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The Airlines' Unique Approach to Customer Satisfaction part 2

Proof there is no downside for the airlines to mistreat us
 

It might well be true that airline travel, in total, is less than it could/should be due to our dissatisfaction with the air travel experience.

But you'd be hard pressed to point to any specific direct impacts uniquely applying - either up or down - to just one of the dinosaur airlines.

 

 

'If you don't fix this, I'll take my business elsewhere' is a valid threat/inducement that both we and most businesses are very aware of.

But the airlines don't seem to care.  Usually unspoken, but sometimes even said out loud, is a 'go ahead, do it, see if I care' response to customer service problems.

In this second part of our article, we look at what the impacts have been on the airlines as a result of their bad service.  The more we look, the clearer it becomes that the airlines are an exception to usual business dynamics - probably due to the abjectly uncompetitive nature of the airline industry.

This is Part Two of a two part Article Series

If you've arrived directly at this page from a search engine or other link, please note this is the second part of a two part article.

You will find its context more explicable if you read the first part which sets out our theory that the airlines don't care about customer service because there are no negative consequences as a result of their providing poor customer service.

An Attempt to Prove or Disprove this Theory (continued from part 1)

Okay, so it sounds almost unbelievable, doesn't it, that the airlines deliberately choose to ignore the generally accepted western free market business practices of caring for their customers.

But let's look at the facts.

First, it is surely true that airlines do not look after their customers well; neither in the big things nor the small things.

Second, who can dispute that all the major airlines have very similar approaches to managing their customer experiences.

So, with these two facts setting the scene, let's look at outcomes.

Has any airline ever admitted to being harmed as a result of their poor customer service standards?  We have an abundance of examples to analyze - failed airlines that have either closed down their operations entirely, or been bought out, or that have gone through a Chapter 11 bankruptcy (or two, or three).

And even for the airlines that don't fail in this manner, they lose as much money as they make - some calculations suggest that the airlines in total have lost more money than they've made, in total, ever since the start of commercial passenger services.

When you read the reasons (excuses) put forward by airline management to explain the demise of their airline, or just their most recent massive quarterly loss, have you ever seen a CEO say 'Well, frankly, we mistreated our customers and lost a lot of passenger revenue as a result'?

Has a CEO ever said 'We made a mistake when we decided to (charge whatever fee, or whatever else) and it cost us a lot of business, so we've decided to reverse that now.'?

You can read stacks of press releases where airlines and their senior executives blame all sorts of things for their losses.  The economy in general, the cost of fuel, government regulation and taxation, 'unfair' competition (whatever that is - the DoT never seems to find any), too many planes, paying their staff too much, and so on and so on.

But you're unlikely to ever read any attribution of a bad financial result as being a result of bad customer service.

The airlines don't believe that customer service matters, either positively or negatively.  Clearly they see no value in offering better customer service, and equally clearly, they see no cost associated with providing poor customer service.

An Unchanging Set of Airline Players

This is a wide ranging discussion of airline management inadequacies and so I'll repeat the basic point :  The airlines don't care about customer service issues because there is presently no benefit and no penalty to them associated with the customer service levels they adopt.

Let's look at this from a numerical perspective.  In most competitive marketplaces, we see what marketeers call a 'product life cycle' - products and indeed brands and companies seem to evolve.  This year's hero product and company was last year's zero, and will be zero again at some future point.

This is very evident in some of the faster evolving markets such as those in the computer industry.  Look at the shifting market shares of Microsoft's Internet Explorer, for example,  It started off at zero, quickly grew to take over 90% of the browser market, but now holds less than 50% and seems to be in unstoppable decline.

The same can be said for most other industries.  Today we have major car manufacturers that didn't exist (at least in the US) only a few decades ago, while some of our oldest marques have disappeared.  And so on and so on.

But what about the airlines?  Yes, it is true that we've lost a lot of airline brands (Northwest, Eastern, TWA, Pan Am, and so on for as long a list as you care to compile); but what have these now defunct airlines been replaced with?

If we are talking just about any other product, we see companies going out of the marketplace, and new entrants coming in to the marketplace.  But what about the airlines?

Since deregulation, way back in 1979, the only airline that has appeared, survived, and reached measurable size is JetBlue (and to be exact, its market share is a puny 3.6%; it is dwarfed by its much larger dinosaur competitors).

All the major airline players in the market today have histories dating back forty years or more.

An Unchanging Set of Market Shares

Not only is the airline industry notable for lack of new players, it also seems to show very stable market shares.  This is extraordinary and quite unlike most other markets.

It is actually quite difficult to accurately track market shares inasmuch as they relate to actual passenger preferences, because the overall market shares are influenced to a great deal by airline mergers, and also by airline policies in terms of opening up more routes or closing some down.

For example, we all know airline routes where we are more or less forced to fly a particular airline, whether we want to or not - it is unfair to attribute the passengers that this airline carries on that route as being due to the preferences of the passengers to choose that airline over other (non existent) airline alternatives.

In an attempt however to get a feeling for the shifting market shares as a result of passenger preference, we've chosen to track domestic airline data only (because we feel there are substantial shifts in international data that are the result of airline actions rather than customer actions), and we're simply counting the number of passengers carried.

These are simplifications, but perhaps they will allow for some sort of pattern to emerge.

We came across an eleven year data series from the DoT Bureau of Transportation Statistics, and we chose to look at the aggregate annual total number of airline passengers, and then the percentage of that number who were passengers on American Airlines. (Yes, we could have adopted many other measures too, but for this purpose we think a count of passengers boarding flights is more relevant than a measure of fare revenue generated, for example.)

AA - The Clearest Example of Static Airline Market Shares

AA has arguably been the most stable of all airlines during the period 2000 - 2011, with only one bankruptcy appearing towards the end of 2011, and apart from merging with TWA at the beginning of the data series, it had no other significant merger caused distorting shifts in market share.

As an aside, it is interesting to see how shortlived the 2002 bump in market share caused by the TWA merger proved to be.

AA Market Share 2000 - 2011 

As can be seen, there's been very little overall movement in AA's market share over this eleven year period.  AA started in 2000 with an 11.4% share and ended in 2011 with a 10.2% share.  In other words (and not factoring in the strangely transient lift in numbers from TWA), it has been steadily losing market share at the infinitesimal rate of about 0.11% a year over the last 11 years.

That hardly shows any sort of impact from any sort of loss of outraged passengers, does it?  Neither does it suggest any sort of huge win/gain by AA by picking up outraged passengers from other airlines.  Instead it points to a steady state, unmarked by any significant rises or falls in passenger market share.

It could also be argued that the small gradual decline in market share was more a result of new airline entrants such as JetBlue (which steadily grew from 0.2% market share in 2000 to 3.6% in 2011 - a 0.3% a year growth rate) and perhaps Virgin America (still a trivial factor in the overall market); these are carriers which took market share more or less evenhandedly from all the dinosaur carriers in the markets they entered.

Adjusting for the Southwest Significant Exception

It is true that Southwest also grew during the eleven year period (12.1% in 2000, 17.3% in 2011, a 0.47% annual growth rate).  But Southwest is a special case - it could be argued that rather than taking market share, as these numbers would imply, Southwest has instead simply been growing the market as it continues to add new services between new city pairs - what is termed the 'Southwest Effect'.

Whereas AA and all the other dinosaur carriers have done precious little domestic expansion in terms of routes served, Southwest has been slowly but steadily growing its route network every year.

It can also be said that Southwest's passengers are in large part a slightly different demographic to those of the four remaining major legacy/dinosaur carriers.  Southwest, with its no-frills and no first class, caters more to infrequent leisure passengers, the dinosaurs focus more on frequent and business type travelers.

So perhaps we can take both the Southwest and JetBlue numbers out of the total airline numbers, and look instead at AA's share of what remains.

AA Adjusted Market Share 2000 - 2011 

When considered as a share of the market primarily comprising itself and the other dinosaur carriers, AA's market share changes even less than it did after allowing for the possible distorting effects of Southwest and the entrance of a new airline.

We don't know for sure, but we'd guess that if you were to somehow manage to create a data series for each of the other major 'dinosaur' carriers (these days there are only three others remaining - Delta, United and US Airways) and if you could work out how best to adjust for the impacts of their various mergers, bankruptcies, and everything else, you'd probably see no major shifts in market share among any of the four remaining legacy/dinosaur airlines, perhaps all the way back to shortly after deregulation and the first mad scramble for market shares and new routes ended.

The stable market share enjoyed by American Airlines is extraordinary and suggests the market is far from aggressively competitive.

Summary and Conclusion

Sure, airlines have come and gone, but it has seldom been as a result of being abandoned by their passengers.  Instead the problems with failed airlines generally relate to bad management decisions in terms of airplane purchases, routes traveled, and labor relations.

In surprising reality, the major 'dinosaur' airlines are all very closely identical in all relevant measures, including a poor approach to customer service.

And while we may continue to suffer from their bad customer service, we have no real alternatives.  We can jump 'from the frying pan to the fire' by changing from one indifferent airline to another indifferent airline, but in the broader picture, the airlines laugh at us when we do so, because what each airline loses in terms of its own customers abandoning it, it seems to simultaneously pick up a similarly balanced number of new customers who have abandoned other airlines in favor of this airline.

So what can we do to influence the airlines to provide better service and customer support?  Almost nothing, it seems.

There is the thought you could simply give up on flying entirely; or, at the very least, minimize the travel experience as much as possible and cut back on your travels each year.

Many of us have already done so, relying on new forms of contact and communication to replace or supplement in person visits.  Email, text messaging, faxing, phoning, and video conferencing all keep us closer to our friends, family, and business associates without the need to travel.

But this leads to a further problem.  Each time the airline industry as a whole suffers a loss of passenger business across the board, they respond in exactly the wrong way.  They cut back still further on services and make the flying experience still more unpleasant.

This is Part Two of a two part Article Series

If you've arrived directly at this page from a search engine or other link, please note this is the second part of a two part article.

You will find its context more explicable if you read the first part which sets out our theory that the airlines don't care about customer service because there are no negative consequences as a result of their providing poor customer service.


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Originally published 29 Mar 2012, last update 02 Jul 2017

You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.

 
 
 
 

 


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