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“Customer Satisfaction of Legacy carrier v/s Low cost

carriers”

(A comparative study with reference to customer satisfaction of Legacy carrier Emirates

Airlines versus Low cost carrier’s in UAE & recommendations for changes in the

operational strategy of Emirates airline)

SYNOPSIS FOR DISSERTATION TO BE SUBMITTED BY SPRING 2014

TO

WISDOM BUSINESS SCHOOL FZE

In partial fulfillment of the requirements for the award of the MBA Degree in Operations

Managment from Sikkim Manipal University, India

SUBMITTED BY:

Mr. Rakesh Shalikram Meshram

Roll number 1304001635, Operations Management

Under the Guidance of

Mr. Girish Nair

MBA, Finance, Post Box No: 686

Dubai

SUBMITTED TO

Project Coordinator,

Wisdom Business School,

RAKIA Free zone.

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INTRODUCTION

The aviation industry has reached a crossroad. While on one hand fuel and labour costs continue

to be key issues, the phenomenal growth in passenger traffic has created new opportunities for

growth. In this highly competitive industry, while operational efficiency helps reduce costs,

customer satisfaction is the key to market leadership and sustained profitability in the long term.

One of the key dimensions of competition in the aviation industry is unit cost. Quite simply, a

low unit cost is a competitive advantage as it allows airlines to be profitable at low fares. One of

the difficulties in comparing unit costs is that they vary according to average trip length.

In general, the cost of producing a seat-kilometre falls as average sector length increases since

the fixed costs are amortised over more seat-kms and variable costs such as fuel are more

efficiently consumed in longer flights.

Air transportation plays a substantial role in world economic activity, and society relies heavily

on the benefits associated with aviation. The aviation industry includes suppliers and operators of

aircraft, component manufacturers, fuel suppliers, airports, and air navigation service providers.

Its customers represent every sector of the world’s economy and every segment of the world’s

population.

The competitive nature of the aviation industry has become more intense in recent years. As the

competetiveness intensifies, the ability of the firms within the industry to withstand extended

periods of productive inefficiency diminishes. Economic theory clearly establishes the

importance of measuring efficiency in the aviation industry. Those firms with lower level of

efficiency are likely to feel the impact of economic dynamics more severly. The concept of

efficiency here is the capability of a unit in utilizing input to produce output. In the context of

airline, units assessed are “services” and the output produced are “customer satisfaction” which

also impacts the sales and growth of the carrier.

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COMPANY PROFILE

Emirates is the international airline of the United Arab Emirates. Its main activity is the

provision of commercial air transportation services. On 25th October 1985, Emirates flew its

first routes out of Dubai with just two aircraft a leased Boeing 737 and an Airbus 300 B4. Then

as now, the goal was quality, not quantity, and in the years since taking those first small steps

onto the regional travel scene, Emirates has evolved into a globally influential travel and tourism

conglomerate known the world over their commitment to the highest standards of quality in

every aspect of business.

With a fleet of more than 232 aircraft, Emirates currently fly to over 147 destinations in more

than 80 countries across six continents from its hub in Dubai and their network is expanding

constantly. Over 1,500 Emirates flights depart Dubai each week on their way to destinations on

six continents. In recent years, Emirates has made numerous significant announcements

regarding the future of its already state-of-the-art fleet. It has a particularly strong presence in the

South and Southeast Asian region, which together connect Dubai with more international

destinations in the region than any other Middle Eastern airline. The countries with the largest

number of airports served by Emirates are India with 10, United States with 9, the United

Kingdom with 6, Australia and Pakistan with 5. Their services includes Aircraft operations

(passenger), Aircraft operations (sky cargo), Emirates airport services, Emirates flight catering,

Emirates destination and leisure management, Emirates hotels and Emirates global call centers.

UAE’s aviation sector is soaring high. Most of its airline companies are experiencing robust

growth and are rapidly extending their routes and fleet size. It could be safely assumed that

UAE’s overall aviation sector is driven by its favorable geographic location, mounting tourist

inflow and government backed economic model, which strongly emphasizes on aviation sector.

Not to forget, the hospitality sector as well.

Situated on the crossroads of East and West, UAE’s aviation sector has diverse components. At

one end, it has high end carriers such as Emirates and Etihad with their extensive global network;

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on the other hand it has efficient and successful short haul budget airlines such as Air Arabia and

Fly Dubai.

In the 1st half of 2000, aviation in UAE witnessed a new change with Air Arabia, the 1st ever

UAE low cost carriers making an entry. There were apprehensions as low cost carriers was a

relatively newer concept. Nevertheless, Sharjah’s flagship carrier (It is now RAK’s official

airline as well), which also happens to be publicly listed, has been a profitable venture since its

inception.

INDUSTRY PROFILE

The UAE carriers are consistently recognized for their innovative andcutting edge developments,

while maintaining an enviable safety record. In addition to their fleet and network

expansion,UAE carriers continue their march towards growth with significant improvements in

their business strategy, joining hands with some of the major airlines either through acquisition

of stakes or code sharing. Whilst Emirates hassigned a 10-year partnership deal with Qantas,

Etihad is aiming to extend its international partnerships by entering into code-share agreements

and purchasing minority shares in airlines from countries stretching from Germany to Australia.

Other UAE carriers, suchas Air Arabia and Fly Dubai are also looking at continuous expansion

and growth plans.

This study is targeting to find out the service efficiency and customer satisfaction between legacy

carrier Emirates Airlines and other low cost carrier in the UAE by ……………….. for the last 2

years and the low cost carriers has become reasonably popular here due to the marketing efforts

and activities of the company.

This study helps to review the myths of UAE operating carriers, & explores the concepts &

models of airline functioning. It provides empirical evidence of convergence and divergence in

passenger behavior and covers various psychological & sociological aspects that contribute in

opting decision-making process with relate to choosing airlines.

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The study focuses on level of satisfaction of passengers that helps airlines to improve their

operating or service provide strategies with better understanding of the passengers expectations

and needs. The study is conducted by exploring the following issue:

The philosophy of how legacy carrier Emirates airlines operates and select

different strategies as compared to the low cost carrier service’s under study (e.g.

airlines, products)

The psychological behavior of consumers while taking decisions in selecting

efficient airline.

The Environmental factors responsible for making customer to choose airline in

terms of cost, service facility and security concerned.

How consumer motivation & decision strategies differ between airlines that

differ in their level of importance or interest that they entail for choosing.

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PROBLEM IDENTIFICATION AND DEVELOPMENT

The brand under study Emirates Airlines has been operating during the last 29 years consistently

with an impeccable track record of sales as compared to the similar brands in the international

market. Emirates business model is the business model that lies at the heart of Emirates

commercial success. Its main ingredients are a lean workforce comparable to a low cost carrier

and a flat organizational structure that allows the airline to maintain low over head costs.

Emirates has got a up-brand reputation due to the marketing strategy adopted by the company in

developing a blueprint for customer service and capturing the customer expectation as per

changes happening from time to time. But of late, it is found that the airline has been losing its

brand loyalty and brand attractiveness due to various factors which is unknown to the company

so far. So the issue under study is to capture the real reasons for losing the brand equity by the

company in this market and understand the intricancies of changes that has been taking place in

the expectations of the customer.

The problem development area is focused on customer satisfaction which is the study of

individual passengers, travel agencies, business travelers and the processes legacy carrier and

low cost carrier use to adopt strategy to satisfy passeneger needs. In all there are number of

reasons why passengers should be able to look forward to flying longer for less. UAE carrier’s

big draw back is as they cant operate domestic sectors hence target sectors are mainly

international market. Market and environmental factors affecting sustainability of Emirates

airlines and this is clear opportunity for airlines to generate additional revenue through providing

airport transfer services for its passengers at a reduced cost also match up the competitive fares

which low cost carriers provide by reducing or adopting “no frill” policy. Out of number of

aircrafts operates to specific city from which few lower capacity aircrafts can be operated

targeting low profile passengers this way emirates can reduce their maintaine cost attract new

customers retaining the existing one’s. In short , we may say that the whether it is in Arab World,

US, Europe, Asia or Africa for passengers or any organization cost is the prime concern. From

passengers perspective value for money is when they get a cheap flight ticket at a convienent

time to reach their destination. This study is an effort to elicit information about customer

satisfaction by systematically approaching the problem under study.

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OBJECTIVE AND SCOPE OF STUDY

Objectives of the study:

To perform a comparative analysis of operational efficiency of Emirates airlines

as compared to other Low cost carriers.

To study whether there is a significant difference between the customer

satisfaction level of Emirates airline and that of Low cost carriers.

To study the demographic and behavioral attitude of travelers while choosing

airline for travel.

To suggest the operational strategies to improve the sales performance of

Emirates airlines.

.

Importance & Scope of the study:

In view of the changes taking place in the aviation industry, it is important to identify the

characteristics of various category passengers using airlines with different product elements.

Both legacy carrier and Low cost carriers should find the outcome of such effort useful to

enhance their understanding of their market segments and, accordingly, develop products to

effectively serve the needs of each segment. The study is conducted for the customer satisfaction

level with regard to selection of Emirates airline reputed brand in the avaiation industry from

UAE. Emirates as a group has wide range of products available in the tourism industry for large

segment of customers and plays an extensive role in the boosting of UAE economy. The scope of

the study is to analyze the different problems faced by the airline industry in the current

competitive market, and to identify and prevent defects in service related process to anticipate,

achieve or exceed customer satisfaction.

But my present study is restricted to operational service efficiency and customer satisfaction of

legacy carrier Emirates airline versus low cost carrier primarily with a time focus of the

performance of the brand for the last few years based on the secondary data recorded in the

system coupled with the primary data collected from various sources about the current issue.

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Since the study is limited to the current issues mainly, the cost factor is negligible as compared to

the benefit that we expect from the study.

HYPOTHESIS FORMULATION

In exploring the difference between customer satisfaction level in legacy carrier of Emirates

airlines to that of other low cost carriers, the study will examine demographic and behavioral

similarities and differences between two samples of business travelers, one using low cost

carrier and other using legacy carrier Emirates airline which represent two distinct market

segment. Following is the hypothesis for objective - To study whether there is a significant

difference between the customers satisfaction level of Emirates airline and that of Low cost

carriers.

Null Hypothesis (Ho) – There is no significant difference between the customer’s

satisfaction level of Emirates airline and that of low cost carrier.

Alternative Hypothesis (H1) - There is significant difference between the customer’s

satisfaction level of Emirates airline and that of low cost carrier.

UNIVERSE AND SAMPLING METHOD

My study is based on a research design that consists of developing a questionnaire comprises of 10 to 15

questions to the selected passengers, questions each to the business passengers, leisure travelers,

passengers with low income, high profile passengers and travel agents etc. The total universe is

comprised of all categories of passengers in Dubai specifically and UAE in general.

In the sampling method, I will be selecting a sample size of approximate 50 passengers

representative sample and find out the average. Sample unit will be combination of various

category travelers i.e business passengers, leisure travelers, lowincome expatriates and travel

agents.

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For this project the research instruments used for this survey were structured questionnaires. The

questionnaires were designed to find the operationa; efficiency level and customer satisfaction

level of Airline industry in U.A.E. The samples taken from the whole population is around 50

from various groups that comprises of various categories of air travelers.

DATA COLLECTION

Collection of data is the 1st and the most important part of a statistical inquiry with intention of

finding out an organizational problem. The process of systematically recording the results

obtained after an investigation is called as collection of data which is the most important part of a

study as the entire study and its interpretation depends upon the data that we collect. My

objective is to study about the real problem that my department is confronting now and hence, I

intend to collect data from primary sources which will be supported by data from secondary

sources that is available from various sources. From these data, the statistical analysis will be

done after proper classisficiation, coding and tabulation.

SOURCES OF DATA

There are different sources of collection of data for my study in question. For deciding the

sources of data, I have considered the purpose for inquiry and found that the following are the

broad sources of data:

a. Primary Data

b. Secondary Data

a. Primary Data

Primary data relates to data which has been collected first hand and which has been collected for

the purpose of analysis. It is undertaken, when data needed by the researcher does not exist, or

are dated inaccurate, incomplete or unreliable, the researcher has to collect primary data. The

primary data was collected through questionnaires.

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Sources of Primary Data - Primary data was collected through

Various category customers (business travelers, leisure travelers etc).

Travel agents.

Methods of Collecting Primary Data:

Direct Personal Investigation i.e. Interview Method:

Under this method, I intend to collect data personally by directly interviewing various

category passengers like business travelers, leisure travelers, income category expatriates,

travel agents, expert opinion from airline employees. Data will be collected by asking

questions relating to the inquiry.

Indirect Oral Investigation

Under this method, I does not collect the information directly, instead I got them

indirectly, through various departments airline experts, product marketing professionals,

ex employees of organization who know the information and who are ready to part away

with the information they posses. This method issued in those cases were either direct

contact is not possible or were the information to be collected are in the nature of

complex one.

Information Through Mailed Questionnaire:

Under this method, the structured questionnaire drafted by me with the intention of

collecting the data will be mailed to the respondents wherever I am assured that the reply

will be there and in those cases, response cannot be expected, I intend to contact them

directly with the questionnaire.

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b. Secondary Data

Secondary research invariably precedes primary research. These are the data that were collected

for another purpose and already exist somewhere.

Sources of Secondary data –

In house magazines of Emirates airline like Safar.

Organisational intranet website.

Internet website.

Brouchers, magazines.

Annual financial and sales report’s

DATA ANALYSIS

Analysis of data is a process of raw data that has been collected must be refined and

structured in such a format that can be lead itself to staifactory level. The collected data

will be inspected, edited coded and transformed. The process will start by validating the

measuring instrument which could be questionnaire or any other primary technique. Data

analysis has multiple facets and approaches, encompassing diverse techniques under a

variety of names, in different business, science, and social science domains.

Based on my defined objectives in my study, I will proceed with the following systematic

ways to analyze the data that I have collected through primary sources and recorded from

secondary sources. The data collected through primary source will be assessed by

assimiliating the data with the secondary soruces. The data analysis is done as per the

following procedure:

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a. Measurent Phase - Classification, Tabulation and Codification

As per my first descriptive objective “perform a comparative analysis of operational

efficiency of Emirates airlines as compared to other low cost carrier”. On the basis

of quantitative and qualitative data analysis I will be using the statistical tool of

classification, tabulation and codification to derive operational efficiency segment under

study. All the statistical techniques will be applied to codify the data as per my

requirements.

b. Analyzing Phase - Pareto Analysis

As per my third objective “To study the demographic and behavioral attitude of

travelers while choosing airline for travel” I will be using Pareto Analysis of 80:20

principle on the data collected from the questionnaires, namely complaints,

information updates, ground services etc. I will find out the factors while choosing

airline for travel by the customer. Pareto Analysis is used to focus problem solving

activities, so that areas creating most of the issues and difficulties are addressed first.

c. Imrovement Phase - Standard Deviation

I will be using standard deviation for analyzing from the bell curve that the results of

questionairres submitted to customers and travel agents, complaints about air fares,

target audiences and problem’s in the availability of seats should be minimized

inorder to increase sales..

d. Control Phase – Gap Analysis (SWOT analysis)

With regard to my fourth objective “To suggest the operational strategies to improve

the sales performance of Emirates airlines” I will be performing Gap analysis to find

from questionnaire, survey and group discussion, the comparision of various factors

responsible to compete with low cost carrier in order to improve own product.

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CONCLUSION

Air transportation has seen a tremendous changes in the last few years. Air travel is just a

glorified luxurious travel indeed, flying as comfortable and fast way of travel has lost much of its

glamour from the past. Where as air travel was a high price privilege for the upper classes during

most of the last century, globalization has led to an increased need for affordable and fast world-

wide passenger transport. Leading network airline such as Emirates and Ethihad now more

actively stress service quality, reliability, business lounges, frequent flyer programmes and direct

link with other airlines and prestigious hotels in their promotion programmes. LCCs continue to

build their image as a much-needed service in the region to meet the travel needs of common

people looking for cheap, no frill travel. With rapid growth in the market share of LCCs, most

airlines in the GCC region must carefully delineate their market segments to gain competitive

advantage with specific travel packages.

With respect to my research subject “customer satisfaction level of legacy carrier versus low cost

carrier” the topic chosen is to understand the satisfaction level regarding selecting the carrier.

UAE a land of opportunity and 90 percent population comes from various countries as a

expatriates which creates a wide range of scope for airline industry to grow. During last few

years it has been seen remarkable growth in low cost carriers and their strategy of targeting low

profile expatriates. However things has changed now, cost is the primary concern for each one of

us. Hence cost factor has changed the behavioral attitude of passengers while taking decision on

selecting airlines and due to this legacy carriers like Emirates airlines impacting much. Though

the emirates airlines vision is broad and concentrating on long haul international sectors we

cannot ignore short haul sectors and passengers behavioral attitude and satisfaction level.

This study helps for further improvement and development of the product, attracting more

customers and also enables the companies, to find out the satisfaction level of the customers.

………………………………….