It’s bad news for airlines and worse news for U.S. air travelers. According to the 25th annual Airline Quality Ratings (AQR) report, the U.S. industry scored worse in 2014 than the previous four years.
The 12 leading airlines in the country collectively did worse in all four performance areas the AQR tracks: on-time arrivals, involuntary denied boardings (getting bumped), mishandled baggage, and a combination of 12 customer complaint categories that fliers go out of their way to submit to the Department of Transportation.
Most of the complaints from disgruntled fliers, nearly 63 percent, were over flight issues, customer service problems, or baggage troubles.
The AQR weights the four factors to reflect the relative importance of each to customer decision-making. The report is a joint project of researchers at Embry-Riddle Aeronautical University and Wichita State University.
The top three rated airlines for quality are Virgin America, for the third year running, followed by Hawaiian and Delta, which rose from third and fourth spots respectively compared to 2013. Alaska also had a good year, improving in two of the four categories, proving there are some bright spots. The bottom three airlines are SkyWest, ExpressJet (former subsidiary of Continental), and Envoy (until recently American Eagle). Scroll down for full results.
Bad Sign for Fliers
The drop in rating is seen as a clear negative signal to consumers. At a time of mergers and greater profits for airlines, “customer satisfaction is not the airlines’ first concern,” said report co-author Dean Headley, associate professor of marketing at the W. Frank Barton School of Business, Wichita State University.
Headley said over the last seven or eight years, the nature of customer complaints, which generally relate to fliers being unhappy with the way they’re treated, haven’t changed and yet airlines don’t seem to be dealing with it.
Why aren’t they? They have no incentive to, said Headley. In an environment where just four airlines own 61.2 percent of the market share and are “making money hand over fist,” there’s no reason to make a priority of customer service.
“As long as they lock down their part of the market and their hub, why should they care?” said Headley.
In 2014, the 10 biggest U.S. carriers posted $7.3 billion in profits, mostly due to dropping oil prices and increased demand. Fuel is the biggest operating cost for carriers, about 33 percent, so even a small drop in price per barrel can mean big savings for an industry that uses 10 billion gallons of fuel per year. Delta said that for every penny fuel prices drop, it saves them $40 million a year.
Headley and others in the industry indicate that although airlines are saving on fuel, that isn’t being passed on to consumers. This has nothing to do with the lag that accompanies fuel price changes due to forward fuel-buying practices, it’s because airlines have no incentive to reduce prices.
What Changed
It was 9/11 that actually triggered the change in the way airlines operate.
After 9/11, interest in flying took a deep dive, and the airlines responded by reducing capacity by almost 20 percent, literally taking planes out of service. In the years that followed, as demand returned, the airlines learned that if they held back supply somewhat, they could still meet demand and at the same time earn higher profits.
In the 1990s, airlines used to fly with planes 65 to 70 percent full; today carriers try to operate with a load factor of 80 percent or more. U.S. airline set a record in 2014 for load factor, reaching 83.4, according to the Department of Transportation. That puts pressure across the system and means more overbooked flights, more bumping, more misplaced baggage due to tight turnaround times and the gamut of other customer service problems that currently plague the industry.
In 2007, the industry reached maximum capacity and had a record year for flight delays and complaints. That was the tipping that resulted in the discovery of another model for revenue: reducing services and charging for “extras” like checked luggage, food, and more leg room.
In 2014, the major U.S. airlines earned $5.4 billion from a la carte services, and another $10 billion from frequent flier programs and related activities, according to IdeaWorksCompany’s annual Airline ancillary revenue report.
By unbundling the charges, airlines were able to cut those costs from their bottom line and give consumers the option of paying only for the services they want.
Fliers aren’t happy, but that won’t change how airlines deliver their services.
“That rubs them wrong,” said Headley, “but they’re still going to fly.”
“The old ways are never coming back,” he said.
