CEBU PACIFIC AIR

(A Case Study in TQM)

In partial fulfillment of the requirements in GSTQM Submitted to Dr. Brian C. Gozun

Professor

Submitted By Ernesto M. Santos

MBM Student

May 14, 2011

CEBU PACIFIC AIR

A Case Study on Quality Management

COMPANY BACKGROUND Founded on 1996 as Cebu Air, Cebu Pacific offers scheduled flights to 33 domestic destinations, and to 16 international destinations in 10 countries. It is currently the country's leading domestic carrier, serving the most domestic destinations with the largest number flights and routes, and equipped with the youngest fleet. Its main base is Ninoy Aquino International Airport, Manila, with other hubs at Mactan-Cebu International Airport, Francisco Bangoy International Airport and Diosdado Macapagal International Airport. The airline is a subsidiary of JG Summit Holdings, controlled by the Gokongwei family - one of the richest Filipino-Chinese families based in the Philippines. Cebu Pacific is currently headed by President and CEO Lance Gokongwei, presumptive heir of John Gokongwei, the chairman emeritus of JG Summit. With a company slogan, Its time every Juan flies Cebu Pacific entered the market with a promise to give "low fare, great value" to every Filipino who wanted to fly. It operates a fleet of 25 Airbus (10 A319 and 15 A320) and 8 ATR 72-500 aircraft, the youngest fleet in the Philippines. Cebu Pacific remains to be the pioneer in creative pricing strategies as it manages to offer the lowest fare in every route it operates. VMG in Relation to Quality Management The mission of Cebu Pacific is to bring people together through an affordable, reliable mode of travel that is delivered with good customer service, and to enhance the quality of life of the communities and to be an active partner in the nation's progress. While its vision, is to become the most successful low-cost carrier in the Asia-Pacific region; to be the best domestic airline and the Filipino travelers' first choice, recognized with unparalleled genuine, warm and caring service; to become the pioneer in innovation and commitment to excellence. To achieve its vision, their goal is to become the employer of choice by providing many opportunities for professional and personal growth in learning, egalitarian and non-bureaucratic workplace; by employing quality people and by adopting state of the art equipment, facilities and systems to ensure consistent highly efficient levels of operation. There is commonality and direct relationship in definition. In an airline industry, the things that the air-traveling public has come to expect are about on-time performance, schedule reliability and a smooth, comfortable flight. Quality is defined as the ability of a product or service to consistently meet or exceed customer expectations.

By emphasizing the importance of customer service, social responsibility, value for teamwork, care for people, innovation and technology, as core values, there is adherence to quality. Several Key Dimensions of service quality which are stated and/or implied in the previous statements include understanding customers needs and wants, access, communication, security, reliability, responsiveness, and tangibles which are very important while there is continuous improvement, employee empowerment, benchmarking, and knowledge of analytical tools in Total Quality Management as what is implicit. How Quality is Managed Cebu Pacific entered the market with a promise to give "low fares, great value services". They pioneer in creative pricing strategies to manage lowest fare in every route it operates. There is re-fleeting program so as to double its capacity. Cebu Pacific is the only airline in the Philippines operating a 100% brand-new fleet with 24 Airbus (10 A319 and 14 A320) and 8 ATR 72-500 aircraft. It is the first local airline to introduce e-ticketing, prepaid excess baggage and seat selection in the country. Cebu Pacific has partnered with various destination hotels, car rental service, travel insurance and entertainment ticketing service to provide its guests a more convenient travel experience. It became the first airline in the Philippines to use social media, through its Twitter Account. It uses forecasting. The airline targets to reach the 100 million passengers mark in 2015. It had more than 1 million passengers in the month of April 2011, a record for the rapidly growing airline. Problems Related to Quality In an airline industry, most of the problems related to quality are sometimes subjective as in the case of complaints which are sometimes judged against customer expectations, or emotions or even objective when it comes to talk about tangibles which are important component in a service industry. Also, there are external factors we call force majeure or acts of god which threatens operations. For example, in its Clause 8 - General Terms and Conditions of Carriage of Passengers and Baggage, regarding the schedules, cancellations, delays and diversions of flights, it says there that, the Airline may cancel, terminate or delay any flight, or suspend the operation of a flight route at any time after a

reservation has been made only when justified by circumstances beyond the Airlines control. On the other hand, complaints on the tangibles are noted like on issues about credit card payment facility, on-line check in facility, seat comfort, prices of food and beverages, food selection, and others.

Best Practices Related to Quality On-time performance. In Accordance with industry standards, an 'on-time' departure is one that departs from the designated bay no more than 15 minutes from the scheduled departure time. Cebu Pacific had an average of flight with ontime performance, 79.12% in 2009, and 85.10% in 2010. The airline wants to improve this rating for the next 4 years as paralleled to their targets of 100 million guests passengers on record from its first flight. Cebu Pacific (CEB) gained an International Organization for Standardization (ISO) 9001:2008 Certificate recently. This is an upgrade of CEBs ISO 9001:2000 Certificate obtained in February 2003. The ISO 9001:2008 certificate guarantees that CEB has consistent business procedures covering all key processes in the airline. This includes effective monitoring processes, adequate records for all transactions, and mechanisms for continuous improvement. CEB also made history with its original ISO 9002 Certificate and Aviation Quality and Safety (AQS) 9000/121 Certificate in 1999, when it was given the distinction of being the first airline in the world with system-wide certifications from both ISO and AQS. Other airlines are ISO-certified for certain divisions only, not as an entire organization. Cebu Pacific is meticulous as an airline. It wants to assure every passenger that they have world-class safety and quality management systems modeled on the latest best industry practices. Its rigid maintenance programs and comprehensive training programs for pilots, cabin crew, engineers and maintenance personnel have allowed the airline to pass the Civil Aviation Authority of the Philippines (CAAP) stringent audits every year, and every other audits conducted by other regulatory bodies. Cebu Pacific acquired the following awards that will affirm its commitment to providing quality service and to protecting the environment;

2010 WWF Partner of the Year Award given by the WWF-Philippines for the company that has made the most difference in saving the environment. Besting other WWF-Philippines partners like Coca-Cola, Smart, BPI and HSBC, it was identified as making the greatest impact on the lives of Filipinos. Gold Award for the Best Established Service Brand Campaign. Marketing Communication Effectiveness Awards 2005 awarded by the University of Asia and the Pacific to recognize the most effective brand campaigns across different industries. Domestic Airline of the Year, The Kalakbay Awards 2004, considered one of the most prestigious awards in the Philippine Travel Industry Gold Award for Best Marketing Program, Air Carrier Domestic Category Pacific Asia Travel Association 2004, an international award.