Introduction
In the USA, 2007 shows all the signs of being one of the worst years on record for airline service quality performance. On-time arrival rates have dropped to 72 per cent, an all-time low. The rate of mishandled baggage which stood at 6.5 per 1,000 passengers in 2006 is rising as an increasing number of passengers are checking baggage in the wake of the new regulations on liquids in handheld carry-on luggage (American management association, 2007). In addition, the industry has witnessed several very high profile service failures including the very public meltdown of JetBlue Airways, a former darling of the US airline industry. Bad weather and lean operations over the Valentine’s Day holiday resulted in the stranding of over 5,000 passengers, primarily at the New York hub. This event is projected to cost JetBlue US$14 million in refunds and overtime. It remains to be seen whether the cost in terms of reputation and goodwill will be even greater (Tiernan, S. et al, 2000).
American Airlines (AA) is the principal subsidiary of AMR Corporation (AMR). AA reported a full-year net profit of $504 million for 2007. However, it ended the year 2008 with a fourth-quarter loss of $69 million (Schofield, 2006). High fuel price and slowing economy account for major reasons for the loss. However, we still need to investigate into the internal factors that cause loss. Therefore, it is of great importance to see why these things happen and what can be done to improve the situation.
Marketing Concept
There are several definitions of marketing concept, In 1959, Felton proposed the definition of marketing concept as, “A corporate state of mind that exists on the integration and co-ordination of all the marketing functions which, in turn, are melded with all other corporate functions, for the basic objective of producing long-range profits” (Jeffrey, and Morgan, 2006).
Over the years, people are adding more ideas into the definition and more focus points are added. In 2004, American Marketing Association announced a new definition of marketing concept and it asserted that, ‘Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders” (McCarthy, 2005).
In this new definition, value, process and customer relationship, which reinforce the notion of beneficial exchanges are specifically pointed out. This is therefore the philosophy where the customers’ needs drive the AA’s major decisions (McCarthy, R. and Spector, R., 2005).
Market Orientation
Narver and Slater (1990) defined market orientation as, “The organizational culture…that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and, thus, continuous superior performance for the business.”
AA understands this definition very well and they strictly follow the definition to create competitive advantage in the US airline industry. (Appendix 1)
Customer orientation
- AA is committed to Customer Service Plan and the American Airlines Customer Assistance Relief Effort (CARE) program. Under these two programs, they are dedicated to provide safe, dependable and friendly air service to all of its customers; to assist passengers and their families after major aircraft-related emergencies.
- AA regularly collects customer needs and requirements. When they get the feedback from customers, they will see what went wrong and take actions to improve it (McManus, S. and Newby, T., 2002).
- AA has a program called A- advantage. This is a program benefit to AA’s frequent flyers. If you fly with AA frequently, you are eligible to become member of the A Advantage. Being a member, you can collect your mileage and exchange the mileage points with some souvenirs or some other benefits.
- AA offers special care services to customers of all kinds. Specifically the company has special services to those customers with disabilities of all kinds. Particular employees are assigned to assist these customers so as to make them enjoy the company’s services.
- The American airlines market orientation model is not only full fledged but also practical in all aspects. Right from the formulation of the customers plan to its subsequent step by step implementation the company shows its commitment in satisfying customer needs. Its customer feedback, interaction and service department go along way in manifesting its market orientation. The company has a healthy relationship with the external environment which is a symbol of market success. The core of a company’s marketing strategy lies in the external environment.
As a result therefore the company’s relationship with the external environment becomes crucial as far as the delivery of customer value is concerned (Saunders et al, 2008).
All In all, to American Airlines is customer oriented as it is in service industry and customers are very key to the success of business.
Competitor orientation
- American Airlines is a major player in the US airline industry; however it faces competition from other companies and in order to stay ahead of the pack the company has a programme through which it keeps track of the activities of its competitors so as to learn how to keep its market portfolio up.
- Jet Blue is one of American Airlines’s biggest competitors. Though American Airlines ranks first in revenue in US airline market, Jet Blue is the best and cheap airline company in the United States. Jet Blue has attracted a large number of passengers who pay more attention to price. Instead of competing fiercely with each other, American Airlines decided to partner with Jet Blue.
- Basing on the revenue passenger miles and available seat miles, the American airlines is the 2nd largest airline on the globe after the famous Delta Air Lines. In other rankings the airline company comes 2nd to Southwest Airlines with regards to the carrying volumes throughout the 1st ten months of the year two thousands and eight. As far as its market segmentation is concerned, according to Bamford and Xystouri (2005), “the airline has only one operating segment which entails the operation of its major subsidiary, American Airlines, and airline subsidiary, the American airline Eagle Holding Corporation.”
Inter Functional Coordination
Inter functional orientation is achieved by the cooperation between the various departments of the airline company to handle marketing and consumer interests.
Organizational Culture
The American airlines organizational structure aids in the formulation and execution of its service delivery model. Its relationship with the customers has been perfected by the company’s customer interaction as well as the feedback system.
Long-term profit focus
The American airline company consequently has a long term perspective as far as service delivery is concerned. The company’s customer plan has well planned procedures on how to meet its market obligation with a long term perspective. All the parameters mentioned above are portrayed as being congruent to the delivery of customer value with an eye on the long term (Jolly, 2003).
American Airlines Client Operations
Since it is an airline with a global network, its clients have the privilege to enjoy its variety of services. The company has a customer service plan through which it ensures quality service delivery to the customers. The airline company operates under two brands: the American airlines and the American eagle. At the heart of its marketing concept lies its endeavour to provide safe, reliable and friendly travel to its clients together with their luggage (Noland and Bradley, 1998). The company is dedicated to ensuring that every flight remains memorable to the customer. And as such it offers all kinds of customer packages depending on their likes. In 2007 together with others the company prepared the department of transportation (DOT) service plan which primarily aimed at dealing with the needs and interests of customers. The report together with the company’s customer plan has gone a long way in assuring the delivery of customer service. In line with its marketing orientation the company offers a wide range of related services to the customers (Weinstein and Bruce, 1999).
Low fare
The idea of low fares is aimed at assisting the not-well-to-do people in society to travel. Under normal circumstances air transport is reserved for the rich. The low income earners are never in a position to afford the fares. The company after interactions with the customers through its market orientation program came up with the system of low fares so as to meet customer’s needs.
Inconveniences
Information concerning any alteration in the availability of services is relayed to the customers in time. The company ensures that the clients don’t go through shocks in case there develops hiccups in the industry. Information regarding change in the time of travelling is relayed in advance through customer’s phone calls. This saves the customers a lot of time, money and convenience. This is true indication of the company’s commitment to customer service delivery.
Baggage delivery
Customers and their luggage normally travel in the same airline so as to minimize cases of theft and misplacement. During cases when the luggage doesn’t arrive in the same flight with the passenger, efforts are made to ensure its delivery within twenty four hours. The company consequently makes efforts to contact customers whose unchecked bags contain contact information.
Handling of customer issues
The company endeavours to be a product and service leader in the airline sector. And as such respond with vigour to customers issues whenever they arise. The customer department of the company has a frontline office equipped with relevant human resource to handle any customer issues in the most appropriate manner. In case of any grievances by the clients the company takes timely responsibility as far as handling them is concerned. Each and every complaint is taken seriously and the response relayed to the customer. Customer orientation is given much weight since the customer relations department acquires useful information from customer focus groups, customer surveys and discussions. It is from here that the company designs the delivery of customer service. Customer information is considered integral and therefore handled with great care. This kind of information is utilised by an organization to accelerate the production of products and services offered. Information from the clients is given first priority so as to customise the services to meet their needs.
Customers with Disabilities
The company offers special care services to customers of all kinds. Specifically the company has special services to those customers with disabilities f all kinds. Particular employees are assigned to assist these customers so as to make them enjoy the company’s services. The company’s market orientation strategy comes into focus as it consults with various disability groups to ensure that their needs are amicably catered for.
Customers Issues and Analysis
The company’s client operation blueprint aims to meet particular goals to ensure the delivery of customer service. The process of setting these goals involves interaction with the customers so as to identify what their needs are. Due care is also given to the customers to ascertain what their opinion about customer delivery is.
The company always seeks to reconcile the service delivered with the customer’s perception of the same (Weinstein and Bruce, 1999). These customer service goals are periodically evaluated to accommodate the ever changing customer needs. To the company, every customer is special and efforts are done to ensure that each customer is accorded the service they deserve and that the safety, comfort and convenience of every customer come first (Weinstein and Bruce, 1999). The customer service plan therefore includes the following aspects:
A four-year period survey was carried out by Bamford D. and Xystouri T. (2005). From passenger complaints record, they found out that, “the majority of complaints concentrate around three areas which were Delays, diversions & cancellations/Punctuality, Service interruptions, e.g. through frequent strikes and Complaints regarding the attitudes of ground staff.”
Ishikawa Method
The Ishikawa Method (1990) described by Slack et al (2007b) has been used to establish the root causes of the above mentioned three areas.
Delay
If we take a look at delays as a problem, according to Bamford and Xystouri (2005), “some of the causes of these problems for example weather which is predictable are however not controlled and there seems to be no initiative which can be put in place to control their consequences.” According to the US Department of Transportation (1989), “70% of delays in the commercial airline service are caused by weather and that in addition, external factors beyond the immediate control of the airline can cause service failure (flight diversion or cancellation due to air-traffic congestion, a failure in another airport where the airline’s aircraft are engaged).”
Let’s put aside those reasons that are not avoidable by people. There are some other factors that cause delay or cancellation of flights. The easiest one to observe is the system problem. Bookings went wrong, system breakdown, too many people checking in at the same time, etc. The other major one that accounts to technical problem is aircraft availability. Fleet planning and structure impact punctuality. It is not only the sheer size of the fleet that is affected; it is also about the variation within and across the aircraft types (Neihues et al, 2001). Aircraft availability also includes unscheduled maintenance. Sometimes, passengers hear announcement that a certain flight is delayed because cabin crew are still cleaning up the aircraft. People always feel annoyed about this announcement, wondering, why can’t they better plan or calculate the time needed?
Service Interruption
The second most complaints that customers make is service interruption. Let’s take strikes for example. Right now, it seems that airline strikes are very popular. On April 28, 2007, pilots of AA marched a half-mile from their union office to the corporate headquarters, shouting all the way about how management is reaping upwards of $180 million in bonuses while pilot pay has fallen during the past five years (Palmeri, 2004).
This can actually be related to human resource management. Since the staff’s needs are not met by the company, they decided to take some actions to raise the attention of the company. This may be a good way to attract company’s attention. However, it greatly affects passengers’ needs. Indirectly, the company is destroying its reputation by not able to meet its staff’s needs.
Ground staff attitudes
The last major complaint is attitudes of ground staff. The airline management come to terms with the fact that training, rigorous recruitment procedures were very crucial in having the right employees on board to sustain the needs of the customers. Dobbs (1993) affirms that, “without formal training, staffs have few tools to meet the expectations of customers or managers and that the level of consistent, appropriate and focused training was found to be a key issue within the airline. Ground staff were not sufficiently trained for the highly ‘customer centered’ aspects of their jobs and therefore lacked appropriate key skills and diplomacy for handling the demands of customers.”
Gap Analysis
Gap analysis is introduced by Parasuraman et al. (1985). It is primarily used for looking at service quality issues between customers’ expectations and service delivered. He divided it into 5 categories, namely:
- Gap 1: Managers do not know what customers expect.
- Gap 2: Managers do not correct shortfalls on what customers expect.
- Gap 3: Variability in performance
- Gap 4: Performance does not meet expectations raised by communications
- Gap 5: A combination of all the previous gaps
This model is very useful in analyzing the problems that AA has encounter. The problems that AA have mainly falls into Gap 3 – The gap which occurs when the actual service delivered is different from what is supposed to be delivered.
Customer Expectations
The American airline company has a diverse base of customers. The company has many customers from virtually all walks of life. However the study only seeks to focus on the business class regular customers. For the purposes of the study these group was thoroughly studied and analyzed. Their expectations of service delivery were the main focus of the study. This was pitted against the performance of the company as far as service delivery is concerned. Among their service expectations were the needs for faster service delivery, convenience and luggage safety.
The Company was found to have been incompetent in handling the whole issue of convenient luggage delivery. Under normal circumstances the luggage travels in the same flight with the customers. In case this is not possible arrangements are made to ensure that the luggage reaches the customers within twenty four hours. However it was realised that in the recent times luggage has taken more than two days to arrive after the customer flight. This has been of great inconvenience to the business class regular customers. As a result the customers launched a complaint with the company for the address of their grievances. The company’s response was quick and fast as it sought to put thins in order. It is against this background that the study revealed the company’s commitment to service delivery.
Problems That Occur In American Airlines (Variance between Customers Expectations and American Airline’s Performance and Expectations
The performance of the American airliners has not been to the extent which is expected by the customers. The expectations were higher than the performance. As much as the performance was not that bad the company did not meets the expectations of the customers fully. As a result there is a lot to be done as far as service delivery is concerned. The effect this company needs to revisit the expectations of its customers and design means of fulfilling them.
Business class travellers of the American airlines have been experiencing several hiccups from the company’s service to them. Specifically the customers have not been satisfied with the frequent delays in the delivery of the luggage (Bowles and Blanchard, 1993). This has caused many inconveniences to the business travellers most of whom have tight business schedules while travelling. The paper analyzes the measures the company has taken to address the issue and their outcome. The issue of reservation also crept in our study when we discovered that the reservation system of the company has not been working well causing a lot of concern among the customers.
The booking system of the business class tickets has experienced several hiccups making a majority of the travellers to kiss flights therefore losing business. The paper takes care of the analysis of the problems of the customers as far as the delivery of customer service is concerned.
The American airline has a multi faceted customer service program through which a number of factors combine to bring about successful satisfaction of customers. Under root cause analysis there are four distinct parameters have influence the company’s market decisions. These are people, machine, methods and materials. This has been instrumental in addressing customer concerns over the quality of service delivered. For instance the recent complaint by the business class regular customers was addressed through the model mentioned above. The relationship between people, machines, process and materials was used.
The evolution and success of any marketing strategy involves the various procedures that are in place to assure service delivery. For the American airlines, this has not been a problem. The company’s customer plan has envisaged the step by step guidelines on how to assure customer satisfaction. The company’s customer interaction module has consistently guaranteed the checks and balances of its marketing strategy.
The company’s frontline and back office operations of customer care have always identified the variances in the customers’ perception in relation to the delivered service. These comparisons help the company update its customer orientation module. The comparative benefit of the existing options is a key stage in the entire analysis. Under this stage the benefits accruing from the company’s efforts and strategies are recognized and therefore strengthened (Poisant, 2002).
Though American Airlines has a very good program to know about customers’ needs, they still can’t meet customers’ needs. It knows very well that all flights should depart and arrive on time. It knows that they should treat their customers nicely and solves all their problems; however passengers are still encountering flight delays.
Conclusion and Recommendations
The development and evolution of the marketing concept has put all the efforts on the satisfaction of the needs of the customer. In deed these are the times when customer is king. The delivery of customer value has therefore taken the centre stage in business management. Every business firm strives by all means to serve the desired value to the customer. It has become the only way to survive in modern day business dynamics. This is a direct result of the evolution that has taken place in the entire business environment (Merlin, S. and Cerasale, V., 2004). Things have changed and there is need for American Airlines to pay total attention to its customers and there respective needs if the company wishes to establish a niche for itself in the airline business. Service delivery to the customer is therefore the key determining factor in the airlines business management. The company has to thrive and increase its interaction with the customers in order to understand their needs. From this interaction with the customers the company can therefore be able to understand the said needs and wishes of its customers. American airline’s customer plan is an epitome of service delivery as envisaged in the key concepts of market orientation and customer satisfaction. The company’s marketing strategy is a reinforcement of the customer’s role in shaping the business endeavours of a firm. The success of the airline company therefore can be attributed to its perfect customer delivery strategies.
The American airlines can make use of the many strategies available for the upgrading of its service delivery system. Chief among them are the various models commonly applied which include; down-sell, usage stimulation in order to minimise or eradicate its challenges which according to Bamford and Xystouri (2005) includes “delays, diversions & cancellations/Punctuality, Service interruptions, e.g. through frequent strikes and Complaints regarding the attitudes of ground staff.”
Often asked questions are how to develop and execute marketing strategies for realizing the delivery of customer value. However the most often used strategies are cross selling and up sell. These two tend to be overused leading to negative customer relationships. The fact remains that there are various strategies that can be used, as well as the different methods to execute them and therefore no need to merely focus on the two. Ishikawa method and gap analysis are some of the models which American Airlines can use to be able to establish a clear picture of its business environment and therefore use the information to come up with intervention to enable it to remain competitive in the market while addressing the needs of its many customers.
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