Customer Satisfaction in Commercial Aviation: Cost-Effective Strategies

Introduction

Customer satisfaction is not a mysterious or complicated issue, but it has emerged as an important concern 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 shifted entirely to issues of airport security and a wide range of safety concerns. Congress also acted to indemnify the airline industry from civil liability for personal and property damages resulting from the violence, and approved legislation to assist the airline industry — 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. 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 attacks and reduce taxes that then comprised approximately 26% of the cost of a typical economy-class airline ticket. By sharp contrast, taxes accounted for only 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 that involved laying off more than 27,000 employees since the September 11 attacks. He 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.

More than four years after the terrorist attacks, airlines had managed to substantially 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 had once again emerged as a serious problem. According to Petrick (2002), from a marketing perspective, it makes good business sense 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 a competitive edge. It has also been maintained 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," Petrick notes, "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 does not necessarily mean the product or service represents significant value. It is entirely possible that a consumer who is very satisfied with a product or service may still consider it a poor value if the costs of obtaining it are perceived as inordinately excessive. By contrast, a consumer who is only moderately satisfied with a product or service may believe it to have substantive value if they perceive 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. Notwithstanding the inherent security issues involved, the extent to which a company achieves a high level of customer satisfaction while balancing the need to remain profitable will likely determine the extent to which that airline emerges as an industry leader in the future. This paper seeks to identify those aspects of commercial aviation that are perceived as contributing to consumers' sense of value and satisfaction.

The commercial aviation industry is vital to the nation's interests and has come to be widely regarded as an important part of American culture. 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 flown on a commercial flight in recent years has experienced the following: "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 — which has resulted in less rather than more competition among providers — as well as the wide array of security policies implemented following September 11, 2001. 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 not new. 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 choosing 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 produce 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 broad language and the absence of any meaningful enforcement tools meant that these initiatives were largely ineffective.

Review of Relevant Literature and Research

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 led 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).

When people travel on an airline, they have a legitimate right to expect that they will arrive at their destinations safely and on time. However, the various security initiatives implemented post-September 11 have adversely affected the commercial airlines' ability to deliver on the latter, while some observers question 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 collected in the reservation system against established parameters — such as whether a passenger paid for a ticket with cash — and cross-references that information with a government-supplied terrorist watch list. According to Doug Laird, an aviation security consultant who helped Northwest develop its system, the prescreening helped 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 was still imaged, but luggage associated with higher-risk passengers was 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 (the Gore Commission) in a 1998 report. In response, the FAA mandated that all airlines adopt the program — known then as CAPPS, and later as CAPPS I and II — the following year. CAPPS I assesses risk and categorizes passengers into two groups: those who require further scrutiny ("selectees") and those who do not. This system remained in place as of the time of writing (Gips, 2004, p. 63). Following the September 11 attacks, 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 refined to its current form as presented in the interim rule issued in August 2003, with implementation scheduled for November 2004 (Gips, 2004, p. 63). The recent targeting of an infant by the CAPPS II system because of a name similar to that of a terrorist on the watch list highlights the constraints inherent in this approach. While the need for improved security procedures was underscored by the September 11 attacks and subsequent thwarted attempts, the fact remains that these procedures have adversely affected the airlines' ability to deliver services in a manner that many travelers perceive as efficient and customer-oriented.

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

Kundu and Vora (2004) note that consumers' perceptions of service quality are influenced by five distinct gaps in organizations. These gaps describe differences between:

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 fifth gap is related to the size and direction of the first four, and organizations should seek to narrow all gaps to the maximum extent possible. However, quality service is not delivered by aircraft, tarmacs, or terminals — it is delivered 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, 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. Salopek (2003) reports that Delta implemented a number of initiatives designed to improve the perception of value among 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). Many of these initiatives predated September 11, 2001, but gained momentum in subsequent years. In May 2002, Delta announced its award-winning "Our Airline, Our Business" campaign in response to the September 11 attacks, a campaign that fueled a fundamental shift in the entire U.S. aviation industry (Salopek, 2003).

The program received wide recognition from Training magazine and SHRM, and was 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 profitability, customer satisfaction must also be taken into account for these companies to survive in the long term. "Service quality has become essential for the survival of service companies in the emerging world without borders. 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 fundamental components of excellent service.

Southwest Airlines, the self-named "symbol of freedom," has enjoyed significant successes where other carriers are struggling, largely 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. By the time of this study, Southwest had grown to 29,000 employees and 332 jets, and in 1998 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; 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 positions 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 needed to deliver quality service has paid off significantly. 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). Southwest's employee turnover rate is just 7% — the lowest in the entire industry — and for the four-year period from 1993 to 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. The company uses a six-person ground crew to ready an aircraft in just 15 minutes, compared with the industry average of one hour. Southwest has also created a workplace with few rigid rules, rewards employees through a profit-sharing plan, and ensures that 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). One final feature of Southwest appears to distinguish it from its counterparts in the rest of the industry: Southwest is a "fun" place to work, a feature that translates into increased customer satisfaction. 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 past attempts to facilitate labor-management cooperation in the aviation industry have not met with such success, most notably at Eastern Airlines, where a strike — despite the existence of employee stock ownership and union representation on the board of directors — resulted in the airline being forced into liquidation (Guzda, 2002). Aristotle Onassis once observed that the secret to success was "knowing something that the other fellow didn't know," and clearly Southwest and Delta know something that their competitors either do not know or are ignoring in favor of short-term bottom-line results. These competitors will undoubtedly come to regret their lack of emphasis on customer satisfaction and will likely follow Eastern's fate unless they take steps to bring their level of service up to the standards being established by these industry leaders.