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Airlines

New Study: Poor Customer Service Doesn’t Hurt Airline Profits

New Study: Poor Customer Service Doesn’t Hurt Airline Profits
Jeff Edwards

A study from the University of Nevada Reno reveals that airlines have very little incentive to worry about customer satisfaction. The research finds that rather than brand loyalty or customer service, carriers are more likely maintain a healthy bottom line by focusing on controlling costs and logistics.

A new study from the University of Nevada Reno finds that although airlines continue to tout customer service as a marketing ploy, happy customers have very little to do with an airlines overall profitability. Instead researchers concluded, cost controls, load factors and efficiency of logistics are the most likely contributors to a given carrier’s financial success.

In an article revealing the results of the research, University of Nevada Reno Chair of Accounting Jeff Wong and University of Nevada Associate Professor of Accounting Jannet Vreeland noted that despite public outcry over a spate of high profile instances in which passengers were roughly removed from overbooked flights, the very practice that led to a string of public relations nightmares continues nearly unabated. The economists concluded that the financial benefits of overbooking flights far outweighs the risk of alienating customers.

Wong said that the results of the paper were in many ways expected. The study focused on how airlines approach overbooking and “bumping” passengers in the wake of the Dr. David Dao controversy in which police officers physically dragged a 69-year-old physician from his seat on a United Airlines Express flight in order to make room for employees traveling on company business. The research found that while airlines modified some policies following the incident, overbooking flights and bumping passengers remains a key tool for carriers to use in order to ensure flights takeoff as close to full capacity as possible.

“From the shrinking width of seats and space in-between the seats to baggage fees for luggage and limited food services on domestic flights, many airlines still tout their customer satisfaction,” Wong told Forbes this week, noting that airline profits are more likely based on “factors not associated with a price for service, but rather logistics.

In the end, their profitability does not appear to be dependent upon customer service, based on our analysis. Given that the airline industry offers a service with few alternatives, the findings of our research may not be surprising.”

The researchers say that while rare circumstances in which passengers are involuntary bumped from flight will continue to occur, airline officials have hope that new technology help soften the blow. Rather than ending the practice of overbooking, airlines are instead looking at new ways to target volunteers before boarding ever begins.

“Overbooking by airlines may not disappear as a practice, but artificial intelligence can assist airlines in identifying passengers who may have flexibility in their travel plans on an overbooked flight,” Wong and Vreeland write. “The airlines could offer incentives to these passengers in order to avoid bumping other passengers with less flexible travel plans.”

View Comments (10)

10 Comments

  1. jrpallante

    October 11, 2018 at 1:39 pm

    I hope the airlines never stop overbooking. Over the past 30 years, I have never seen anybody involuntarily bumped from a flight. Typically, when the gate agent announces an oversold situation, there is a rush of volunteers eager to snatch up a valuable travel voucher. I have probably volunteered my own seat 20-30 times in exchange for many thousands of dollars in free travel. Not only do I get a voucher for giving up the seat, but on several occasions I have successfully talked myself into an upgrade on a later flight. In most situations, a smile and a friendly disposition go a long way. Try it some time!

  2. Lord Bowdon

    October 11, 2018 at 3:18 pm

    Such a shame that customer service now means nothing. But the problem is the race to the bottom – they all are as bad as F9, which I no longer fly after I was threatened with removal from the plane simply because I asked about sitting in a different seat. The person who was next to me was so large, he could not fit between the armrests and occupied about 1/4 of my seat. That set the FA off on a “do as your told” tirade.

    But below are equally irritating issues I have encountered with the legacy carriers:

    AA. Booking an MCE seat to HKG (9 across at the time, vs. 10 in main cabin), and finding myself, without being notified, in a regular seat. No compensation because my “status” granted me the upgrade free, but I would hazard a guess that they had an opportunity to sell the seat for more.

    UA: 12 hour delay caused by a chain of events, mechanical, weather, mechanical, weather, crew timeout. A grand total of 2,500 “compensatory miles” for my misery.

    DL. Having to self tag 4 heavy bags at AMS, and no help offered by staff “laughing” at my unfamiliarity with the cascading mechanical doors.

    SWA: No curbside check-in staff at MKE on a Sunday afternoon, requiring self tagging of oversized bags.

    AA: Involuntary schedule change on an international flight after booking, which increased the journey time by 6 hours, making competitors’ flights much more appealing. AA refused to allow me to cancel for a refund, even though I would never have bought the ticket had I known that they were going to make the change in routing (resulted from PHL replacing ORD as a Euro hub). I believe that a six hour increase in journey time is of such significance that pax should have had the opportunity to cancel without penalty, even though Conditions of Carriage rules differently.

    Conditions of Carriage are almost worthless. As noted in other threads, it is virtually impossible to be re-accommodated by the airline’s staff on competitor if your original flight is delayed or cancelled – and you can never prove that there was no room on the other flight.

    While many years ago, I went out of my way to fly on my preferred US carrier, now I use SWA for the majority of domestic flights, and in many cases, a foreign country’s flag carrier for international flights.

  3. strickerj

    October 11, 2018 at 6:11 pm

    I think most of the airlines figured this out years ago. The bottom line is that when there’s no real competition, what’s the incentive to provide decent customer service?

  4. KRSW

    October 11, 2018 at 6:16 pm

    Perhaps we need to bring back Regulation. At least then the airlines were forced to compete with service and there were standards.

    Unfortunately, Americans are whores. People still fly United despite the bad press. Until people stop flying a carrier, they’ll continue to squeeze every last cent (and ounce of civility) out of flying.

  5. mostg

    October 12, 2018 at 1:03 am

  6. Sabai

    October 12, 2018 at 11:50 am

    That headline is making everyone at Airlines Against Americans all hot and bothered; consolidation nirvana has been reached.

    Also good news for Marriott…

  7. kkua

    October 12, 2018 at 2:35 pm

    Stop behaving like old farts and take a page out of the playbook used by millenials: rant via social media. The customer service is more proactive and provides instantaneous remedies. Airlines want to capture the good publicity and grab brand loyalty of the next generation of travelers.

  8. FlyingNone

    October 12, 2018 at 3:18 pm

    Yeah. right. Tell that to the thousands that stopped flying United when they merged with Continental- what about that LOST PROFIT??. What a debacle; we could no more give good customer service than we could have handed every passenger a thousand dollars….I was there on day one and it was (and may still be) a living nightmare.

  9. 777 global mile hound

    October 12, 2018 at 9:02 pm

    So that’s why American and others have gotten so bad
    I suppose they really believe in that study
    Don’t believe the study I left the airline over it! Had 20 years with them before they hot the skids and their still declining sadly

  10. Gigantor

    October 15, 2018 at 8:03 am

    Simple solution… I no longer travel to the US.

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