the service becomes unacceptable. It is a useful method because service quality is assessed from customers’ perspectives, and by comparing and contrasting the difference between the each customers groups and the differences between the company and its competitors, managers know where they are in the market, how to position the service and which group will be the target customers. Zeithaml (1990) (As cited by Donnelly et al, 2006) identifies five dimensions of service quality management:

• Tangibles: the existence of modern equipment and facilities, professional employees, and communication materials.
• Reliability: performing the service as promised, carrying out the service right at the first time and managing to solve customer services’ problems.
• Responsiveness: willingness to help customers, provide prompt service and readiness to customers’ request.
• Assurance: The knowledge and courtesy of employees and their ability to convey trust and confidence.
• Empathy: understanding customers’ need and wants and giving customer’s individual attention, convenient business hours.

Among the five gaps of SERVQUAL, this research concentrates on Gap 5- the difference between customers’ expectation and perception. The reason for this limitation of the research due to the fact that it is the only gap that can be investigated solely by the data provided by customers while other gaps need information from management board and the company itself.

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