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

Young woman in international airport at check-in counter, giving her passport to an officer and waiting for her boarding pass

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.”