First the good news: the major airlines—American, Delta, United, and Southwest—all reported record or near-record earnings for the first quarter of 2015. Much of that was due to significantly lower fuel costs as the price of oil has declined significantly over the past several quarters—American, for example, paid just $1.5 billion for fuel in the first quarter, a 40 percent drop from the same period last year. And because most airlines are running at or near capacity, airlines don’t feel the need to lower ticket prices anytime soon. So unless oil prices spike again, the airlines will likely remain highly profitable for some time to come.
Now the bad news: the airlines reported record or near-record earnings for the first quarter of 2015. Why is that a problem? Because those glowing earnings reports, combined with their determination to hold the line on ticket prices, will likely only fan the flames of travelers, politicians, and others already enraged about the industry’s changing structure, its many annoying practices, and the public’s general dissatisfaction with the flying experience.
How can airlines counter the long-standing poor perception of the industry?
Is it even possible? The answer is yes—if done right.
The media of course is rife with stories about just how unpleasant it is to fly these days. Most of them concentrate not so much on the price of tickets themselves, but rather on a variety of complaints regarding service, comfort, and the general experience.
Charging extra fees for services that used to be free, such as checked-baggage fees, and in some extreme cases even carry-on bags, the added cost to reserve certain seats, overcrowding, overbooking—the list is long. The airlines argue that they of course have the right to monetize services they used to provide for free, and that doing so helps keep costs down for all travelers. Travelers, of course, disagree, feeling that they are being nickeled-and-dimed to death, especially given the general unpleasantness of the experience, and that many of the costs are either hidden or not clearly explained.
The first key for airlines to improve their somewhat tattered reputations lies in improving their transparency, both in their public communications and in their dealings with passengers. Last fall, Spirit Airlines, often rated the least liked airline in the country, tried a new take on transparency by offering customers 8,000 reward miles points if they would take a survey on what they liked and disliked about the company and airlines in general.
The results were interesting. Fees, it turns out, were only the fifth most complained-about feature of airline travel generally. The first was seats, followed by lost bags, delays, and then service. And 36 percent of respondents complained about Southwest Airlines’ seats, compared with just 18 percent for Spirit’s fees. That suggests that the airline’s effort to be upfront about its fees—even offering tips on how to minimize them on its website—have been reasonably effective.
The second key to restoring that reputation is for airlines to pay attention to what really matters to travelers—and take constructive steps to affect their opinions about flying. A recent J.D. Power survey of more than 11,000 travelers found that they are only slightly more satisfied with the flying experience than they were last year—even those willing to pay to check their bags. But the survey also found that customers who chose an airline based on their customer service and reputation ended up being significantly more satisfied than those who based their decision solely on ticket price.
That’s probably why respondents rated JetBlue Airways the top airline, for the tenth year in a row. It has a strong reputation for good service, thanks to its real efforts to keep its customers happy. Any airline can boast of its excellent customer service, but that has to be backed up by what customers actually experience as they travel. Otherwise, their public perceptions will inevitably suffer.
The final key to improving those perceptions lies in the politics of the airline business. A number of politicians, including New York Senator Charles Schumer, have grown increasingly vocal about why consumers aren’t reaping the benefits of lower fuel costs, and whether the industry is in essence an oligopoly firmly in control of its pricing structure.
Adding fuel to the fire are calls by the industry to block certain foreign airlines (notably from the Middle East) from increasing their competitive presence in U.S. markets. If airlines are to meet these complains, especially in the face of their recent record profits, they will likely have to reconsider, and perhaps temper, their public posture on several of these issues, while working harder to educate the public on why their stances are to the benefit of all travelers.
Few industries are as inherently uncertain as the airline business, and there is much that airlines simply can’t control: fuel prices, weather- and mechanical-related delays, passengers’ unreasonable demands and expectations. Only by improving on what they can control—their degree of transparency, their overall customer service, their roles in government regulation of their industry—will they succeed in improving their overall public perception, while potentially boosting growth at the same time.