The Airlines'
Unique Approach to Customer Satisfaction part 2
Proof there is no downside for the
airlines to mistreat us
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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.
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'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.
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.
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
30 May 2021
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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