THE REVITALIZATION OF BRAND IMAGE OF LOW COST AIRLINES: A Survey of Working People in Indonesia By Hendy Febiansyah 014201000146 A skripsi presented to the Faculty of Business President University In partial fulfillment of the requirements for Bachelor Degree in Economics Major in Management February 2014 i PANEL OF EXAMINERS APPROVAL SHEET The Panel of Examiners declare that the skripsi entitled “The Revitalization of Brand Image of Low Cost Airlines : A Survey of Working People in Indonesia” that was submitted by Hendy Febiansyah majoring in management from Faculty of Business was assessed and approved to have passed the oral examination on January 27, 2014. Ir. Erny E. Hutabarat, MBA Chair – Panel of Examiner T. Manivasugen, MBA Examiner I Suresh Kumar, ST., M.SI Examiner II i THESIS ADVISER RECOMMENDATION LETTER This thesis entitled “The Revitalization Factors of Brand Image of Low Cost Airlines : A Survey of Working People in Indonesia” prepared and submitted by Hendy Febiansyah in partial fulfillment of the requirements for degree of Bachelor in the Faculty of Business has been reviewed and found to have satisfied the requirements for thesis fit to be examined. I therefore recommend this thesis for oral defense. Cikarang, Indonesia, February 7, 2014 Acknowledged by, Recommended by, Vinsensius Jajat Kristanto SE., MM., MBA. Suresh Kumar, ST.,M.SI. Head, Management Study Program Advisor ii DECLARATION OF ORIGINALITY I declare that this skripsi, entitled “The Revitalization Factors of Brand Image of Low Cost Airlines : A Survey of Working People in Indonesia” is to the best of my knowledge and belief, an original piece of work that has not been submitted, either in whole or in part to another university to obtain a degree. Cikarang, Indonesia, February 7, 2014 Hendy Febiansyah iii ABSTRACT This study explored factors which influencing the revitalization of brand image of low cost airlines in Indonesia that is perceived negatively by Indonesian people because of various incidents and accidents that often happen to low cost airline in Indonesia such as Air Asia, Citilink, Lion Air and Tigerair Mandala. While overall brand perceptions play so many important roles in influencing consumer perceptions of low cost airline in Indonesia. This study analyzed and argued brand revitalization is comprised of improvement of brand image. Warranty program, advertising communications, innovative product improvements, third- party appraisals, reliability aspects, tangible aspects are hypothesis to play role in revitalizing of brand image of low cost airline in Indonesia which plagued by negative perceptions. The sample of 300 respondents is consists of 45% of male and 55% of female respondents. This study method used both factor analysis and multiple regressions. According to the results, the revitalization brand image of low cost airline in Indonesia is positively influenced by warranty program, advertising communication, third-party appraisals and reliability aspects, which advertising communication is the most significance variable influencing toward the revitalization of brand image of low cost airlines in Indonesia. Keywords: Brand Image, Revitalization, warranty programs, advertising communication, innovative product improvements, third-party appraisals, reliability aspects, tangible aspects, incident, accident. iv ACKNOWLEDGEMENT “Namo Buddhaya, Namo Dhammaya, Namo Sanghaya” “Namo Sakyamuni Buddhaya, Namo Amitofo” “Namo Kwan She Im Phu Sa, Namo Ti Chang Wang Phu Sa” “Tadyata Om Gate Gate, Para Gate, Parasam Gate, Bodhi Svaha” “Sabbe Satta Bhavantu Sukhitata” -Most Commonly Prayer of Buddhayana Traditional Buddhist Origin- First of all, I would like to say thanks to my Great Parents, Buddha, Bodhistava- Mahasatva, great almighty deities, my good karma, and universe as I am able to finish this research effectively. In this opportunity, I would like to also give my gratitude to these important people 1. Mr. Suresh Khumar, ST., M.SI, my great thesis adviser, thank you sir for everything. Thank you for your patience, guidance, suggestions, positive criticism, and support. Wish you all d best sir! May your family and you always be happy, healthy, wealthy, and live in prosperity. The last, good luck for your PH.D. God bless you and your family. 2. Mr. V. Jajat Kristanto, SE., MM., MBA., Mom Ir. Erny E. Hutabarat, MBA, Mr. T. Manivasugen, MBA, Mr. Bruno Rumyaru, MA., Mr. Irfan Z. Habsjah, MBA, CMA, Mr. Luhur Korsika B. Sc., MIB, Mr. Orlando, MBA., Mom Hernawati Wibawati Retno Wiratih, M. Sc. Thanks for everything over the past three and half years. 3. Billy Homario, Michael Thomas, Regina Jaya, Catherine Ria Cahyadi for becoming gorgeous friends of mine from the first year. Accept me for whom the way I am, accept my stupidity, my complicated mood and everything. A word of thank you is never enough to replace all memories we have been through beyond the time. Hope the best for you in d future. v 4. To Cocong-ers, Deby Jakal Dwijayanti, Imelly Pastika Sinaga, Novita Nurfitriyana. We have been in such „complicated‟ relationship from first semester until this last semester. Thanks for everything cocong-ers. Hope the best for all of you in d future. 5. To IB-ers, Rifka Christy Halim, M. Husni Yuliyanto, Kurniantio Dharmawan, Raynard Tantra, Gandri Pohan, Hendra, Josephine, Athalia Permatasari, Shintia Dewi, Elian Setiawan, Sally Maryanto, Harry Afriani Gepis, Tobias Eric Hengilus. Bro Bro, Sis Sis, I hope we can be graduated together, in the same time, on the same place. Thanks for being friendly friends of mine until today. Hope the best for all of you in d future. 6. To my seniors, William Wijaya and Andrea Saputra, thanks for always and never tired for advising and supporting me on my thesis and lecturing me in this past 3 and half years. Hope the best for all of you in d future. 7. To my KMBA friends, Rendy Sun, Hardi Lawindro, Theja Natanael. Feriko Tjhia, Weriyen Oktavia, Chintia Tjandra, Natalia, Chelia, Ade Stefanus, Silvia Lim, Airien, Rendy Yuan, and others. Thanks for being my family in this past 3 and half years. 8. To the fabulous and gorgeous friends of mine, Wisnu Setiawan, Lissa Yun, Nesia Lisa Pertiwi, Christin Widjaja, Rieka Wulandari, Rosyanti, Afryandi, Rendi Putra Tjhientoso, Ruth, Agustinus Wiharja, Kris Rasta, Sonario, Anthony Perkasa, Abdi, Banu, Natalia Lois. Thanks for sharing lots of fun in this past 3 and half years. 9. Last but not least to all my friends who I can‟t mention one by one. Hope the best for all of you Cikarang, Indonesia, February 7, 2014 Hendy Febiansyah vi TABLE OF CONTENTS THESIS ADVISOR RECOMMENDATION LETTER i DECLARATION OFORIGINALITY ii PANEL OF EXAMINERS APPROVAL SHEET iii ABSTRACT iv ACKNOWLEDMENT v TABLE OF CONTENTS vii LIST OF TABLES x LIST OF FIGURES xii I INTODUCTION 1 1.1 Research Background 1 1.2 Problem Identifications 4 1.3 Statement of Problems 6 1.4 Research Objective 6 1.5 Research of Limitation 6 1.6 Definitions of Terms 7 1.7 Significance of Study 8 1.6.1 The Researchers 8 1.6.2 The Low Cost Airlines 8 1.6.3 The Reader 8 1.6.4 President University 9 1.6.5 Future Researchers 9 II REVIEW OF LITERATURE 10 2.1 Theoretical Review 10 2.1.1 Brand 10 2.1.2 Brand Image 10 2.1.3 Brand Association 11 2.1.4 Brand Attitudes 11 2.1.5 Brand Revitalization 11 2.1.6 Warranty Program 12 vii 2.1.7 Innovative Product Improvements 12 2.1.8 Advertising Communications 13 2.1.9 Third-Party Appraisals 13 2.1.10 Perceived Quality 13 2.2 Previous Research 14 2.3 Theoretical Frameworks 19 2.4 Hypothesis 19 III RESEARCH METHODOLOGY 21 3.1 Research Design 21 3.2 Population and Sampling Design 21 3.3 Research Instruments 22 3.4 Reliability and Validity 27 3.4.1 Reliability 27 3.4.2 Validity 28 3.5 Data Collection Procedure 29 3.5.1 Primary Data 30 3.5.2 Secondary Data 30 3.6 Testing Hypothesis 30 3.6.1 Multiple Regressions 30 3.6.2 Classical Assumption Test 31 3.6.3 F Test 32 3.6.4 T Test 33 3.6.5 Coefficient of Determination Test 34 IV ANALYSIS OF DATA AND INTERPRETATION OF RESULTS 35 4.1 Company Profile 35 4.1.1 Air Asia 35 4.1.2 Lion Air 38 4.1.3 Tigerair Mandala 42 4.1.4 Citilink 43 4.2 Data Analysis 45 4.2.1 Factor Analysis 45 viii 4.2.2 Reliability Test 53 4.2.3 Descriptive Statistic 60 4.2.3.1 Respondent Profile 60 4.2.3.2 Variable Frequency 64 4.2.4 Classic Assumption Test 81 4.2.4.1 Normality Test 81 4.2.4.2 Heterocedascity Test 82 4.2.4.3 Multicollinearity Test 83 4.2.5 Testing the Hypothesis 84 4.2.5.1 F Test 84 4.2.5.2 T Test 85 4.2.5.3 Multiple Regressions Models 87 4.2.5.4 Measuring the Variability of Regressions Models 89 4.2.6 The New Frameworks 90 4.3 Interpretation of Results 90 V CONCLUSIONS AND RECOMMENDATIONS 94 5.1 Conclusion 94 5.2 Recommendations 95 5.2.1 Company 95 5.2.2 The Future Researchers 100 REFERENCES 101 APPENDICES 107 APPENDIX I QUESTIONNAIRE 108 APPENDIX II TOTAL VARIANCE EXPLAINED 112 APPENDIX III ROTATED COMPONENT MATRIX 113 ix LIST OF TABLES Table 1.1 Differences between Low Cost and Full Service Carriers 4 Table 2.1 Previous Research Data Analysis 14 Table 3.1 Illustration of Likert-Style Rating Scale Questionnaire 23 Table 3.2 Relative Grading System for Each Dimensions 23 Table 3.3 Variable Operation 24 Table 4.1 Air Asia Fleets 36 Table 4.2 Lion Air Fleets 39 Table 4.3 Tigerair Mandala Fleets 42 Table 4.4 Citilink Fleets 44 Table 4.5 Communalities Table 45 Table 4.6 Table of KMO and Barlett‟s Test 46 Table 4.7 Table Variance Experiences 47 Table 4.8 Table of KMO and Barlett‟s Test 47 Table 4.9 Total Variance Explained 48 Table 4.10 Communalities Table and Rotated