BTN's 10th Annual Airline Survey: Buyers Put American First, As Service Ratings Drop - Business Travel News

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BTN's 10th Annual Airline Survey: Buyers Put American First, As Service Ratings Drop

November 19, 2007 - 12:00 AM ET

By Jay Boehmer

(Download a pdf of the full story and charts here.)

American Airlines took top honors in Business Travel News' 10th Annual Airline Survey, edging out Continental Airlines by three-tenths of a point.

Southwest Airlines finished third, after a first-place finish last year, which represented the first time a carrier other than American or Continental placed on top since Business Travel News began tracking corporate perceptions of airline performance in 1998. United Airlines placed fourth this year, followed by Northwest Airlines, Delta Air Lines and US Airways, according to ratings by 358 corporate travel buyers, the majority of whom managed travel for small and midmarket companies.

On a scale of one to five, the former being poor and the latter excellent, ratings among the Big Six and Southwest this year averaged 2.97, compared with an average last year of 3.05 and 3.25 in 2005.

2007 has been a year marked by high-profile service disruptions, the most full planes in recent memory and an abysmal summer travel season—rife with delays and cancellations. It's no surprise, then, that corporate travel managers rated overall carrier performance with lower scores on average in every category than they did last year. Though some carriers improved scores in a few categories, only Northwest Airlines managed to raise its overall rating from 2006—albeit by a modest one-hundredth of a point. All other carriers' scores faltered in 2007.

Many buyers cited on-time performance, a decline in general customer service, bumped passengers, hard-bargaining airlines and aging aircraft in assessing domestic carriers—issues that dominated the dialogue this year in the United States.

Survey winner American Airlines acknowledged the challenges that have plagued the domestic air industry. "This is one of the worst years ever in the history of United States airline service," said vice president of global accounts Frank Morogiello. "There's no room for error—because you're running into 80 percent to 85 percent load factors, when one flight goes out, there's no room to put the people on the next one. Couple that with weather—we had the worst weather logged at our hub in Dallas in almost 20 years—and an outdated air traffic control system. No one used to have the middle seat occupied. Now, it's always occupied."

In addition to potential nightmares that await corporate travelers at the airport and in the sky, average ratings for all carriers in the nine major categories slipped across the board. Survey figures show an overall decline in domestic carrier average scores, showing a downward-sloping perception of the quality of the airline industry's negotiating flexibility, data availability, problem resolution, communication, account manager relationships, customer service and overall price value.

"It's a challenging industry environment and continues to be, with the airlines being sort of back in the driver's seat: Load factors are at record-high levels, and fare increases could leave a sour taste in some of the respondents' mouths," said American Express Advisory Services senior practice leader for air Mitch Cwanger.

Corporate travel buyer respondents noted less flexibility overall among major domestic carriers in negotiating transient pricing, as the average score in that category declined. John Heilner, vice president of consulting firm Management Alternatives, said with high load factors, airlines more stringently are managing accounts based on contract performance. "They've been talking about that for at least 10 years, and each year they say, 'This year we really mean it,' " Heilner said. "They certainly mean it more than they used to, and they're being more difficult about extending agreements if performance hasn't been there. I think travel managers have really gotten the message. We hear it from our clients about being more careful about not having too many deals—which we always advised them not to have."

One corporate buyer said, "As the airlines are now making money, they have short memories related to those corporations that were loyal to them. They seem only focused on what we are not doing and chasing the next incremental sales dollar."

American Express' Cwanger agreed that domestic carriers are more strictly monitoring contract commitments and more aggressive in "holding their clients to those agreements," he said. "If they don't meet them, carriers don't necessarily cancel those agreements, but they do adjust the terms to make them financially worthwhile for the airline to invest in that upfront discount they're offering."

American Airlines' Morogiello said, "The days of doing an RFP and overcommitting 150 percent of your business are gone. People are held more accountable and I think that makes those customers more important. We want to gravitate to companies like that. There are many, but there aren't many that you want to make sure you have in your portfolio forever."

Flexibility in negotiating meetings pricing took the biggest hit this year and was the category in which buyers were most critical. Out of five points, respondents rated meetings pricing flexibility at 2.76 points—the lowest rating of all categories.

According to a Business Travel News Meetings Monitor survey of 150 corporate meeting buyers released in September, 47 percent said they received no discounts or perks on group air tickets and 22 percent are receiving smaller discounts. Most airlines offer some sort of corporate group discount program, but others have cut meetings programs, including Southwest Airlines in 2003 and Delta Air Lines in 2005.

American Express's Cwanger said, "Most airlines we work with are going to roll a meeting into the corporate transient agreement in place. Some carriers still have meetings discounts out there, but it really is up to the travel counselor to determine which discount will be better."

Corporate travel buyers also gave lower marks to carriers' ability to provide soft-dollar benefits, including special VIP treatment for frequent travelers. That category garnered the second-lowest score, after flexibility in meetings price negotiating.

Although some buyers said such add-ons provide significant value to their most frequent of travelers, others were less inclined to be placated. "I haven't seen an increase in the soft benefits, such as upgrades or elite nominations or that sort of thing," said Cadence Design Systems director of global travel Marcia Saurman. "From my perspective, when I go in to make a presentation to the CFO on the hard dollars in cost avoidance and cost reduction, the upgrades and the premier nominations are fluff, so I don't even put those in there. If I can get a few more points on the discount and forego some of those things, that's what I'd rather do."

Amex's Cwanger said more companies are seeking to quantify such value-added benefits to show their value to bean counters—though putting hard figures on soft-dollar benefits can be elusive.

Most of the largest U.S.-based carriers rely on Prism data for contract management, but buyer ratings in that category varied widely—from 3.28 for American Airlines to 2.58 for US Airways. Of the carriers in the survey, only US Airways and Southwest do not use Prism for data reporting, said Prism Group vice president Les Baker. Meanwhile, those carriers ranked lowest in the contract data category.

Several travel buyers noted that contract performance data is more readily available and precise than it's ever been.

"Between the fact that they're pretty much all getting Prism data, along with the fact they've had some years now to massage their own software and get more out of the data, they can look much more deeply into contract performance," Management Alternatives' Heilner said.

As airline customer service issues have moved to the forefront and even have spurred congressional hearings this year, travel buyers were among the multitude to slam carriers on levels of service. Corporate travel buyers this year graded every single carrier with a lower score than last year in the quality of customer service.

One large-volume travel buyer said, "I think our travelers are numb," while another Corporate Travel 100 buyer said his travelers "go to the airport assuming they'll have service disruptions. When you don't, and the plane leaves on time, you think, 'Thank God.' "

Though buyers logged a myriad of such gripes in survey responses and clearly weighed faltering customer service into this year's scores, some respondents accepted that account managers and sales reps have little control over the flight experience.

"Even if you complained about a bunch of over-50, unhappy flight attendants who barely smile, what's your account manager going to do? With regards to your discount and your contract, they're empowered to do something," said one corporate buyer, "but if you tell them, 'Your equipment is so old,' what are they going to do? Snap their fingers and get a new aircraft for you?"

Buyers were quick to suggest improved communications as one way to remedy lackluster customer service. One buyer said one preferred carrier "recognized mistakes they made in service and communication and are working with us to make things right." However, not all buyers took that view, as quality of airline communications this year fell modestly from 3.26 to 3.18. Only American Airlines improved in that category.

Similarly, nearly every carrier's score declined in complaint/problem resolution, with the exception of Northwest Airlines. The average rating of that category slipped this year to 2.96 from 3.07 in 2006.

Though most carriers saw a slight drop in their rating on the value of relationships with account managers this year, the category witnessed the smallest drop of any category—with a downgrade of only one-hundredth of a point from 2.99 last year to 2.98.

"I haven't felt any kind of shift in how responsive account management is, or how much they care," said Cadence's Saurman. "Quite the contrary. They're feeling it too. They're getting the pressure too. They absolutely need the partnership."

Individual Airline Performance

With an overall score of 3.2 on a scale of one to five, landing it in first place, American Airlines placed the highest scores in six of the nine categories in which carriers were ranked. Though the carrier posted lower scores this year in six of nine categories and its overall performance slipped from last year, buyers this year ranked American as the most flexible in negotiating transient pricing, meetings pricing and services and amenities.

The carrier also earned top marks in availability of contract performance data and value of relationships with account managers and sales reps.

Morogiello credited much of American's success this year to an experienced team of account managers. "We have a hell of a team that has survived the churn, the bankruptcies, the turnovers—we've been able to retain them," he said. "We don't have rookies walking in. We have seasoned veterans who know how to sell, know how to do account management, know how to have tough conversations. And we have one hell of a group of customers that can do the same."

Though Continental Airlines failed to take the lead in any single category, the carrier posted enough favorable scores across the board to garner a second-place finish. With its overall score of 3.17 on a scale of five, Continental lost first place to American by three-hundredths of a point, but beat the carrier in overall price value and quality of customer service, while staying at American's heels in most other categories.

Continental staff vice president of North American sales Monisa Cline said her entire staff this year became the first among domestic airlines to earn the Certified Corporate Travel Expert designation. "We want to make sure our sales professionals understand the buyer's perspective and it also reinforces professional development for our sales team," Cline said.

Cline said corporate travel business remains "steady and strong" and the carrier has maintained the size and scope of its corporate sales force to target each market segment, from the small business to large enterprises.

"Our philosophy is to do customized deals that fit the needs of the customer and we're seeing good, steady growth," she said. "Obviously, we have a lot more international service. As we grow more internationally and become a more global airline, there's a more strategic fit for larger multinational companies. Most of the deals include international."

Southwest Airlines' top finish in last year's survey surprised many corporate travel industry watchers, since the carrier did not offer extensive global distribution system participation, corporate contracts, an international network or a business class cabin—many of which are top buyer requests. The carrier this year has embarked on a strategy to woo more corporate travel business—initiating some global distribution system participation, showing more willingness to negotiate, bolstering its frequent flyer program and ramping up its sales force—but buyers this year ranked the carrier in third.

Southwest, however, still maintained its lead in the categories of overall price value and customer service. In fact, the carrier's 3.99 score in overall price value was the highest score gained by any carrier in any single category.

Southwest CEO Gary Kelly said customer service and price value are top of mind for the airline, and should help it gain more corporate travel business.

"Given the schedule we have and the overall customer service package, we are definitely destined to earn a lot more business travelers—and they're harder to win over. Leisure travelers are oriented toward price—we know that. We win that game hands-down as a low-fare brand. Leveraging that with our business travelers will be a very powerful offering," Kelly said.

United Airlines once again found itself in the middle of the pack, garnering a 2.99 overall rating from corporate travel buyers, down from a score of 3.04 last year. The carrier found its score slip in nearly every category, except for flexibility in negotiating transient pricing, which stayed flat at 2.92 on a five-point scale from 2006.

One small-volume buyer said, "United called, and even though we are not big enough to contract, if we align ourselves and move a significant amount of business their way, we will eventually prove ourselves to be someone they would like to partner with as we grow."

Northwest Airlines this year was the only carrier to improve its overall score from 2006—though only by a modest one-hundredth of a point. This year, it posted a higher score in flexibility in negotiating transient pricing, meetings pricing and services and amenities. Northwest also improved in complaint resolution and the value of corporate account managers.

"Northwest is a great airline with the potential to be even better," one travel buyer said. "They just need to get their act cleaned up."

Delta Air Lines this year saw its overall score slip to 2.82 this year from 2.94 last year, experiencing a slip in every category, apart from a flat score of 2.78 in value of relationships with account managers. One travel buyer respondent wrote, "Our primary carrier is Delta, due to it being a hub. Delta has done absolutely nothing to improve our relationship in years."

US Airways this year returned to its spot at the bottom of the heap, with a total score of 2.55, down from its overall score of 2.76 last year. The carrier's score slipped in every category from last year.

While usage among survey respondents was too low to generate meaningful survey results, AirTran Airways, Alaska Airlines, Frontier Airlines, JetBlue Airways and Midwest Airlines all scored higher than average ratings.

While only gaining a 13 percent usage rate, Midwest Airlines posted a higher score than any other carrier, with a 3.41 overall rating and particularly strong scores in overall price value and quality of customer service.

Though only 16 percent of respondents did a meaningful amount of business, Alaska Airlines posted 3.4 points on a scale of five. JetBlue—with a 20 percent usage rate—had an overall score of 3.09.
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