Lack of services providing to airline customers: a case study of Vietnam Airport Ground Services Co. Ltd – Tan Son Nhat branch

ACKNOWLEDGEMENTS First of all, I would like to express my sincere thanks to UEH - International School of Business for letting me be a part of this incredible journey. It is my great pleasure to come along with dearest lecturers and classmates at ISB. Furthermore, I am deeply indebted to my supervisor, Dr. Nguyen Phong Nguyen for his consistent support and guidance. The completion of my thesis would not have been possible without the nurturing of Dr. Nguyen. Thanks should also go to my lovely former colleagues at VIAGS Tan Son Nhat for providing me valuable data and advices. Especially, I would like to extend my gratitude to my parents and my aunt for their unconditional supports and encouragement. 0 TABLE OF CONTENT ACKNOWLEDGEMENTS........................................................................................ 0 TABLE OF CONTENT.............................................................................................. 1 LIST OF TABLE ........................................................................................................ 2 LIST OF FIGURES .................................................................................................... 2 EXECUTIVE SUMMARY ........................................................................................ 1 Chapter 1: Background ............................................................................................... 2 1.1 Company information .................................................................................... 2 1.2 Symptoms....................................................................................................... 4 1.3 Problem justification .................................................................................... 10 1.3.1 Problem definition.............................................................................. 10 1.3.2 Justify the existence of the problem................................................... 16 1.4 The importance of the problem.................................................................... 18 1.5 Potential causes ............................................................................................ 19 1.6 Causes validation ......................................................................................... 20 Chapter 2: Alternative solution analysis................................................................... 22 2.1 Improve and enhance the quality of service: ............................................... 22 2.2 Training programs for human resources and building rules ........................ 23 2.3 Brand communication .................................................................................. 24 Chapter 3: Action plan.............................................................................................. 27 3.1 Action plan................................................................................................... 27 3.2 Limitation in Action Plan............................................................................. 32 REFERENCES ......................................................................................................... 34 APPENDIX 1............................................................................................................ 37 1 APPENDIX 2............................................................................................................ 38 APPENDIX 3............................................................................................................ 41 APPENDIX 4............................................................................................................ 42 APPENDIX 6............................................................................................................ 47 APPENDIX 7............................................................................................................ 49 APPENDIX 8............................................................................................................ 52 LIST OF TABLE Table 1: Number of passengers going from/to Tan Son Nhat Airport from 2015 to 2019.............................................................................................................. 5 Table 2: SAGS (HCM Branch) business performance ratio from 2017 to 2019 ....... 6 Table 3: VIAGS-TSN business performance ratio from 2017 to 2019...................... 7 Table 4: Number of customers of VIAGS-TSN and SAGS in 2018 & 2019............. 7 LIST OF FIGURES Figure 1: Preliminary cause and effect map of VIAGS-TSN..................................... 8 Figure 2: Updated cause and effect map..................................................................... 9 Figure 3: Final cause and effect map of VIAGS-TSN ............................................. 21 Figure 4: Proposed solution for VIAGS-TSN potential problem............................. 26 2 EXECUTIVE SUMMARY Joining Sky team in June 2010 is a good step for Vietnam Airlines when it asserted its brand to the world in the context of globalization today. However, according to that, every activity of passenger service standards has been set and ensured the compliant commitment of individuals and organizations in the service supply chain for passengers. Vietnam Airport Ground Services Co., Ltd (VIAGS) was required from the Corporation to provide ground service with the criteria of “Safety - Standards - Quality - Efficiency”. The company is committed to providing services to customers on the basis of a quality safety management system in accordance with International Standards ISO 9001:2008, ISAGO standards, and quality agreements agreed with customers. Although with 25 years of professional experience, the company’s brand is increasingly diminished. VIAGS Tan Son Nhat (VIAGS-TSN) – a branch of VIAGS is facing low sales and the reduction of customers in recent years when the customers of the company were unchanged from 2018 to 2019 while the number of customers in existing competitors were increased. There are many given different problems. It is believed that the potential central problem is related to product quality providing to customers. The main cause is poor in planning the material supply of VIAGS-TSN. This paper will divide into main sectors, including identifying existing problems, justifying the central problem, analyzing alternative solutions, and finally giving implementation of an action plan. 1 Chapter 1: Background 1.1 Company information VIAGS is the first business model in Vietnam that specializes in providing synchronous and international standard services at three major airports: Tan Son Nhat, Da Nang, and Noi Bai. With its precursor as a ground service enterprise with 25 years of experience. The Corporation has more than 4,500 skillful staff who are professionally-trained from basic to advanced levels. The company also inherits and develops international qualifications of Safety and Quality Management System (ISO) 9001:2015 and IATA Safety Audit for Ground Operations (ISAGO) granted by IATA. The vision, mission, and core values of VIAGS in generally and VIAGS- TSN in particularly are described as following: VISION VIAGS endeavors to become one of the best ground services companies in Asia. MISSION To provide quality aviation services in accordance with international standards meeting the ever-increasing needs of our clients through an effective corporate governance system and advanced resources. For the community: providing services with high quality for the development of the society and industry. For the airlines, customers: providing reputable, reliable and effective services. For the company members: providing a professional, dynamic and efficient work environment associated with the member’s responsibilities, rights and interests. CORE VALUES Credibility: The highest safety index, outstanding quality services, guarantee of the reliability indicators of our services, sustained improvements of customer credibility 2 are objectives that VIAGS always tries to maintain and commit to customers and airlines. Enthusiasm: Job values, professional ethics are always prioritized so that all VIAGS members are profoundly aware of duties, responsibilities, devoted to work and thoughtful towards customers. Professionalism: VIAGS is the mixture of the consolidation - outstanding characteristics in the supply chain services of each airport will be selected, inherited to synchronize towards an overall high-quality service system of VIAGS. Humanity: Human is the center of the development strategies of VIAGS – taking care of customers by emotions, understanding, and commitments; taking care of staff as a valuable asset to foster, develop, recognize the contributions fairly and humanely. As a subsidiary of VIAGS, the main function is to provide comprehensive ground handling services in air transport lines at Tan Son Nhat International Airport. The main service of the company consists of six segments, including station management services, passenger and baggage handling services, ramp services, load control and flight operation services, cargo and mail warehouse services and executive aviation services. The biggest strength of VIAGS-TSN is that it possesses skilled and well- trained staff from basic to deep, dedicated, friendly service in specialized service in the ground service industry. VIAGS-TSN is ultimately meeting the strict standards of the international aviation industry, the regulations of airport authorities, specialization according to the specific standards of each customer airline. Since its establishment, VIAGS-TSN has more than 1,700 employees and more than 600 ground service equipment to ensure the service of new-generation aircraft, oversized cargo, and overburden flight. VIAGS-TSN is serving more than 30 airline customers. VIAGS- TSN always tries to meet the strict requirements in the ground service of the airlines. However, there is another aspect existing in the process of strengthening the company's position. It is showed in the SWOT analysis in the Appendix, which 3 provided a clear insight into the capability of the company. From the result, it is evident that there is an inverse ratio between the business operating years and the company's sales revenue. In recent years, the image of the company gradually fades away in the eyes of customers, even a large quantity of customers had considered choosing VIAGS-TSN. The company wants to satisfy consumer trends of customers in general terms, not paying attention to unique values than rivals to make up the different feelings from customers. Therefore, to create a good sense in the customer's mind, it requires the company to create "invisible" wealth, in which the service is a matter for the company concerned to be able to develop and enhance competitiveness competition in the market. Indeed, competition among companies today is not only on brand, price, but also the competition in terms of product quality and service. It is the issue which VIAGS-TSN company is facing when the rate of customers is reducing gradually. 1.2 Symptoms The growth of the economy facilitates the development of the air transport industry. The income of the population increased, the development of manufacturing industries increased the solvency, time requirement becomes necessary, so the demand for air travel increased. The air transport market has been expanding with an increase of low- cost aviation segment, and it has continued to maintain a high growth momentum (forecast that the total number of international visitors increased by 16.2%, domestic growth by 13.8%, and charter flights by 35.4% over the same period). Although with 25 years of professional experience, VIAGS-TSN has not been a popular name of customers in the ground service segment. In the context of expanding international relations, international integration has advantages. However, at the same time, it creates pressures on the company's development. It is competition in price as well as service quality to other companies providing ground services at the airport. It is stated that in the environment of high competitive pressure, with the continuous fluctuations of the current macro-economic 4 conditions, customers are the decisive factor for the existence and development of companies providing services at the airport. Each company not only focuses on reaching and attracting new customers in the market, but it is also essential to coordinate with existing customers in continuing the signing contracts as an essential strategy because creating a stable customer base is essential to ensure the business of the company to grow. The issue of maintaining and increasing the quality of service provided in order to satisfy customers has become a significant trend in the competition between the companies providing ground services at the airport. The growth rate of the aviation industry through the years through Tan Son Nhat Airport has increased, the service output of the company is also constantly growing. Air-ground service is a reciprocal day for aviation operations. The growth of aviation operations will create a very favorable operating environment for ground service. Therefore, in recent years with the rise of aviation activities in the region, the number of passengers going to/from Tan Son Nhat airport is increasing. Year Number of passengers 2015 26,546,475 2016 32,486,537 2017 35,906,372 2018 40,511,335 2019 41,110,896 Table 1: Number of passengers going from/to Tan Son Nhat Airport from 2015 to 2019 (Source: The Civil Aviation Administration of Vietnam – CAAV’s report) 5 The more development the air-transport market is, the more newly established companies will be. Therefore the competition sharply raises. VIAGS-TSN Company has not focused on developing internal operations; it is an adverse condition for the company when airline customers choose the other brand to be served their demand, namely Saigon Ground Service (SAGS). This shortcoming means the number of customers coming to the company is not much, so to build the trust of customers becomes more difficult with VIAGS-TSN Company. It is shown clearly in the following tables (table 2 and table 3) when the business performance ratio 2018 - 2019 of SAGS (HCM Branch) is higher more 7.5 times than VIAGS-TSN. SAGS Gross Sales Annual Growth 2017 721,651 - 2018 729,918 1.15% 2019 935,877 28.22% Table 2: SAGS (HCM Branch) business performance ratio from 2017 to 2019 (Source: SAGS financial statement of the year 2017 to 2019) The annual growth of two companies in three years is also markedly different. Although in 2017 and 2018, gross sales of SAGS was much lower than that of VIAGS TSN (18.9% and 23.4%), by 2019, this growth shortened very quickly, to only 5.4%. In particular, the annual growth of VIAGS - TSN plummeted in 2018 and 2019 (1.8 times) while the annual growth of SAGS increased sharply (24.5 times). It can be seen that there were specific weaknesses in the business strategy of VIAGS - TSN. 6 VIAGS TSN Gross Sales Annual Growth 2017 890,352 - 2018 953,134 7.05% 2019 989,015 3.76% Table 3: VIAGS-TSN business performance ratio from 2017 to 2019 (Source: VIAGS-TSN financial statement of the year 2017 to 2019) Moreover, VIAGS-TSN Company is facing the reduction of customers as well as low sales, particularly in terms of quantity in recent years, which influencing negatively to value earned per customers as well as the sale revenue of the company. In 2019: VIAGS-TSN has no new airline customers. SAGS signed three new contracts with Air Busan from Korea, Edelweiss Air from Switzerland, Indigo from India. 2018 2019 VIAGS-TSN 38 38 SAGS 36 39 Total 74 77 Table 4: Number of customers of VIAGS-TSN and SAGS in 2018 & 2019 Besides that, the more crucial issue is in terms of internal aspect that the company is currently lacking the service scope, especially ground package and ramp equipment. The number of instructors is not sufficient to meet the needs of customers in the crowded season. Due to influenced so much from its parent company, VIAGS-TSN products are no significant differences with other companies'. The products of the company did capture the desired needs of the customer but have not yet come up with something outstanding point. 7 Based on the SWOT analysis, the financial report above with the responses of interviewees in the Appendix, in summary, the symptom leading to the main problem of VIAGS-TSN is low sales. The sales growth shows it was indented reduction rather than competitors, the decrease in the number of customers as well as perceive quality when the rate of change from using VIAGS-TSN to other companies is high. Potential central problems Lack of new and wide range Ramp equipment Lack of services providing to customers No boost more sales with old customers No new customers Symptom Low Sales Figure 1: Preliminary cause and effect map of VIAGS - TSN Figure 1 shows the preliminary cause and effect of VIAGS - TSN. The revenue of any company depends on the number of customers using products and services. Customers are always at the receiving end of the services of the company. If they are satisfied with the organization's services, they stay and become loyal, and the organization benefits in terms of revenues, and so on (Koi-Akrofi et al., 2019). The symptom of VIAGS - TSN currently is low sales, which is due to no new customers and no boost more sales with old customers. It involved providing services of the company which has not satisfied with customers, including tangible products (equipment), intangible product (service), price, appearance of competitors, changing law and political trends or market situation. For VIAGS - TSN company situation and 8 base on in-depth interviews with Sales and Marketing Manager, Airline customers representative, Operation Team Leader,… There are four potential problems are leading to low sales described in figure 2 below. Potential central problems Lack of new and wide range Ramp equipment: still using old equipment Lack of services: limited in providing various services Ground handling charge: high price No new customers Market situation: appearance of competitors Figure 2: Updated cause and effect map 9 1.3 Problem justification 1.3.1 Problem definition The service nowadays is merely a label attached to a product. Service is a significant factor in the success of the business, and there is now a lot of the concept of "service" being perceived differently in each researcher and from many different angles. According to MUTRAP's document - Multilateral Trade Assistance Project (2006), so far, there is no official definition of services. Researchers in the field of marketing and business offer many service concepts. However, the most commonly cited concept is that of Valarie A. Zeithaml and Mary J. Bitner (2000): "Services are the behaviors, processes, and ways of performing a certain job to create value for customers, satisfying customer needs and expectations." (pp.41) Service is one of an important factor in terms of image, feeling, instant message when people think about a company or product". This concept is relatively simple, but it also covers almost all elements of the brand definition. It is believed that service is used to distinguish between different companies. The signs can be words, images, a combination of factors reflecting by the color". Thus, the service confirmed the seller or manufacturer. Service is also the commitment of the seller to ensure supplying to consumers of products characterized by the company in terms of the characteristics, benefits, and services. World Intellectual Property Organization (WIPO) affirmed that "service is an intangible sign to identify a particular individual or organization. " Therefore, the brand is used to help customers distinguish the goods or services of the company with the same products as competitors. Service today has become one of the most important factors for success in business. Although business is the production of goods; we are working for a large corporation or as merely operating a small company, the service is always considered as the first factor governing the success or failure of the company. For that reason, success in service is successful in business. Moreover, the main objective of service 10