This Surprising Airline Is Tops in Customer Loyalty
By Sean Williams
| More Articles
April 20, 2014 | Comments (3)
CAPS Rating 4/5 Stars
I know it might seem something of a stretch with few people enjoying the process of flying, but certain airlines are simply better than others at driving customer loyalty.
There are a number of factors that anger fliers, ranging from the length of time it can take to get through security, to dropping off a bag, or even getting your ticket. For airlines, at least some of these are well beyond their control, such as getting through security. This means the other service-oriented factors of flying, such as ensuring on-time arrivals, checking in bags efficiently, and even pricing the flight competitively compared with peers help drive customer loyalty and allow certain airlines to stand head and shoulders above their peers.
Source: Hakan Dahlstrom
As you might imagine determining which airlines drive consumer loyalty better than others can be difficult to measure, which is why I'm sure glad we have Brand Keys
, a research firm that measures consumer engagement and loyalty for 555 brands across 64 categories.
One thing to keep in mind here is that Brand Keys' research is comprehensive for the airlines it covers, but that it doesn't cover nearly all airlines. In fact, compared to the 15 most commonly flown U.S. airlines we examined last week
based on fleet age, Brand Keys covers a mere six: American Airlines and US Airways -- which are now American Airlines Group
) -- plus Delta Air Lines
) , JetBlue
) , Southwest Airlines
) , and United Airlines, which is part of United Continental Holdings
) . The good news is these are among six of the largest airlines in the country, so it'll give us a good bead on which airlines are making smart moves within the sector.
However, rather than simply diving into which airlines led the pack and which one flew in dead last -- which I am going to get to -- let's first examine why customer engagement and customer loyalty even matter in the first place.
Why customer engagement and loyalty matter
Within the airline industry consumer loyalty can be difficult to come by. Consumers are easily put off by the long waits and cramped quarters of traveling by plane, so the little things like ticket price, credit card perks, and any sort of free perks can really make a company stand out.
Source: Southwest Airlines.
This brings us to our first factor: customer engagement. To first get that consumer to fly your airline you need some sort of combination of positive peer, friends, or family review, an attractive ticket price, or some notable perk that stands out above the crowd. Southwest, for example, allows passengers two free checked bags, which is a fantastic motivator to bring in new customers who dislike baggage fees.
But it's not just enough to bring that customer in -- the airlines need to devise methods to keep that customers coming back over and over. For many airlines, the solution lies within mileage reward credit cards
, which offer patrons the opportunity to earn
point which can be used toward free flights in the future. Since these points typically only work with the host airlines and perhaps its partners it encourages consumers to stay loyal to a particular brand.
Both engagement and loyalty are crucial for the airline industry, since it runs on such tight margins
. Airlines constantly need an influx of new customers to drive top-line growth while retaining a good percentage of existing fliers to pad their cash flow.
The winners and losers
Now that we have a better understanding of how customer engagement and loyalty factor into the equation, let's have a look at Brand Keys' rankings for the airline industry.
According to Brand Keys, the rankings were as follows:
- Southwest Airlines
- Delta Air Lines
- US Airways
- American Airlines
- United Airlines
You read that right; in a sea of veritable majors, JetBlue came out on top in terms of customer engagement and satisfaction.
JetBlue FlyFi launch. Source: Anthony Quintano
JetBlue and Southwest dominate
JetBlue certainly isn't the cheapest airline by any means, but it offers one of the newest fleets of aircraft ,which provide plenty of entertainment features (e.g., Wi-Fi and television programming) for passengers. Furthermore, JetBlue offers the ability for passengers to check their bags for free, providing an enticing perk for new customers.
According to data from FlightStats and the Department of Transportation, JetBlue wasn't batting 1.000 in 2013, with a fairly low ranking when it came to online arrivals compared with other major carriers, but it was among the best when it came to few mishandled bag complaints, and it was the top dog with the fewest bumped passengers.
Because of JetBlue's smaller size
in comparison with its other peers listed here, it has flexibility that some of the majors just don't have. This flexibility, coupled with its newer fleet and free bag check-in, certainly affords it a good public perception.
Right alongside JetBlue is the champion of the people, Southwest Airlines. Southwest has done a good job for years of emphasizing its two free checked bags as a way to drive traffic, as well as its ability to hit off-route markets, which many of the majors have simply avoided. With consistently high rankings in annual airline surveys and the company ranking above all other airlines last year in terms of receiving the least amount of complaints, it's no wonder that Southwest has little trouble bringing in new customers and keeping its fan base loyal.
The "also flews"
Seeing major airlines such as Delta Air Lines and American Airlines Group bringing up the middle of the pack isn't too surprising. Keep in mind that while these companies do have leverage given their size, they also have almost no route flexibility because of their hubs, and they often have a mountain of debt from the purchase of new planes and the ongoing maintenance of existing planes.
Delta Air Lines, for instance, has the second-oldest fleet of the 15 largest U.S. airlines
. In its defense, Delta has done exceptionally well with its on-time performance
, and ranked at the top of the list in 2013 in terms of fewest cancelled flights. It also has been working diligently to upgrade older aircraft with modern amenities like WiFi and TV programming to make flying more enjoyable for its passengers. But, Delta also sports $8.2 billion in net debt, which can make it difficult to purchase newer planes, and could make it a bit of gamble for investors.
American Airlines Group, similarly, has a number of questions to answer for, including its $20.6 billion in debt. Both companies (American and US Airways) ranked at the absolutely bottom in terms of two-hour tarmac delays last year, and were two of the three worst when it came to flight cancellations. Neither fared exceptionally well with baggage handling, either. Because of its size, American Airlines Group is attempting to rely on its credit card program to drive loyalty, but public perception of the enormous airline, and its consistently mediocre ratings across a gambit of categories, tends to turn off both new and previously loyal consumers.
The worst of the worst
Bringing up the so-called caboose, however, is United Airlines, which also shouldn't come as a complete surprise if you follow the sector. United Airlines ranked dead last in the 2013 Airline Scorecard presented by The Wall Street Journal
, with the company bumping the greatest amount of passengers of any major airline, and ranking second-to-last in cancelled flights, mishandled bags, and complaints.
We also have to keep in mind that major airlines aren't going to be able to compete with regional or even national airlines based on price usually. They're going to rely on their perk rewards to drive return customers. The problem for United is that the other aspects of service mentioned here aren't up to par, giving fliers unfamiliar with the airline few reasons to fly United, and leaving existing customers questioning whether or not they want to stick around. These consistently low rankings are worrisome for United in that they could translate into weaker profits if its costs aren't tightly controlled.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure