Lack of services providing to airline customers a case study of vietnam airport ground services co ltd tan son nhat branch

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business NGUYEN VAN SANG LACK OF SERVICES PROVIDING TO AIRLINE CUSTOMERS: A CASE STUDY OF VIETNAM AIRPORT GROUND SERVICES CO LTD - TAN SON NHAT BRANCH MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City - Year 2020 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business NGUYEN VAN SANG LACK OF SERVICES PROVIDING TO AIRLINE CUSTOMERS: A CASE STUDY OF VIETNAM AIRPORT GROUND SERVICES CO LTD - TAN SON NHAT BRANCH MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Dr NGUYEN PHONG NGUYEN Ho Chi Minh City - Year 2020 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 TABLE OF CONTENT ACKNOWLEDGEMENTS TABLE OF CONTENT LIST OF TABLE LIST OF FIGURES EXECUTIVE SUMMARY Chapter 1: Background 1.1 Company information 1.2 Symptoms 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 37 APPENDIX 38 APPENDIX 41 APPENDIX 42 APPENDIX 47 APPENDIX 49 APPENDIX 52 LIST OF TABLE Table 1: Number of passengers going from/to Tan Son Nhat Airport from 2015 to 2019 Table 2: SAGS (HCM Branch) business performance ratio from 2017 to 2019 Table 3: VIAGS-TSN business performance ratio from 2017 to 2019 Table 4: Number of customers of VIAGS-TSN and SAGS in 2018 & 2019 LIST OF FIGURES Figure 1: Preliminary cause and effect map of VIAGS-TSN Figure 2: Updated cause and effect map Figure 3: Final cause and effect map of VIAGS-TSN 21 Figure 4: Proposed solution for VIAGS-TSN potential problem 26 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 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 VIAGSTSN 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 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 welltrained 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 VIAGSTSN 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 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 lowcost 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 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) - The organization becomes bulky and ineffective due to the inappropriate use of resources, increasing indirect costs - Inequality in exploitation using common resources at the airport - The lack of completeness in the service line - The legal infrastructure is incomplete, the policies and regulations of the law have not been consistent, often changed, and the management mechanism is still inadequate - Technological technology, equipment quickly backward - Fierce price competition - Insufficient awareness of competition staff, the emergence of more competitors - Instability of economic and political situation in the region and the world 40 APPENDIX Internal Factor Matrix No Factors Service of VIAGS-TSN fully meet customers’ requirement Service of VIAGS-TSN have created a good reputation in the market Quality management system meets ISO 9001:2000 and IOSA standards Weight Rating Score 0.1 0.3 0.12 0.48 0.05 0.15 Computerized information system 0.05 0.2 Have a good relationship with customers 0.08 0.32 The equipment is invested promptly 0.05 0.15 0.07 0.21 The structure governed by Vietnam Airlines Corporation The workforce is trained basically 0.05 0.2 Customer support service 0.07 0.21 10 Board of Directors has high qualification 0.1 0.3 11 Good financial capability 0.1 0.3 12 Good promotion 0.06 0.12 0.05 0.15 0.05 0.1 13 14 Management team did not meet the requirements Unpacked service Total 3.19 41 APPENDIX Interview transcript with Station Manager – Cambodia Angkor Air (VIAGS-TSN’s current airline customer) Q1: Can you introduce yourself? Interviewee: “I’m Phan Chinh Bac – Station Manager of Cambodia Angkor Air (K6), we are a customer who is using VIAGS-TSN’s ground handling services” Q2: Can you share with me about the current operational activities of your airline in Tan Son Nhat airport? Interviewee: “Our airline is operating daily flights from/to Cambodia via Tan Son Nhat We have at least flights per day, which connects passengers from/to our main ports: Phnom Penh, Siem Reap, and Sihanouk Ville” Q3: As K6 is using services from VIAGS-TSN, can you share with me your thoughts of their services? What makes you satisfy and what makes you unsatisfied? Interviewee: “As we are one of just some airlines who operating more than flights per day in Tan Son Nhat, so I know clearly about VIAGS-TSN services Generally, they are doing an excellent job from check-in counters to ramp services” “I am really grateful for VIAGS-TSN’s dedicated check-in team and ramp coordinate team They are well-trained, professional working behavior by following our policies strictly, closely cooperate with our airline representatives In short, we are delighted with them” “One service that makes us uncomfortable is a ticketing service Since VIAGS-TSN does not have that service, so they sub-contract to the third-party (SRO – Southern 42 Region Office of Vietnam Airlines) to this It causes a lot of difficulties while working with them” “Since we are operating aircraft ATR-72 which parks in a remote parking bay, we have to use Cobus for passenger transport VIAGS-TSN also does not have this service They have to sub-contract with SASCO” Q4: Can you share with me more about your difficulties while using ticketing services from SRO and passenger transport from SASCO? Interviewee: “Ticketing services include excess baggage charge, upgrading options, and last minutes ticket sales This service is un-separated with check-in service but each service is handled by different Company, VIAGS-TSN and SRO Sometimes they misunderstand each other and have undesirable conflicts We have to cost more timesolving problems due to these reasons Furthermore, there shall be separated monthly reports from both companies which makes more time for us to cross-check Usually, ticketing agents from SRO are not well-acknowledged our sales policies, we feel like they are not doing their jobs with good intentions” “Relating to passenger transport, it also causes difficulties due to we have to contact another hotline of SASCO Sometimes communication between K6, VIAGS-TSN and SASCO is not smooth If VIAGS-TSN can provide this service, communication for boarding passengers would be easy for us” Q5: Can you tell me about the possibility of continuing cooperation with VIAGSTSN? Do you have any plans of changing to another ground handling company? Interviewee: “Since K6 and VIAGS-TSN are long-term partners, we still want to continue signing contracts with them But due to our expenses are increasing, we will ask VIAGS-TSN to discount ground handling charges” 43 “So far as I know some of my colleagues working for other airlines which are a customer of VIAGS-TSN, they also told me that their airlines will also consider negotiating with VIAGS-TSN for better charges” Q6: Do you have any advice for VIAGS-TSN to improve the performance of their services? Interviewee: “They should immediately work for additional services such as passenger ramp transport and ticketing services Due to the lack of these two services, not only K6 but also other airline customers of VIAGS-TSN will feel uncomfortable and not professional” “Some of their ramp equipment such as ground power unit (GPU), portable toilet truck, high-lift for disability, … is old, it would be good if they can invest for the new one” 44 APPENDIX Interview transcript with Customer Services Supervisor – China Airlines (VIAGS-TSN’s current airline customer) Q1: Can you introduce yourself? Interviewee: “I’m Nguyen Hoang Hoai Viet – Customer Services Supervisor of China Airlines (CI), we are a customer who is using VIAGS-TSN’s ground handling services” Q2: Can you share with me about the current operational activities of your airline in Tan Son Nhat airport? Interviewee: “Our airline is operating daily flights from/to Taiwan via Tan Son Nhat We have two per day, which connects passengers from/to Taipei City – the capital city of Taiwan” Q3: As CI is using services from VIAGS-TSN, can you share with me your thoughts on their services? What makes you satisfy and what makes you unsatisfied? Interviewee: “VIAGS-TSN are doing a good job in ground services” “Since CI has operated a long time ago and VIAGS-TSN has a strong team which understands clearly about our policies and procedures” “One service that makes us uncomfortable is a ticketing service Since VIAGS-TSN does not have that service, so they sub-contract to the third-party (SRO – Southern Region Office of Vietnam Airlines) to this It causes a lot of difficulties while working with them” Q4: Can you share with me more about your difficulties while using ticketing services from SRO? Interviewee: 45 “Ticketing services include excess baggage charge, upgrading options, and last minutes ticket sales This service is handling by SRO who has been sub-contracted by VIAGS-TSN Usually, ticketing agents from SRO are not well-acknowledged our sales policies, we feel like they are not doing their jobs with good intentions We have to remind them monthly regarding our updated policies if have” Q5: Can you tell me about the possibility of continuing cooperation with VIAGSTSN? Do you have any plans of changing to another ground handling company? Interviewee: “We (CI) and VIAGS-TSN are long-term partners, we still want to continue to cooperate with them” “Our headquarters signed a bilateral contract with Vietnam Airlines (VN), and VIAGS-TSN is a subsidiary company of VN, thus we will continue to cooperate with VIAGS-TSN” Q6: Do you have any advice for VIAGS-TSN to improve the performance of their services? Interviewee: “Regarding my answer to previous questions, I think they should conduct additional services such as ticketing services” “One more thing is VIAGS-TSN should invest for the new ramp equipment So far we often meet problems during aircraft parking due to old equipment broke-down It did not cause serious problems but I think they should consider this” 46 APPENDIX Interview transcript with Operation Center Team Leader (Main responsible in VIAGS-TSN Operation supervision) Q1: Can you introduce yourself? Interviewee: “I’m Xuan Hung – Team Leader of Operation Center, VIAGS-TSN” Q2: Can you share with me the responsibilities of your department? Interviewee: “Our department is in charge of controlling, coordinating whole operation activities of VIAGS-TSN We are the one who will make a decision in case of irregularities, contact and receive orders from airline customers, and deploy tasks to relevant departments” Q3: Your daily work is communicating with airline customers, can you share with me about some comments or complaints that you receive the most from them? Interviewee: “We have many airline customers operating scheduled/non-scheduled flights from/to Tan Son Nhat Many problems happened during daily operations Nevertheless, the most complaint from our customers is our equipment sometimes broken down during ground time while aircraft are at the parking bay It usually caused flight delayed, and the customers are not happy about it” Q4: Does the broke-down usually happen? What is the reason of this problem? Interviewee: “It occasionally happens Due to most of our ramp equipment is old Some equipment operated from the 1990s and 2000s, the time of our first generation when the company established” 47 Q5: Can you tell me what did airline customers complain about this? Interviewee: “They surely unsatisfied about our services due to the broke-down caused their flight delay Some airlines requested us not to allow the broken equipment to handle their flights anymore With a specific type, we have the quantity from one to eight types of equipment per type, but due to a huge operation statement in Tan Son Nhat, we have to use the maximum of our equipment capability” “VIAGS-TSN also has a maintenance department that will handle maintenance services for all equipment But it just only works for a temporary period The key point is they are old and can not normally work like a brand new one” Q6: Beside ramp equipment, can you share with me about other services you think that should be improved? Interviewee: “One of the services that VIAGS-TSN lack of, it is Cobus We not have Cobus for passenger transportation We are using SASCO’s service” Q7: Can you share with me about this service? Does the airline customer satisfy? Interviewee: “SASCO has enough capability of Cobus to sub-contract with VIAGS-TSN Sometimes they come late to aircraft, which made passengers wait for a long time We often receive complaints from airline customers Due VIAGS-TSN signed directly contract with airlines, so we have to work with SASCO to solve the complaint” “It would better if VIAGS-TSN can invest for Cobus, then we can supply passenger transportation service for airline customers When this service is included in our basic service package, we will easily control, and ground handling performance of VIAGSTSN shall be improved” 48 APPENDIX Interview transcript with Sales & Marketing General Manager (Main responsible in Sales of VIAGS-TSN) Q1: Can you introduce yourself? Interviewee: “I’m Nguyen Trung Kien – Sales & Marketing General Manager of VIAGS-TSN.” Q2: Can you share with me the responsibilities of your department? Interviewee: “My department is responsible for sales, negotiate and sign ground handling services contracts, ancillaries service contracts with airline customers operating in Tan Son Nhat Airport, including regular and Adhoc/charter flight operations.” Q3: In 2019, can you share with me about the ground services market in Tan Son Nhat Airport? How many new airlines launch new flight routes from/to Tan Son Nhat, and how many contracts did you get from them? Interviewee: “In 2019, there are new airlines launched their regular flights from/to Tan Son Nhat They are Air Busan from Korea, Edelweiss Air from Switzerland, Indigo from India We did have contract negotiation with them but can not sign any ground handling contracts with all of these airlines” Q4: How many companies are the competitors of VIAGS-TSN? Furthermore, how many contracts are signed with these competitors? Interviewee: “In the scope of Tan Son Nhat Airport, we have only one competitor named SAGS – Saigon Ground Services, which is a subsidiary of ACV – Airport Corporation of Vietnam.” 49 “All of three airlines, as I said has signed ground handling contracts with SAGS in 2019” Q5: Can you provide me, which is the advantage of SAGS? Moreover, why VIAGSTSN can not win any contracts with new airlines? Interviewee: “First of all, it matters due to handling charges We have basic charges which are approved by our headquarter – VIAGS Our basic handling charges are higher than SAGS We have tried our best to seek our top management for approval of deduction, but the price is still higher SAGS has advantages of pricing due to they have remission of ACV in check-in counter, office rentals, airport services, … premises.” “New airline customers also have concerns about our lack of services and old ramp equipment compared to SAGS That is why they chose SAGS instead of VIAGSTSN” Q6: Can you provide more specific information regarding a lack of services and old ramp equipment? Interviewee: “VIAGS-TSN has struggled in dealing with airline customers by lack of Ticketing services and Passenger transport in ramp field We always have to subcontract with third parties for these services They are SRO – Southern Region Office of Vietnam Airlines to perform Ticketing services and SASCO - Southern Airports Services Joint Stock Company to perform Passenger transport services” “In recent years, we can not get permission from CAAV – Civil Aviation Administration Vietnam of providing Ticketing services, our headquarters is still working on it, and I hope that we can get permission and conduct training for that service.” “Regarding Passenger transport services, we not have a Cobus vehicle That is why we have to sub-contract with SASCO” 50 “Our ramp equipment is currently dated 10 to 20-year-old of operation Most of them are obsolete SAGS is stronger by their new and modern ramp equipment, all of the equipment is less than 10-year-old, some are just to 3-year-old due to they conducted investing in purchasing new ones recently” Q7: Do you think that VIAGS-TSN’s customer service of the staff is one of the reasons that airlines customers choose SAGS? Interviewee: “No, I think VIAGS-TSN has the best training basis for all of our staff Our current customers are delighted with VIAGS-TSN customer services We proud of having professional and well-trained staff.” Q8: What is your suggested solution for all of the challenges? Interviewee: “First of all, by the rapidly growing of Low-Cost Carriers, it means the low-cost airlines who always need the best and competitive ground handling charge, we need to conduct a review and evaluate the entire price policies.” “VIAGS-TSN should seriously conduct working closely with headquarter – VIAGS to improve services’ performance such as: Urgently to work with CAAV for adding ticketing services to improve services scope of the company, conduct investment on purchasing new and modern equipment, especially Cobus for passenger transport services.” 51 APPENDIX Interview transcript with Deputy Station Manager – Air Indigo (SAGS’ new airline customer in 2019) Q1: Can you introduce yourself? Interviewee: “I’m Trung – Deputy Station Manager of Air Indigo (6E) in Tan Son Nhat Airport” Q2: As I know your airlines signed a contract with SAGS for ground handling services in Tan Son Nhat Do you know there was another company named VIAGSTSN? Interviewee: “Yes, of course, we know it We had a negotiation with both SAGS a nd VIAGS-TSN for ground handling contracts But SAGS won it” Q3: Can you share with me about the reason why 6E chose SAGS instead of VIAGSTSN? Interviewee: “First of all, it is all about the price After three times of price revision, the basic ground handling charge of VIAGS-TSN is still around 03% higher than SAGS” “Secondly, when we conduct auditing VIAGS-TSN and SAGS, we found that ramp equipment of SAGS is better than VIAGS-TSN There should be an example: - The average service life of Push-back trucks: SAGS is years, VIAGS-TSN is 16 years SAGS even has towbar-less tractors, which are the most modern ones in the aviation industry - The average service life of Ground power units (GPU): SAGS is years, VIAGS-TSN is 15 years.” 52 “Lastly, 6E is a Low-Cost Carrier (LCC) and SAGS is a company that is more familiar with LCC than VIAGS-TSN.” Q4: Can you share with me more specific about ground handling charges of both companies? Are prices included in the same services? Interviewee: “We sent the same request for proposal to both companies, so there should be the same services included Like I said before, the price of VIAGS-TSN is higher than SAGS” Q5: In your opinion, what is the reason behind the higher price of VIAGS-TSN? Interviewee: “We found that VIAGS-TSN is lacking 02 services: Ticketing services and Passenger transportation by Cobus They have to subcontract with third companies to perform these services So I think this is why they have difficulties in price deduction” Q6: Do you think the lack of 02 services of VIAGS-TSN is the reason why 6E did not sign a contract with them? Interviewee: “Yes, for sure Our headquarter had conducted a very careful assessment of the contract With the lack of 02 services and the higher price, we know what company we would choose” Q7: Do you have any recommendations for VIAGS-TSN to improve their services and to get more new airline customers? Interviewee: “They should immediately work to add Ticketing services and Passenger transport service to their service scope When having these services, they can easily manage the handling charges” 53 “One more thing is that they should invest in new ramp equipment, their equipment is very old It could make serious effects on their daily operation” 54 ... joining of economic alliances of the country, the participation of aviation alliances of Vietnam Airlines to allow aviation activities to share benefits - Having close relationships with many customers, ... with me about the current operational activities of your airline in Tan Son Nhat airport? Interviewee: “Our airline is operating daily flights from /to Cambodia via Tan Son Nhat We have at least flights... 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