Term Paper on "Commercial Aviation"

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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… READ MORE