Special Report: Midwest Express Leads Smaller Carriers

Midwest Express for the third year in a row finished on top of the small carrier segment of BTN's Annual Airline Survey. The Milwaukee-based carrier barely nosed out newcomer JetBlue Airways. AirTran Airways finished third with a much-improved score over last year, while Frontier Airlines and American Trans Air languished at the bottom of the list.

These five carriers generally scored well below the industry average in negotiating and special services categories, but continued to excel in complaint/problem resolution, quality of communication and overall price value.

Due to limited networks, however, usage among survey respondents' companies was between 17 percent and 25 percent. Though such penetration is nowhere near that of the majors, smaller carriers, which generally are lower cost and therefore offer lower fares, have become more popular in the corporate market as buyers focus on cutting costs and maintaining T&E budgets.

"The low-cost carriers in particular have become much more relevant in our travel program since May," said one travel manager. "It is an alternative I just cannot ignore."

Though Midwest Express is a full-service carrier and not of the same breed as the other four, it still only managed to finish first among the five smaller carriers in four of 10 categories. Furthermore, its overall score fell by more than 10 percent, to 2.95 (out of five) versus 3.28 a year ago. Nevertheless, Midwest Express still notched an overall score higher than six major carriers and finished above industry average in four categories. The airline performed particularly well in complaint/problem resolution, finishing second of all 14 carriers in the survey.

Midwest Express sales director Kevin Farley attributed the relative success, in part, to a renewed focus on corporate sales. "We have spent the past 12 to 18 months shifting focus from agency-based efforts to more corporate-based and working cooperatively with travel management companies," he said. "Plus, in this fare environment, the value of our product is getting more recognition from corporate travelers."

Farley noted that small and medium-size businesses, many of which "have seen less of the majors," are pleased to be recognized as valuable by Midwest Express. Looking ahead, Farley said the airline will continue speaking with MIDT providers and "looking for a resolution in early 2003 in terms of agency reporting and better data management."

Growing rapidly and maintaining profitability, JetBlue Airways stormed into the survey with a second place finish among smaller carriers and a higher overall score than six of the nine majors. With low fares drawing in more business, the carrier has managed to add frequencies and attract corporate travelers. As expected, the low-fare carrier, which does not cut corporate discount deals, finished below the industry average in flexibility in negotiating both transient and meeting pricing. It also received a very low score in value of sales rep visits, a likely result of the carrier's tiny, thinly spread salesforce.

However, JetBlue's performance in complaint and problem resolution, a 3.56 score, was the highest of any carrier in the entire survey, reflective of its miniscule ratio of complaints—less than one per 100,000 passengers, as measured by the U.S. Department of Transportation. The 3.22 JetBlue mustered for quality of airline communication exceeded the industry average and scores among all other smaller carriers.

"Our fare structure is so simple and easy to understand that we do not need to communicate a zillion fare rules," said Noreen Courtney-Wilds, JetBlue manager of national corporate sales.

Meanwhile, respondents scored JetBlue's overall price value at 3.57, behind only Southwest Airlines and AirTran Airways. "Where we distinguish ourselves, even among low-cost carriers, is the product," Courtney-Wilds said. "Leather seats, DirectTV, new planes and excellent reliability in terms of on-time performance."

However, she acknowledged that the Kew Gardens, N.Y.-based airline must develop distribution channels more suited for the corporate travel market. For that reason, JetBlue has aligned with AgentWare and Outtask and currently is developing a corporate online booking tool of its own.

The carrier in the past year floated a successful initial public offering, launched its much anticipated frequent flyer program and gradually expanded transcontinental services. More recently, JetBlue began nine daily flights between Long Beach and Oakland, Calif., sparking a fare war with Southwest Airlines.

AirTran Airways showed noticeable improvement this year, pushing its overall score up from 2.70 to 2.81, good for third among small carriers. Its 3.66 score for overall price value was higher than last year's 3.54 and was second behind perennial price value champion Southwest. The carrier also beat the industry average with a 3.25 in complaint/problem resolution.

"We have restructured a lot of our customer relations department and provided our people with additional tools, products and authority to resolve issues on the spot," said Bill Howard, AirTran director of sales.

Orlando-based AirTran also received improved scores in quality of communication and value of sales rep visits. "We have a small sales staff, which is something we always struggle with, but we know we have done a better job in communicating with corporate travel managers and expect to do an even better job next year," Howard said.

Frontier Airlines' overall score slid marginally from the survey conducted in 2001. Compared with last year, respondents gave the carrier lower grades in seven of 10 categories, with scores for availability of special services for VIP travelers and accurate flown revenue data taking the bigger hits. Overall price value, a category in which Denver-based Frontier traditionally has excelled, declined to 3.00, one-tenth of a point below the industry average.

However, improvement was seen in complaint/problem resolution—Frontier's 3.31 score beat the overall industry average—and in both value of sales rep visits and sales rep empowerment.

"We always have had the opportunity to empower employees," said Lowell Miller, Frontier director of sales and distribution. "We give them the flexibility to get the deal done, but make sure they keep in mind the bottom line and that we can't give away the store."

Miller added that new, more restrictive ticketing policies imposed by the majors was "the straw that broke the camel's back" for many corporate travel managers. "They have had enough," he said. "They want something consistent. We keep things simple and that is resonating strongly in the market."

Indianapolis-based American Trans Air again finished in the small carrier basement. However, its score of 2.64 marginally was higher than last year, driven partly by a 3.35 posted for overall price value, a score well above the industry average of 3.10. ATA's usage among respondents was only 17.4 percent, the lowest among all 14 carriers.