Tertiary Business Sector, the Transport

¶ … tertiary business sector, the transport industry has also become very competitive over a period of times. Massive evolutions have been experienced in almost all modes of transport including road, rail, sea and air. The airline industry has not only become very competitive but also in some ways very complicated. Competitive, because the newly emerging trend of low cost airlines have decreased the barriers to entry in what once was a highly capital intensive business to a great deal. This has allowed new airline companies being established every now and then (Berry, 1992). Moreover, the rapid growth in the international airline industry and the increase in more and more international airlines and the growth in their air routes have also increased the competitiveness of the industry. The drastic up gradation in the luxury aspect of some airlines such as Emirates, Air France and British Airways has also added to the competition.

The airline company has also become complicated in certain ways as the numbers of internal and external pressures have increased considerably. The most important factor that has affected the airline industry is the increase in laws and legislations pertaining to the airline industry after some of the major accidents and terrorist activities, primarily 9/11. Compliance to these measures has forced many airlines to take measures that had resulted in a considerable increase in the airline's operational costs. Moreover, customers have become very choosy about their airlines due to various reasons being luxury, cost, loyalty and reliability, and trust as far as their security is concerned. After 9/11and then the current economic crunch many domestic customers now prefer using rail and have reduced their dependence on air travel. This has resulted in significant decline in revenues for many companies, thus pushing companies towards economical crisis. It must be noted that customer relationship management is an extremely critical contributing factor in airline industry today which is becoming increasingly competitive. An airline can easily lose its customers to a competitor on grounds of lack of security, trust, quality, luxury, comfort, or price. CRM therefore has to be an integral part of an airline's brand positioning strategy. This paper evaluates the causes, effects and solution to the current crisis pertaining to customer relationship faced by one of the major airline company, Jet Blue Airways in comparison to its competitors. One company that comes in direct competition to Jet Blue Airways is Frontier Airlines, one of the most aggressive U.S. airline when it comes to customer relations.

Company Overview

Jet Blue Airways have been in the airline industry for quite some time now and are known for their large fleet in both passenger and cargo fields. In order to combat the increasing competitive pressures and attract a larger amount of customers Jet Blue Airways took various promotional measures. One of those measures was issuing club cards which allowed the clients to earn rewards if they stayed at partner hotels or flew at Jet Blue Airways certain routes up to a certain number of miles. Despite of these promotional measures, the financial statements of Jet Blue Airways shows a constantly declining performance. The company is struggling to come out of a losing business but have not succeeded so far. The stake holders of Jet Blue Airways include the customers, employees, government and the shareholders. The only group of stakeholders that is satisfied with the company is its employees. They enjoy job satisfaction and feel motivated to work. However, it must be noted that Jet Blue Air's labor costs are one of the highest in the airline industry. Labor costs, perks, wages and salaries consume a large proportion of the company's total operational cost.

On the other hand Frontier Airline, an air travel company based in Denver, USA, has effectively planned to keep its labor costs low and has kept itself away from over employment has worked to motivate and extract productivity from existing employees. This has helped maintain cost efficiency. Moreover, Frontier Airlines simultaneously invested heavily on offering one of the most innovative facilities for their customers, and as a result generated massive brand loyalty.

The Problem

Despite of being one of the oldest names in the airline industry, Jet Blue Airways finds itself surrounded by a number of problems. These problems are clearly implied in the company's financial statements which have resulted in disappointing the shareholders. One of the major problems of that the company faces is its huge labor costs. The labor costs on average amounts to more than 50% of the total operating expenses that the company incurs. This means that cutting down on the labor costs would result in a significant reduction in the loss and will improve the profitability of the company.

The second problem faced by Jet Blue Airways is increasing complains from the customers. Most customers have serious complains and disappointments as far as the airline's unfriendliness of airline staff including ticketing officers, call center executive and cabin crew, delayed flight schedules, lack of up gradation of in flight luxuries unlike other competitors such as Frontier Airlines, loss of baggage etc. Some customers also complain that the redemption of points, miles and rewards on club membership cards were not offered as promised. These are some very serious complains for any airline company.

Another problem that Jet Blue Airways faces is failure to keep up with the up gradation of facilities. As also complained by the customers, other competing airlines such as Frontier Airlines have made significant improvements in the in flight luxuries and amenities however, customers did not experience any noticeable change in the fleets and service provided by the Jet Blue Airways.

The financial statements of Jet Blue Airways clearly shows that the company has failed to keep down its costs. Most of the costs are consumed by salaries wages and other related expenses. The second most costly expense is the fuel cost which is understandable is prices of jet fuel in the international market have been quite fluctuation and are difficult to control. The least proportion of costs is represented by expenditures related to customers and services such as aircraft maintenance. This implies that the company is compromising on quality measures in order to cut down on costs as other expenses are not being controlled.

Frontier Airlines in contrast to Jet Blue Airways allocates more of its costs to aircraft maintenance, up gradation and customer services. Moreover, they focus on retaining and keeping existing staff motivated so that they deal with the customers in the best possible manner. This is done by providing promising career prospects, training and apprenticeship programs etc. To their employees.

Problem Analysis

The financial statements of Jet Blue Airways show a lack of a concrete and long-term strategic planning and an extremely mismanagement and a highly inefficient allocation of scarce resources. As a result, not only the operational costs and expenses are being out of control but also the quality of the services that is being provided to the customers is also declining. It must be noted that an airline business belongs to a tertiary sector and deals with provision of services. The most important measure of quality thus in case of such a business is to ensure customer satisfaction to the highest levels. This is where Jet Blue Airways lack seriously.

The first problem that is identified above is the heavy expenditures on labor costs by the airline. The press releases of Jet Blue Airways claims that this has resulted in ensuring higher levels of job satisfaction among employees along with keeping the labor turnover low.

While it is true that employee motivation is important for any business particularly for those that deal with provision of services (Borenstein & Rose, 1995). However, this does not mean that companies go out of their way to keep them satisfied and that too at the cost of quality of service that is provided to the customers. It is important to understand that the ultimate goal for any tertiary sector business is to keep its customers satisfied and the primary reason behind ensuring workforce satisfaction is the fact that employees deal directly with the customer's therefore keeping workforce satisfied will increase their productivity. While Frontier Airline has consistently adhered to this theory, unfortunately, that is not the case with Jet Blue Airways. The company has failed to keep the customers satisfied.

Many customers have complained that they received a poor treatment from the airline staff be it the cabin crew or the customer support staff at the call centers. The customers also complain that they do not feel that they get the value for money (Cobb, 2005). This clearly shows that spending huge sums of money on keeping the workforce motivated and satisfied have been futile. The employees might be self satisfied with the jobs but they have certainly failed in keeping the customers satisfied. The customers have also complained that customer service executives do not answer their call at the call center. They are also provided little help from the airline staff in case of emergency. This kind of an attitude by the airline staff can put the airline in jeopardy. Since it is a service sector business the responsibility lies on the shoulders of the concerned staff to keep the customers satisfy and provide whatever help that is possible (Borenstein & Rose, 1995).When travelling and on board, customers normally expect that they are given quality service and are treated friendly and are made to feel at ease. Giving such a treatment to customers and giving them a friendly and easy feedback is the sole responsibility of the staff as this is the ultimate target behind keeping the motivated and satisfied with their jobs. It must also be noted that ensuring that the staff complies with this behavior is the responsibility of the management and concerned supervisory authorities (Lawton, 2003).

Contrary to this, Frontier Airline has not focused merely on keeping the staff motivated, but it also monitors and provides the employees with regular training and apprenticeship program that aim at training them about dealing with customers and crisis and emergency situations.

Many customers of Jet Blue Airways have also been complaining about loss of baggage and delayed flight schedule. They further complain that in case of such emergencies, the airline staff does not only fails to provide them with the necessary assistance but also behaves with them in a very unfriendly and arrogant manner (Miller & Chen, 1994). This can not only have harsh implications on the already declining sales revenue for Jet Blue Airways, but is also against the business ethics. Such business practices will not only implicate negatively on the firm's financial statements but will also result in bad publicity for the company. In extreme cases, it is also possible that pressure groups such as consumer protection groups or individual customers can sue the airline for mishandling their valuable belongings. This can further increase the firm's costs and incur them huge losses. It must be noted that other competing airline giants such as Emirates, British Airways, Air France and Singapore Airlines are known for their excellent customer services both on board and off board. More importantly these airline companies have made their goodwill and brand image and have earned a great deal of consumer loyalty and on the basis of the excellent quality of customer service that they provide. Therefore, in order to remain in competition, it is of immense importance that Jet Blue Airways address these issues on urgent basis.

Frontier Airlines has an efficiently functioning Lost & Found department and there has been little complains about mishandling of customer baggages. Sensitive and fragile baggages are clearly marked and are handled with attention. The airline also offers an additional protection covering facility at the check in counters.

Many customers besides complaining about loss of baggage and frequent delayed schedules also complain about problems such as overbooking of flights and lack of in flight facilities that is otherwise provided by other major airline companies. Customers who are member of the company's loyalty cards also complain that in case of over booking that are not given any preference by the airline to board the flight and the company follows a normal 'first come first serve' policy. This makes it apparent that there is no significant facility that a member flyer can enjoy and customers feel that there is no use of being an airline's frequent flyers if he cannot be helped in case of emergency (Pritsker, 1997). Moreover, they feel that if an airline has overbooked its flights then it is their responsibility to manage it and not the customers'. Apart from that customers complain that unlike other airlines, Jet Blue Airways have failed to upgrade it's in flight services. Services like more comfortable seats and leather seats, personalized TV sets and in flight entertainment and first class and business class seats that are inclinable at 180 degrees are still not offered by Jet Blue Airways. For this reason, customer that fly on longer routes prefer other airlines over Jet Blue Airways as they offer a more enjoyable and comfortable journey by offering facilities such as in flight entertainment and convertible seats and bassinets for infants.

Frontier Airlines has no policy of overbooking and as a result there are little complains of customers not getting preferences. All Frontier Airlines aircrafts are equipped with most modern services which include in flight TVs including Direct TV services, In Flight duty free, stretch and inclined seats. Moreover, the airline also offers special in flight gifts for infants in all classes and for all passengers in First Class and Business Class. Special facilities are provided for loyalty members, frequent travelers and first and business class passengers such as excess baggage, special airport lounges, souvenirs such as shaving kits and wine glasses and extra miles and redeemable points which can be redeemed as promised.

Normally any airline, including Jet Blue Airways, has two types of customer groups. One group includes business tourists and the other one includes leisure tourists. These tourists can be further segmented according to their income levels or purchasing power (Waidenhammer, 2004). One group includes domestic travelers that prefer low cost airlines while the other includes international tourists who are willing to pay higher sums of money in return of comfort, class and luxury. Like any other business, and airline company must segment its market properly and must design the product according to the targeted market segments. However, Jet Blue Airways neither completely fits the category of a low cost airline, given its huge operational costs, nor it completely fits in the category of a luxurious high end airline, considering the lack of facilities and poor customer services. This means that it is highly probable that Jet Blue Air will lose both the major market segments to its competitors. Although Jet Blue Air's competitors also face certain weaknesses such as employee strikes, high gearing ratios and losses in some cases, however, all its competitors have ensured that customer satisfaction is not ignored and the customers are provided best quality service under all circumstances. This has helped them build a strong brand image in the international market, unlike Jet Blue Airways which is constantly losing its market share, goodwill is consistently being devalued and the brand image is being tarnished by the poor customer service.