National Economics University Solvey Business School

Module: Services Management

Instructor: Pro.Dr. R.S’ Jeger

Coursework: Transportation Services

Vietnam Airlines Case Study

Group number: 2-MPM6

Group members:

1. Nguyen Duong 4. Nguyen Thi Mai Phuong

2. Ton Nu Hue Chi 5. Tran Viet Hung

3. Vu Thi Quynh Hoa 6. Le Thi Anh Dao

7. Pham Thi Thanh Hien

---Hanoi, August 2010--

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FOREWORD

The notion of services and services management has been changing over the years

due to improvement of technology and increasing levels of satisfaction from

customers. This has led to a shift from goods to services management in a more

integrated approach. On one hand, services do have some characteristics that pose

specific challenges and require special attention. For instance, intangibility poses

specific challenges to the communication and marketing effort; simultaneously, the

presence of the customer during the service delivery process implies a direct link

between employees‟ feelings and behavior and customers‟ perceptions of service

quality. On the other hand, services are processes. They require a concerted

approach ranging from operational service delivery system, employees and

customers all need to be attuned to deliver value in a seamless way.

The concepts of services management would be various from sector to sector

depending on their mission, vision and strategic priorities. With a view to deepen

our understanding and practical engagement, group 2 had selected Vietnam

Airlines as one of the pilot example in assessing how the integrated services

management approach being translated to the national transportation sector which

has been considered as monopoly or operating closely under the rules of

Vietnamese State for long.

The assignment has actually helped us not only in enhancing our understanding

and getting closer exposure to the subject but also being a last chance for

strengthening the team working spirit.

We, group 2, would like to express our sincere gratitude and thanks to Pro.Dr.

R.S’ Jeger for her useful lectures and entireness encouragement for the whole

process.

From Group 2 – MPM6

Hanoi, August 2010

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TABLE OF CONTENTS

INTRODUCTION

MAIN CONTENTS

1. Part 1: Historical Development Vietnam Airlines- At a glance

2. Part 2: Service concept

2.1 Market segmentation

2.2 Service component

3. Part 3: Service characteristics

3.1 Service process

3.2 Service characteristics

4. Part 4: Customer relations and quality control

4.1 Customer relation

4.2 Quality control and guarantee

5. Part 5: Human resource management

5.1 Cycle of success

5.2 Empowerment

5.3 Stress management

CONCLUSION

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INTRODUCTION

“From the pilots who guide aircraft safely to their destinations…to professionals

who control the nation’s air traffic system from the ground…to managers and

executives who make vital decisions about the future of aviation….to the crew who

look after the passengers on a flight…… In the airline industry, punctuality and

safety are of vital importance. To the former, each minute of delay causes the

company to incur unnecessary costs; and to the latter, it would cause lost of human

resource- the precious ones”.

Vietnam Airlines- a mode of transportation among various other choices-

represents a key challenge to manage and operate because of the nature of the

products being sold and of the complexities of the environment in which the

industry exists. In particular, however, the strategic management is informed by

the fact that it is considered as a special service rather than goods due to its

characteristics of tangibility, perishability, etc.

In this assignment, we would like to present how Vietnam Airlines is managed

from the perspectives of an industry and customer management by application of

concepts and principles of service management provided by Pro.Dr. R.S‟ Jeger. In

addition to that, the process has enriched our understanding and practical

engagement to translate theoretical framework to individual application to our own

service delivery and management.

The assignment will be structured into 5 major parts:

Part one- brief introduction about Vietnam Airlines: the historical

development and key added values to make the service exist will be

presented as the service context.

Part two- service concept: will explore firstly how Vietnam Airlines

positions its market into national and international. Together with that, a

picture of service development over the recent years will be analyzed in

laying the foundation for customer satisfaction management later on.

Part three- service characteristics: will look further into details the process

of this service operation and its typical characteristics in differentiating

Vietnam Airlines with other mode of transportation.

Part four- customer relationship management: Programmes on customer‟s

management and quality control will be examined as part of measuring the

effectiveness and efficiency of this service.

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Part five- human resource management: will reflect internally how Vietnam

Airlines build up capacity for its staffs to be competent and empowered in

managing the service.

Lastly, individual reflection had been shared and consolidated to form the last part

of lessons learnt with a view to emphasizing core concepts and principles in

successful service management.

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MAIN CONTENTS

Part 1: Historical Development Vietnam Airlines- At a glance

Vietnam Airlines can trace its roots back to 1956, when it was established by the

North Vietnamese government after the nationalizing of Gia Lam Airport. Back

then the airline‟s name was Vietnam Civil Aviation. It was instituted after the

government signed the Decree 666/TTg. The airline was created as part of the air

force, which was to be used for civilian purposes. Its flee t consisted of five aging

Soviet-made planes - one Il-14, one An-2 and three Aero 45s. This was due to the

fact that there was an embargo that prohibited the airline leasing and/or buying

American technology or components.

Its first international destination was Beijing, followed by Vientiane in 1976.

During that year, the airline was known as General Department of Civil Aviation

in Vietnam, and began full operations, carrying around 21,000 passengers, of

which one-third were on international flights and 3,000 tonnes of cargo. In 1978,

another important destination of Vietnam Airlines was added, with flights offered

to Bangkok.

During the late 1980s and early 1990s saw the airline expanding its route maps to

Hong Kong, Kuala Lumpur, Manila and Singapore. In 1992 the airline was able to

acquire the American-built jets in the form of the Boeing 737 and Boeing 767. It

was able to do so by chartering the planes, instead of leasing or buying them, and

by painting them white. Also, during this time, many more destinations like Paris,

Tokyo, Seoul, Taipei, Sydney and Melbourne were added

In 1993, the airline completed its restructuring programme which had been started

four years earlier. It involved officially changing its name to the present Vietnam

Airlines Corporation. Several services companies were incorporated into the new

corporation afterwards.

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On September 1996, Vietnam Airlines started offering Business Class services and

three years later, on the eve of the second millennium, the airline launched its

frequent flyer program, Golden Lotus.

On October 20th, 2002, Vietnam Airlines introduced a new logo and corporate

identity that symbolized its dramatic progress towards becoming a world-class

airline. The launch represented a complete repositioning and branding of Vietnam

Airlines, coupled with significant improvements in its infrastructure, operations

and fleet.

The new logo featured one of the most enduring and meaningful symbols of the

Vietnamese people - the Lotus flower. Vietnamese people see the lotus as a symbol

of their ancient culture and their ability to withstand great adversity and retain their

unique traditions. The lotus is associated with the enlightenment and perfection. It

is a common, yet noble and sacred flower. The gold color was chosen to show the

high quality of our product and evoke a sense of luxury.

On 20 June 2005, the airline launched services to Germany, with 2 and 1 flight

between Frankfurt and Hanoi and Ho Chi Minh City, respectively. It came after the

2004-2005 period where travel between the two countries soared 70 percent.

In 2006, Vietnam Airlines was admitted into IATA, the biggest aviation

association in the world. As part of the move, Vietnam Airlines had to meet the

association‟s IOSA safety standards.

With the arrival of the eighty recently ordered airplanes for the duration of the next

ten years, Vietnam Airlines is considering significantly expanding its route map.

The airline is particularly interested in launching services to the U.S., where more

than 1.2 million Vietnamese currently reside. Such plans have been confirmed in

December 2003, but have since been postponed due to the fact that Vietnam is not

yet part of FAA's aviation safety assessment programme. However, the airline is

expected to launch the service in early 2011.

Vietnam Airlines also is working towards launching flights to the Middle East and

Indian subcontinent as well as starting more flights to other destinations in

Australia and Europe. During an interview with Sabre Airline Solutions, CEO

Pham Ngoc Minh said that apart from the United States, Vietnam Airlines is

considering opening new routes such as Ho Chi Minh City/Hanoi, Vietnam-

London; Ho Chi Minh City/Hanoi-Shanghai/Beijing, China; Ho Chi Minh City-

Mumbai, India; Ho Chi Minh City-Brisbane, Australia; and Ho Chi Minh City-

Doha, Qatar.

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Part 2: Service concept

In this part, we will discuss with two subparts in the concept of a service. They are

(i) market segmentation, (ii) service component.

2.1. Market segmentation

Market segmentation is a group of customers who have sufficient in common

that they form a viable basis for a product/ price/promotion combination.

Segmentation of the air passenger market has traditionally been based on the

use of three variables: the purpose of the passengers‟ journey, the length of their

journey and their country or culture of origin.

Among a number of the air transport customers, Vietnam Airlines focuses on

two major passenger markets: domestic and international.

Domestic market

Based on the scales of airlines service

usage, the domestic passenger segment

is comprised of several sub-groups as

individual customers, travelling

agencies and corporate customers. All

travelers in the first sub-segment of the

domestic market differentiate

themselves by the needs which arise

from the socio-economic,

psychological factors.

First of all, air travelling is costly for

most of the people in Vietnam

compared to other means of transport.

Therefore, it is only popular for those

who can afford to make the way from

one long destination to another one.

They are the middle class customers

who have higher economic status and

usually living in the metropolitan areas.

Demographically, they are at the different age ranges and fit for air travelling.

They travel for various purposes: business, leisure or other activities. This sub-

group of the segment shares common requirements while travelling: comfort,

convenience and new experience.

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The second sub-segment of the domestic air passenger market comprises of

agencies providing travelling and tourist services within Vietnam. They are

customers to the airlines in terms that they use the airlines service as part of

their products – tour packages. These customers are interested in making

profits, therefore they look for service provision at a lower costs. Expansion of

their service networks might be another interest to this type of airlines

customers. This depends on the quality and quantity of their sub-product –

airlines services. Therefore, they look for the quality of the airlines services

and increased number of connecting flying points.

The third sub-segment includes corporate customers that can be government

agencies or big business companies. These customers need to arrange travels

for big quantity of the staff and rather on a periodical basis to run their work

related activities. Therefore, for them, it is important to have the services of

high professionalism in terms of punctuality, comfort and convenience.

International market

Vietnam Airlines

prioritizes targeting the

international travelers

who want to come to

Vietnam as tourists to

explore the culture, the

landscapes and people

in Vietnam. These for -

leisure -purpose

passengers usually are

from the countries that

have geographical,

historical, economic,

commercial connections

with Vietnam. Vietnam

Airlines also aims at

expanding to attract travelers from those countries who are recently establis

hed relations with Vietnam. Today Vietnam Airlines‟ network extends to 40

international destinations in the USA, Europe, Australia and Asia.

Demographically, they may be of different ages and at different socio-

economical status. They usually come to Vietnam through the tourist

companies and travelling agencies. The incentive for them to go to Vietnam

would be the welcoming (friendliness) spirit, quality of the airlines services

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when they first step onboard on the Vietnam Airlines crafts. Besides, expenses

on leisure activities are usually from the customers‟ pocket, therefore

reasonable costs for the travelling would be another value they expect for.

The customers use Vietnam airlines to travel for business purposes would be

another target of Vietnam airlines. Like the domestic businessmen, this group

of international travellers values the highly international standards of the

airlines services such as punctuality, comfort and convenience.

2.2. Service component

On the basis of the above needs or requirements of the identified customer

segments, Vietnam Airlines is working on the ways to increase its reputation,

aiming at progressing toward the world class airline rank. Vietnam Airlines is

applying different service components throughout their service process.

o Pricing: To secure the customers‟ loyalty to the service, Vietnam

Airlines applies incentives through the frequent flyer miles program

for customers. It is called “The Golden Lotus Club membership”. They

also use the price discrimination approach, i.e. charge different prices

to different segments. For examples, the domestic corporate customers

who regularly use Vietnam Airlines can be entitled to softer prices

compared to the announced prices for international sections; or special

prices are introduced for certain international section travelers.

o Service Quality: This can be reflected in the more convenient air

ticketing services, or application of electronic checking. Improvement

of the airlines infrastructure through increased investment in buying

new aircrafts, maintenance costs is another way to enhance the quality

of the airlines services. One crucial factor to enhanced quality of the

services is the quality of the human resources; therefore Vietnam

Airlines is organizing specialized training programs for front office,

back office staff and crew members. In order to keep up with the

international air transport standards, Vietnam Airlines has joined the

International Air Transport Association (IATA).

o Service expansion: Vietnam Airllines has established links with tourist

and travelling businesses to add types of services. On this basis

promotional packages for both domestic and international customers

such as Domestic or International Free and Easy Programs, or

Specially are built up to maintain the service scale in the low tourist

seasons. The joining in the international airlines network - SkyTeam

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also creates opportunities for Vietnam Airlines to expand its service

network, i.e. gain more shares in the international air transport market.

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Part 3: Service characteristics

There are a number of factors which make services different from physical

goods. In this section, the service process will be presented to see how the sector

being operated comprehensively before coming into detailed discussion on its

characteristics.

3.1. Service process

The above diagram illustrates the service process that Vietnam Airlines is

offering in the air transport market. Each step is described further as

bellows:

1. The process starts by the marketing activities to attract potential

customers from various segments to come up with a decision to buy a

flight.

2. The reservation is the next step to help customer to “register” their desire

to fly. This is a step in which there‟s an intensive interaction between

front-office staff and customers.

3. Ticketing is a important task of airlines to turn potential customers to be

real passengers.

4. Check-in at the airport is the following step to prepare for the off-ground

service.

5. Service delivery is conferred to the main process of an air transport

service provider (in-flight service).

6. Arrival and follow-up are the last parts of the process where airlines

completes the responsibility with passengers.

Back office staff & activities

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In all of the above steps, the role of front-office staff is crucial to satisfy

customers. The counter staff of Vietnam Airlines represent for the image of

the company. However, it must be noted that the role of back office staff are

really important in ensuring a high level of service delivery. They are

personnel who are involved in all steps in the service process but keep

themselves hidden from passengers.

3.2. Service characteristics

The distinguishing factors of services from goods are:

a. Tangibility

Vietnam Airlines – as other players in the industry – is primarily providing

air-transport service and for the nature of the service, it is commonly said that

“Services cannot normally be seen, touched, smelt, tasted, tried on for size or

stored on a shelf prior to purchase. Their intangibility makes them harder to

buy but easier to distribute”. However, the fact proves that not all services

show the same degree of intangibility, some services are 100% intangible but

others have both tangible and intangible elements. Looking at the case of

Vietnam airlines, we see that the service it provides is likely tangible rather

than the traditional nature of service because of following reasons:

The fact that the airlines‟ product is not a physical object but a

mixture of invisible and visible services where the visible elements

do play very important role in attracting customers: network of

ticket agents throughout cities, corporate office buildings, number

airplanes, image of pilots and crew-members… Customers

indentify Vietnam Airlines‟ service with these physical elements

firstly.

As intangibility of service does create certain problems for

organizations operating in the sector, Vietnam Airlines attempts to

create some form of tangible offering that potential customers can

relate to. With the growth in the TV broadcasting and internet for

example, all elements of its product such as image of airplanes,

crewmembers, destinations… are now available for home viewing

by potential customers. Similarly, company‟s brochures help to

overcome the intangibility problem and this is why so much effort,

expense and creativity are devoted to their design.

Being identified as the national flag carrier, Vietnam Airlines is

carrying-out a lot of activities to show the committment to the well-

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being of the country, its people and community. Since the early

days, Vietnam Airlines has successfully initiated and supported

various social, cultural, educational and sport activities; and given

help to the less privileged, involving handicapped children as well

as senior citizens. A long with the support from the government,

Vietnam Airlines has gained the trust and experience quality from

Vietnamese people as well as foreign flyers.

The above take away some of the uncertainty the customer may have when

buying a flight with Vietnam Airlines. Therefore, the service here is rather

tangible.

b. Simultaneity

The production and consumption of services are inseparable.This

characteristic is completely true for Vietnam Airlines: “The pilot flies an

airplane at the same time as the passengers transported” .The implication of

this simultaneity is that the consumers have direct experience of the

production of the service. This has profound implications for the staff in

service industries.

When a physical product is purchased, it comes packaged and the customer is

likely to assess the product purely upon its product features (such as taste,

size, specification, etc.) but in the case of a service product, however,

customers are likely to be very concerned about the way in which the product

is delivered, i.e. the interaction between staff and customers are crucial. For

airlines, the interaction between passengers and airlines staff normally taken

place more often on the ground such as at the ticket office or check-in

counter in the airports. Therefore, the way airlines‟ (front office) ground

personnel conduct themselves in the passengers‟ presence, what they say,

what they don‟t say, how competent they are can determine whether the

customers fly with the airlines again. In-flight, however, the interaction is

limited with cabin crew but passenger is likely to notice if cabin crew is rude

or unwelcoming.

Knowing this important characteristic, Vietnam Airlines is taking this

characteristic into its human resource management which will be explained

in the later part.

c. Heterogeneity

Services, unlike mass-produced manufactured goods, are never identical.

The human element and other factors in delivering services, ensures that

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services will be heterogeneous, i.e. varied. Where does this heterogeneity

come from? We‟ll look at following possible sources:

Human element

Human behaviour is highly variable and it is difficult for a company to

ensure that its employees display good customer relation skills all of the

time. For an airline, the employees can vary their actions and even can make

mistakes some times. This means that there is an uncontrollable element

inherent in the production of air transport product which can lead to the

passenger being satisfied or disappointed with the flight, leading to the

variation of service provided.

Similarly, the airlines has no influence over the behaviour of the passengers.

The customer‟s attitudes and behaviour will also contribute to the pleasure

gained from the flight.

In fact, however, airlines service is a unique transport mode that requires a

serious attention to ensure safety and securities. There‟re various strict

principles and procedures that both airlines staff and passengers must follow

for safety and security reasons no matter they like it or not (non-negotiated

conditions). Those principles and procedures are incorporating into the

whole service process of Vietnam Airlines. In other words, there‟s a better

planning of interaction between service provider (Vietnam Airlines) and

customers (passengers). Therefore, the variability in the airlines service is

less than other kind of services.

Other factors

The airlines industry is particularly prone to external shocks beyond the

control of its managers and Vietnam Airlines is not he exception. Wars,

hurricanes, terrorist attacks, pollution, adverse publicity or accidents can

have a dramatic and speedy affect upon levels of business. For example the

terrorist attacks in New York and Washington on 11 September 2001 and the

SAR decease had a similar effect upon the industry. As a result, there was a

sharp decrease in the air traffic demand and air transport was seen as

dangerous transport mode in that period. Managers, whilst not able to plan

directly for such events, need to be able to assess the risks that the business

is prone to and have contingency plans in place so that they are able to react

quickly and effectively when necessary.

d. Perishability

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Since production and consumption are simultaneous, services are instantly

perishable if they have not been sold at the time of production. Unlike

manufacturers of goods, they cannot just keep on producing services and

store them for future sales and striking the correct balance between capacity

and sales (supply and demand) is extremely difficult.

Looking at the case of Vietnam Airlines:

A scheduled airline has an obligation to fly between advertised

points regardless of the number of empty seats on the aircraft.

Moreover, airlines is a capital-intensive business where the fixed

cost is very high (the cost of the fleet) so a plane has to take-off with

low load factor is really a nightmare for airlines especially when the

break-even between cost and revenue generated from selling ticket

could not be reached. The management challenge of Vietnam

Airlines, therefore, is to make sure that the company is operating a

full capacity for as much of the time as possible. To be successful,

the company will need carefully designed strategies to stimulate

demand, lengthen seasons, or to offer appropriate pricing levels to

manage and „smooth out‟ load factor. These elements will be

discussed in the later part.

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Part 4: Customer relations and quality control

In this section, it comes now to one of the most demanding aspects of Airline

Management today- the attempt to apply relationship management concepts.

Theoretically, the segmentation of the air travel market means that airlines should

be well placed to take advantage of some of the techniques of relationship

management.

4.1. Customer relations

It‟s very clear that all firms –

airlines included – will lose some

of their customers every year for

different reasons. Having a good

relationship marketing strategy

which creates sustaining

relationships with customers and

partners is of great importance for

every service provider. Vietnam

Airlines is not an exception. For

this airline operator, customer

satisfaction, customer loyalty and

profitability are closely

interlinked. In order to better meet

customers‟ demand and

expectation, Vietnam Airlines has

been expanding its cooperation

with the world‟s and regional

leading airlines, offering seamless

services to an extensive global network. Vietnam airlines has become the 10th

member of Sky Team on June 10, 2010. With this important cooperation,

Customers of Vietnam Airlines can use services of Sky Team‟s members in

169 countries with 850 agents. Besides, Vietnam Airlines also corporate with

other service providers such as hotel and mobile operators, banks to have

integrated services. For example, in terms of online payment, Vietnam Airlines

has cooperated with big banks in Vietnam and in the world to issue visa cards

for customers especially loyalty customers such as V-Top-Eximbank,

Vietcombank Vietnam Airlines American Express. In addition, since August,

2008, through a program with Mobifone, customers of Vietnam Airlines can

enjoy special priorities such as lower mobile fare, deposit-free when using

roaming service, etc.

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Vietnam Airlines owned well trained front-office and back-office staffs whose

working strategy is “Professional but from heart to heart”. That is also the

customer relation management of Vietnam Airlines. With three ticketing offices

at main regions of Vietnam and hundreds of ticketing agents in and out of the

country and well equipped information system customers can have easy access

to Vietnam airlines‟ system to book the ticket or to find all information related

to the flight they want. In addition, Vietnam Airlines has a huge customer

integrated database consisting of information on customers‟ demography,

activity and customer relations that enables it to build and launch suitable

promotion programs for customers. Not only pay attention to single customers,

Vietnam Airlines also designed program to support companies and

organizations who are its frequent users. This program is called The Corporate

Account Program. In this program Vietnam Airlines offer its Corporate

Accounts a comprehensive solution, which reduces travel costs and increases

service quality.

Here after, two successful programs offered by Vietnam airlines and its partners

are mentioned

a. Golden Lotus Program for frequent flyers

This program was applied since end of 1999 with

much benefit for frequent flyers of Vietnam Airlines.

Since then, it has been developed and applied for all

customers of markets that Vietnam Airlines has flight

routes. The frequent flyers is divided into 4 types and

issued different types of cards (Silver, Titanium, Gold

and Platinum) basing upon the freque ncy of flight.

Since Vietnam Airlines joined the SkyTeam, this

program has been upgraded to be Golden Lotus Plus Program (GLP) which

offers Vietnam Airlines‟ frequent flyers plenty of benefits such as Free

Tickets, Privileged Service and Remarkable Convenience. GLP has five tiers

- Register, Silver, Titanium, Gold and Platinum. Register is the entry tier for

GLP program. According to his/her GLP membership level, a customer will

receive various free preferential services and benefits when traveling on flights

operated by Vietnam Airlines. For example, frequent flyers when flying with

Vietnam Airlines can enjoy Privileges such as (i) in terms of reservations

before departure: Guaranteed Economy Class seats on international flights,

Guaranteed Economy Class seats on domestic flights between Hanoi, Da Nang

and Ho Chi Minh City and Priority on waiting-list; (ii) Check-in: Member's

access to Business Class counters, Priority for free upgrades to Business class

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for member with confirmed Economy or Deluxe Economy seats but those

classes are full & Business class is available, Free upgrade to Deluxe Economy

for member's Economy ticket with eligible subclasses for mile credit upon seat

availability; (iii) Baggage privileges: Priority baggage tags, Extra baggage

allowance when weight system applied, Extra baggage allowance when piece

system applied, (iv) Lounge access: Business Class Lounge access when

traveling on Vietnam Airlines‟ operated flights (even when traveling on

Economy class), Priority Boarding; (v) Award Redemption: Award ticket for

member, Award ticket for people registered in the Redemption Group, Excess

baggage award for member, Free ticket for infant under 02 years old registered

in the Redemption Group traveling with member using award ticket on Vietnam

Airlines‟ operated flights and (vi) Tier Bonus: Extra accumulation miles (for

award redemptions only, not for tier qualifying).

b. Free and Easy Program

This program is built and applied for all passengers flying with Vietnam

Airlines. This program which consists of 2 sub-programs (Domestic Free and

Easy Programs and International Free and Easy Programs) offers a service

package of flight fare and hotel accommodation.

o Domestic Free and Easy Programs: Passengers will have the

opportunities to use the Domestic Free and Easy packages, staying in

the most luxurious hotels with the best prices in the Middle Area of

Vietnam such as: the Furama Resort, Sandy Beach Resort, Hoi An

Beach Resort, Palm Garden, Golden Sand Resort, Ana Mandara Resort,

Ninhvan Bay Villas, Novotel Nha Trang, Vinperland resort, Royal

Hotel and Villas Dalat, Ana Mandara Dalat.

The domestic Free and Easy programs are for all Vietnamese citizens

and foreigners living in Vietnam. The package for one passenger in this

kind of program consists of a round-trip economy class ticket, 2 nights

stay in a hotel with breakfasts, two-way airport-hotel transfers.

o International Free and Easy Programs are applied for all Vietnamese

citizens and foreign nationals. The package for one passenger in this

kind of program consists of a round-trip economy class ticket, 2 nights

stay in a hotel with breakfasts, two-way airport-hotel transfers. Besides,

for extending stay, passengers have to pay for extra-night stay.

Passengers who depart from Danang, Hue, Nha Trang and Dalat will be

charged an additional of USD 50. The international programs are valid

until 31December2010.

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Along with strengthening the service quality to better customers‟ satisfaction,

Vietnam Airlines also pay attention to enhance its responsibilities toward

community as the best way of public relations to embed the Golden Lotus

image- a complete repositioning and branding of Vietnam Airlines onto

customers‟ hearts.

As the flag carrier of Vietnam, Vietnam Airlines is committed to the well-being

of the country, its people and community. Since the early days, Vietnam

Airlines has successfully initiated and supported various social, cultural,

educational and sport activities; and given help to the less privileged, involving

handicapped children as well as senior citizens. It has taken part in many events

and fields such as (i) International & National Events: Apart from being the

official carrier of the international events held in Vietnam such as the APEC

Summit, Global Women Summit, regional tourism expos etc., Vietnam Airlines

has also sponsored many Vietnam Festivals held all over the world - in Japan,

UK, US, Korea, and France; and given support to the overseas Vietnamese

communities; (ii) Tourism Promotion: Playing the role of a “tourism

ambassador”, Vietnam Airlines has actively involved in numerous activities and

festivals to promote the tourism of Vietnam, as well as of major cities and

provinces throughout the country; (iii) Culture and Education: In the field of

Arts: Vietnam Airlines believes that its support to the Vietnam National

Symphony Orchestra to go on tour locally and abroad is essential to enrich the

musical and cultural life of the people. Not only that, the highly acclaimed

music and fashion show of Vietnam - Charming Vietnam was proudly brought

overseas (Australia, UK, Singapore) by Vietnam Airlines, in an effort to

introduce the unique traditional culture of the country. In the field of Education:

As part of its support to the community, Vietnam Airlines contributes to many

educational projects such as The Vietnam Intelligence, Honoring Young

Business Talents, etc. These programs provide young people with the

opportunity to achieve their full academic potential; (iv) Sports: As part of the

efforts to help strengthen Vietnam‟s sports, Vietnam Airlines has financed

major sporting tournaments as well as the football, volleyball, golf, and tennis

teams of Vietnam, for their participation in domestic and international

competitions and (v) Community: Vietnam Airlines is also committed to

helping the less privileged communities by significant donations to various

funds of “The Social Assistance”, “For the Poverty”, “The Golden Heart”,

“The Children Support”, and “The Agent Orange Fund”. In addition, it has been

building houses of gratitude, nurturing 167 mothers who lost all their children

in the war, assisting people and provinces who suffered from natural calamities,

and continuing our contributions to better local welfare.

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4.2. Quality control and guarantee

Quality management poses

especial problems in

service industries

generally and in the

aviation industry in

particular. In service

industries, output is

instantly perishable at the

time it is produced. It is no

t possible to produce the

product and then check it

over before delivery to the

customer as can be done,

for example in the car or

electrical appliance industries. In aviation, there is not only the problem of

perishability of output. The production process itself is a complex one, where

the activities of many different departments have to come together in the right

way and at the right time if product quality is to be sustained. This is especially

so in areas such as safety and punctuality.

In case of Vietnam Airlines, a part from offer passengers best quality of the

service, trying to meet the standards of Aviation Safety and Airport Security set

by organisations such as the International Civil Aviation Organization (ICAO),

the United States Federal Aviation Administration (FAA) and the International

Air Transport Association (IATA) is another way that Vietnam Airlines

commits for the safety of every flight and passengers. Vietnam Airlines had to

surpass the association's stern safety appraisal as well as meeting hundreds of

requirements on organization and management, air and on-land services, and

cargo transport to become an IATA official member.

In addition, Vietnam Airlines has been on the way to renew its fleets. In the

wake of the 1997 crash in Phnom Penh, Vietnam Airlines began a fleet

replacement programme, retiring its second-hand Boeing 767s and phasing out

all of its Soviet-built airliners, replacing them with newer Western-built aircraft.

In December, 2001, Vietnam Airlines signed a historic agreement with Boeing.

It ordered its first ever US-built aircraft, signaling the start of trade under the

Bilateral Trade Agreement between the two countries. The airline ordered four

Boeing 777-200ERs, to be delivered in 2003. With a range of 14,260 km,

capable of flying non-stop in excess of 17 hours, these aircraft are able to fly

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from Ho Chi Minh City to Los Angeles.The four airplanes, as well as six other

Boeing 777s leased from International Lease Finance Corporation (ILFC), are

the flagships of the airline, and are deployed mainly on long-haul flights to

Australia and Europe, as well as flights between the airline‟s hubs.[3]

In September 2005, Vietnam Airlines ordered eight Boeing 787-8 aircraft and

10 Airbus A321-200s for deliveries starting from 2009. These new aircraft were

to allow Vietnam Airlines to expand its network and replace some leased

aircraft. However owing to delays in the 787 program, Vietnam Airlines has

only received the A321s. Regarding the delays from Boeing, Vietnam Airlines

CEO Pham Ngoc Minh noted, "We are not happy about the constant delays. It

affects our business plan”. In 2010 the airline changed its Boeing 787 order to

the -9 model, stating that the 787-8s didn't meet all the requirements Boeing

initially promised. The airline is now expected to receive its aircraft starting

from 2013.

On 1 October 2007 Vietnam Airlines signed an MoU for the purchase of 10

Airbus A350s, and an additional 20 Airbus A321s. The Airbus A350s will

supplement the Boeing 787s already ordered by the airline. This single order

will result in Vietnam Airlines becoming one of the largest Airbus operators in

Asia. Two years later the airline signed another deal for sixteen extra Airbus

A321s and two Airbus A350s during the 2009 Paris Air Show.

Later in 2009 Vietnam Airlines signed an MoU with Airbus, confirming its

negotiations to order four Airbus A380s. With this deal, the airline became the

first new customer for the type since 2006. According to Vietnam Airlines,

these aircraft will allow Vietnam Airlines to expand its services into North

America, as well as launch its Intercontinental First Class cabins. Vietnam

Airlines is particularly interested in a higher-weight variant of the A380-800

that is currently under development.

As of 1 April 2010, the average age of the Vietnam Airlines fleet is 7.4 years.

The Vietnam Airlines fleet consists of the following aircraft (as of 10 June

2010). Please see table below:

Vietnam Airlines Passenger Fleet

Aircraft Total Order

Passengers

(Business/Deluxe

Economy/Economy)

Notes

Airbus

A320-200 10 0

162 (0/0/162)

150 (12/0/138)

Short-haul international and domestic

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Airbus

A321-231 21 29 184 (16/0/168)

1 unit being leased to Cambodia Angkor Air

Deliveries: 2008-2011 (16 new A321-231s in

2010)

Short- and medium-haul international and

domestic

Airbus

A330-200 8 0 266 (24/0/242)

AVOD in-flight entertainment

Medium-haul international and domestic

Airbus

A330-300 1 0 320 (36/0/284)

AVOD in-flight entertainment

Medium-haul international and domestic

Airbus

A350-900 0 12 TBA

Entry into service: 2014

Long-haul international

Airbus

A380-800 0 4 TBA

Entry into service: 2015

MoU was signed with Airbus regarding

the purchase in November 2009; negotiations

are underway and may change to the -900

versions

Long-haul international

ATR 72 14 12 66 (0/0/66) 2 units being leased to Cambodia Angkor Air

Short-haul international and domestic

Boeing 777-

200ER 10 0

307 (25/54/228)

325 (35/0/290)

338 (32/0/306)

AVOD in-flight entertainment

Long-haul international and domestic

Boeing 787-

9 0 16 TBA

Entry into service: 2016

originally 787-8 models, but changed to -9 in

June 2010

Long-haul international

Fokker 70 2 0 79 (0/0/79) Short-haul international and domestic

Total 70 70

Although Vietnam Airlines use non-negotiated principle in safety and security,

these kinds of guarantees are made explicit towards the passengers because they

are clearly written in Article 8 of General conditions of carriages for passengers

and baggage.

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Part 5: Human resource management

People are an important resource to most organizations, but in service based

organizations in particular it is often the human resources or people who represent

the key factor in delivering successful performance. Human resource management

is all management decisions and actions that affect the nature of the relationship

between the organization and the employee. This section will examine in details

how Vietnam Airlines has been maintaining its cycle of success, recruiting and

empowering its staffs as well as stress management as part of efficiently internal

management.

5.1. Cycle of success

As airlines are in part service businesses, a successful airline must run many

things well. To keep business going on well, VNA focuses on 4 general areas:

Attracting customers: by providing customers with the excellence of the

airlines‟ services and the attractiveness of the airlines‟ promotional

programs. The actual products such as: aircraft types, seat space, class of

services, booking methods, in flight services ... are competitive keys for

success. The promotional programs are designed and launched regularly,

and specially target to frequent travelers, create loyalty and repeat business.

Managing fleets: The airline route system is the most consistent success

factor. Aircraft utilization in hours per day shows the effectiveness in the

airlines‟ major assets usages. The success or failure of this can make or

break the airline‟s reputation. Managing the destination and the schedule to

be matched with customers‟ demand and to maximize aircraft utilization is

one of the key assignments.

Managing people by focusing on the quality of the airline‟s people

relationship among managers, employees and business partners. Key

interventions are prioritized as:

Saturating the airline‟s people with information that will help them

having a better understand the airline, its mission and vision,

customers and competitors.

Providing training programs which concentrates on front line

communicative skills to customers and internal employee –

management problem solving. VNA aims to provide training course to

build functional expertise as well as relational competence and to use

conflict to build relationships likely taking it as an opportunity for

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learning each other and improving the understanding other parts of the

operation.

Encouraging employees to e themselves at work and opening major

events for employees and their families.

Keeping flexible job to build stronger relationships between functions,

improving coordination between employees.

Pushing the effectiveness of the relationship between management

and the union of employees.

Managing finance: Focusing on revenue and cost control by maximizing

revenue through competitive and innovative pricing schemes and well-

managed fuel procurement and price hiding. The relationship between unit

revenue and unit cost are very important. The airline must manage well these

factors, a measure of capacity to normalize these two units is used since the

available seats of the airline‟s fly, not just those that are occupied. So that

net unit revenue is the measure of profitability for the airlines, it represents

all revenues minus all costs divided by the total seats flown.

5.2. Empowerment

In term of individual level, empowerment, in one hand, is considered the increase

of autonomy and taking initiatives. In another, empowerment is implicated for an

organization as a whole which affects the way of working, of organizing and of the

relationship between employees and managers.

Basing on the empowerment approach, elements of empowerment can be seen in

some aspects such as (i) the quicker response to the customer demands during the

service or when the problem arises, (ii) the higher levels of employee satisfaction,

(iii) better quality of customer interaction, (iv) the higher commitment resulting in

employee involvement, quality improvement and innovation.

For the airline service sector in general and for Vietnam Airlines in particular, one

of the most crucial factors is “non negotiated guarantees for safety and

security”. It has significantly affected and controlled the empowerment. The

empowerment in the services of Vietnam Airlines is limited. There are some

reasons for that limitation.

o The process of services includes many specific procedures which are

routine and strictly controlled by the monitoring system including the

machine and the board of managers. The Vietnam Airlines employees

who work at the front-office such as check in service always work

with the computer system coordinated and controlled by the main

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server system. This system is programmed basing on the permanent

procedures and the processing orders from the managers to the

employees. However, in the emergency cases such as the requirement

of medical treatment for passenger, the flight crews can have

autonomy and make decision to solve problems.

o Vietnam Airlines is a state-owned enterprise the finance regulations in

general are regulated by the decree of Vietnamese government and the

guidelines by the ministry of transportation and ministry of finance.

5.3. Stress management

The frontline service is very important in the airline sector because it represents the

face of the firm. That is why every airline operator pays much attention to the role

stress and how to manage these role stresses to guarantee the quality of services

delivered by the employees.

There are 3 kinds of role stress which the managers have to consider. They are role

conflict, role ambiguity and role overload.

Role conflict:

Intra-sender role conflict: sometimes the front line employees

such as check in ones or flight attendants in flight services may

get different requests from passengers.

Inter-sender role conflict: may not happen because the

supervisor always monitors and takes the order in specific

cases.

Inter role conflict: may not happen

Personal-role conflict: the flights which are uncomfortable or in

abnormal or bad conditions may affect the cabin crew.

Sometimes, they lead to the personal -role conflicts.

Role ambiguity is impossible because of guarantees or safety and security

reasons. All employees from the managers to the staffs have to know

exactly and clearly about their roles and tasks in the process of services.

Role overload: is almost happened for the frontline employees such as the

check in employees. The check-in staffs always work under pressure long

queue of passengers waiting for check in to go on board. In this case, the

role overload is only quantitative load which the employees can fully

accomplish if they have enough time.

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CONCLUSION

Managing and operating a service is not an easy

task at all. Lots of factors will have to be taken into

account both internally and externally in achieving

its goals and maintaining its image. Especially, in

case of Vietnam Airlines having its mandate of

ensuring safety and security and carrying forwards

the arrogant slogan of Bringing Vietnamese Culture to the whole World is really a

challenge. Having gone through to this last part of this assignment, we have better

understanding and practical reflection on a comprehensive picture of a service

management. Overall, there are three main findings that we would like to share as

our common interests and lessons learnt in ending the process. Those are:

Customer oriented management is one of the core element and dynamic

factor in continuously improving the quality of the service. This has been

done through the establishment of proper reflection mechanism known in

case of Vietnam Airlines as Client Claim Letter, online customer

satisfactory survey, online check- in... Of course, there are still gaps for

improvement in the coming times, but we do acknowledge the transition

in the sector comparing to the monopolized management before.

A tradeoff between safe and security with customers/ passengers are

obvious in case of Vietnam Airlines: this un-negotiated principle

somehow affects the level of satisfactory of the customers due to their

restricted roles to some processes such as buying ticket, checking in,

boarding, luggage check in and out only. Unfortunately, it is a must in

ensuring the exits of this service.

An integrated management approach of service is crucial for long term

sustainability of the service, especially of a carrier like Vietnam Airlines.

We would like to use the bellowed diagram in illustrating how complex

and challenge it would be in managing a service and ending our

assignment as well:

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We would like to once again, take this opportunity to express our sincere and

heartfelt thanks to Pro.Dr. R.S‟ Jeger for your great guidance and encouragement.

Without yours, we obviously haven‟t been able to fully accomplish our group

assignment not mentioning about other added values which have been mentioned

above.

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