Services Management - Vietnam Airlines - Group 2 - MPM6 - 15 August

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
Group 2 –MPM6 Page 2

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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
Back office staff & activities
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.

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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
Passengers
Aircraft Total Order (Business/Deluxe Notes
Economy/Economy)
Airbus 162 (0/0/162)

10 0
A320-200 150 (12/0/138) Short-haul international and domestic

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1 unit being leased to Cambodia Angkor Air

Deliveries: 2008-2011 (16 new A321-231s in
Airbus
21 29 184 (16/0/168) 2010)
A321-231
Short- and medium-haul international and
domestic
Airbus AVOD in-flight entertainment

8 0 266 (24/0/242)
A330-200 Medium-haul international and domestic
Airbus AVOD in-flight entertainment

1 0 320 (36/0/284)
A330-300 Medium-haul international and domestic
Airbus Entry into service: 2014

0 12 TBA
A350-900 Long-haul international
Entry into service: 2015

MoU was signed with Airbus regarding
Airbus the purchase in November 2009; negotiations
0 4 TBA
A380-800 are underway and may change to the -900
versions
Long-haul international
2 units being leased to Cambodia Angkor Air

ATR 72 14 12 66 (0/0/66)
Short-haul international and domestic
307 (25/54/228)
Boeing 777- AVOD in-flight entertainment
10 0 325 (35/0/290)
200ER Long-haul international and domestic
338 (32/0/306)
Entry into service: 2016

Boeing 787- originally 787-8 models, but changed to -9 in
0 16 TBA
9 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.

Services Management

Services Management

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National Economics University Solvey Business School

Module: Services Management

Coursework: Transportation Services

Group number: 2-MPM6

---Hanoi, August 2010--

From Group 2 – MPM6

Group 2 –MPM6 Page 2

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

2. Part 2: Service concept

2.1 Market segmentation

3. Part 3: Service characteristics

3.1 Service process

4. Part 4: Customer relations and quality control

5. Part 5: Human resource management

Group 2 –MPM6 Page 3

Group 2 –MPM6 Page 4

Group 2 –MPM6 Page 5

Part 1: Historical Development Vietnam Airlines- At a glance

Group 2 –MPM6 Page 6

Group 2 –MPM6 Page 7

Part 2: Service concept

Group 2 –MPM6 Page 8

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

Group 2 –MPM6 Page 10

also creates opportunities for Vietnam Airlines to expand its service

Group 2 –MPM6 Page 11

Part 3: Service characteristics

Back office staff & activities

Group 2 –MPM6 Page 12

Group 2 –MPM6 Page 13

Group 2 –MPM6 Page 14

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

Group 2 –MPM6 Page 15

Since production and consumption are simultaneous, services are instantly

Group 2 –MPM6 Page 16

Part 4: Customer relations and quality control

Group 2 –MPM6 Page 19

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

4.2. Quality control and guarantee

Airbus 162 (0/0/162)

Group 2 –MPM6 Page 22

1 unit being leased to Cambodia Angkor Air

Airbus AVOD in-flight entertainment

Airbus AVOD in-flight entertainment

Airbus Entry into service: 2014

Entry into service: 2015

2 units being leased to Cambodia Angkor Air

Entry into service: 2016

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

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

Group 2 –MPM6 Page 23

Part 5: Human resource management

5.1. Cycle of success

Group 2 –MPM6 Page 24

server system. This system is programmed basing on the permanent

Group 2 –MPM6 Page 26

Managing and operating a service is not an easy

Group 2 –MPM6 Page 27

Group 2 –MPM6 Page 28