"The World's Leading Airline" Is Actually the Worst in the U.S.

United Continental (NYSE: UAL  ) CEO Jeff Smisek has been marketing United as "the world's leading airline" for the past year. At an industry conference last month, Smisek stated that he wasn't worried about American Airlines taking the title of the world's largest airline following the latter's merger with US Airways (NYSE: LCC  ) . Instead he was focused on the goal of being the world's leading airline. This entails having the best route network to get people where they need to go, and providing strong customer service along the way.

Unfortunately for United and its customers, reality doesn't quite live up to Smisek's vision. The 2013 Airline Quality Rating survey (an annual study of various quality of service metrics for the U.S. airline industry) put United at the bottom of the list (No. 14). Furthermore, the No. 12 and No. 13 airlines -- SkyWest (NASDAQ: SKYW  ) subsidiaries SkyWest Airlines and ExpressJet Airlines -- are regional carriers doing most of their flying for United. United's poor service quality will make it difficult for the airline to sustain its historical revenue premium. As a result, I believe the market is overestimating United's ability to bounce back quickly from its disappointing 2012 earnings performance.

Survey says!
The Airline Quality Rating survey (link opens a PDF) takes into account four criteria: on-time performance, denied boarding frequency (aka "getting bumped"), mishandled baggage, and customer complaints. For 2012, United and its regional partners were near the bottom of the pile in terms of on-time performance and mishandled baggage, and were by far the worst offenders in terms of denied boardings and customer complaints. United's overall score of -2.18 was far worse than the scores for its major competitors:

Airline

Rating (smaller negative number is better)

American Airlines

-1.11

Delta Air Lines (NYSE: DAL  )

-0.58

Southwest Airlines (NYSE: LUV  )

-0.81

United Airlines

-2.18

US Airways

-0.87

Data from 2013 Airline Quality Rating survey

United Continental's performance significantly deteriorated compared to 2011, when United scored -1.45 and Continental scored -1.41. Much of this drop can be attributed to the difficult merger integration process, particularly a number of IT system problems that disrupted flight schedules and hurt customer service. Nevertheless, even if the company had maintained its 2011 rating, that still would have placed it significantly behind all of its major competitors.

Why it matters
Despite its poor service compared to peers and unit revenue growth near the bottom of the industry for 2012, United still maintains a modest revenue premium over competitors. This is partially the result of having hubs in many of the biggest and wealthiest cities in the country. However, it its also partially a legacy of Continental Airlines' reputation for superior service. As recently as 2009, Continental was the top-ranked network carrier in the AQR survey. However, United Continental has lost that customer service advantage to Delta, and it should not be surprising that Delta has subsequently closed much of the revenue gap between itself and United.

United simply cannot be the "world's leading airline" unless it makes a massive effort to get on the same page with employees, improves its internal processes, and regains its place as the top-ranked network carrier in the AQR survey. Delta's service improvements mean that United has to become much better than it ever was in the past -- even before its 2012 setback -- to stop the slow drain of high-value customers from United to Delta. For example, Delta is aggressively expanding in New York and investing heavily in its facilities there to challenge United's hub at Newark Airport. Delta has already seen some success in winning new corporate contracts in New York, most of which would otherwise have gone to United.

Foolish conclusion
United Airlines wants to be the world's leading airline, but in 2012, it was actually the worst airline in America. United's strong route network cannot overcome the airline's poor quality of service. While the company has made progress on its merger integration process, it is far from being competitive with Delta and other leaders on the customer service front. This is likely to hurt revenue growth and could drag down United's stock over time.

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Read/Post Comments (9) | Recommend This Article (4)

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  • Report this Comment On April 09, 2013, at 3:25 PM, sunbreak wrote:

    Well, United's claim of being the world's leading airline isn't untrue - it just doesn't complete the title - it's just the world's leading airline of worst service. They deserve every bit of their reputation for worst service. It's the only airline I've seen totally ignore their customers when a flight was cancelled and walk away from the booth, leaving customers to wonder what was going on until they found out for themselves the flight wasn't going to happen. Or, how about the flight that was continually delayed for 9 hours and instead of rescheduling flights for those whose connections are going to be missed, the booth attendant closes up and goes over to help at an adjacent gate for a different flight, leaving those in the old line to have to go into a line for a totally unrelated flight in order to attempt again to get service to reschedule their flight.

  • Report this Comment On April 09, 2013, at 4:15 PM, oimui wrote:

    Our bad experience everytime without fail with front line staff. checking in and boarding They are hostile and rude. By the time we get on board we don't event want to interact with the stewardesses.

    We are in search of another airline to fly us domestically and overseas.

  • Report this Comment On April 09, 2013, at 4:23 PM, TMFGemHunter wrote:

    I'm sorry you've both had such terrible experiences with United. Unfortunately, it seems like such horror stories outnumber the instances of good/friendly service at United.

  • Report this Comment On April 09, 2013, at 4:53 PM, Ridgerunner59 wrote:

    How ironic on the timing of this article. My husband and I just experience a day of hell with United this past Friday. First the plane was delayed, due to mechanical issues; then they stated, after a hour wait, that another plane would be coming in and would only put us behind by 1 hour. Funny thing is, I got a automated call from United flight was delayed as I was sitting at gate!! "New" plane boarding to be at 10:30am - well 10:30 came and went with no plane and no updates. Finally I walked over 30 minutes later and asked the person behind the gate desk for an update. She turned away and said she would be making an announcement. As I walked back to my gate seat, she makes the announcement that flight has now been cancelled and for all to come to desk for changes on their boarding passes (sigh - would have been nice to know that before I walked away). So everyone rushed up and it took another 30 minutes to see an attendant - we had no choice on which airline or time - we got booked on American at 6 hours later. They did give us food vouchers at $10.00 each (where can you eat at at airport for $10.00 - lol). Well long story short we made it safely home over 14 hours later!

  • Report this Comment On April 09, 2013, at 7:28 PM, travelbliss wrote:

    United has the worst customer service in the world of any form of transportation. The agents are rude and a CEO who has no idea the culture comes from the top down. The TSA gets a bad rap but in San Antonio the TSA performed the service United should have. My ID was stolen at the hotel where I was staying. I was without ID on my return trip home. I made several phone calls to United prior to my departure and was told they could process me by a background check. However, when I arrived to fly out the agent smirked, grinned walked off, and refused to offer up other solutions to my problem. The TSA offered to do a background check to get me thru security. Luckily I had printed my e ticket at the hotel otherwise I would not have had a boarding pass. The agent was not going to process a boarding pass. The gate agent should consider a career as a prison guard not in customer service. I contacted United Airlines customer service and CEO, the response I received was less than satisfying. United Airlines is great advertisement for other air carriers at no cost. I WILL PAY MORE IN THE FUTURE NOT TO FLY UNITED AIRLINES!!!!!!!!!! Jeff Smisek get a clue... you're not doing your JOB.. Ignorance is bliss for only so long. Employees need good leadership to do their job and know what the expecations are. They are mirroring your behavior. So I'm not surprised by the headline "United Is The Worst Airline"

  • Report this Comment On April 10, 2013, at 10:28 AM, tommy4591 wrote:

    I have been a flight attendant for 35 years with United. Needless to say I have seen many changes over the years. Some good, some bad, some disastrous. We just had a customer serivce traing day. It was in the DISASTROUS category.

    I was amazed at how out of touch our current managment (if you can call it that) was, with not only thier customers, but also thier employees. Shameful is the word that comes to mind. They enjoy huge paychecks while watching the demise of a once proud company. I am embarrassed at this outcome. However I still strive to give our customers the best service I can, with the tools I am given. United deserves to be at the bottom of the heap. I can only hope that someone with some management sense will take control before it is too late.

  • Report this Comment On April 10, 2013, at 12:22 PM, TMFGemHunter wrote:

    @tommy4591: thanks for your comment. Do you have any specific examples of what made the training day disastrous?

    What I still find bizarre is that most of United's top management came from Continental, which was always known for good customer service. I don't know where/why that got lost in the merger...

  • Report this Comment On April 10, 2013, at 2:36 PM, TravelPath wrote:

    TMFGemHunter...I believe the answer lies in the dramatically different cultures of the two airlines...CO was known for good CS for all travelers in the past, but this was in decline during the Smisek years before the merger...UA was more focused on their VFF and premium travelers and would do almost anything for them while the "casual" traveler might or might not receive good service. Then there was the implementation of CO operational policies on UA which caused much disruption and decreased aircraft availability. Finally add the poor implementation of CO's computer system (SHARES), which in my opinion was not up to the task of a airline this size, resulting in a decrease of CS and the addition of unnecessary complexity during ticketing, check-in and especially during irregular operations (something UA always excelled at...CO, not so much)...well, we end up with what we have.

    It seems that the problems that UA is experiencing are a direct result of decisions of the new "executive suite"...I know from much experience that the customer facing employees are doing their very best with flawed products and policies. If I had a dollar for each time a UA employee has asked me to write to corporate because "they don't listen to the employees"...I would be a rich man!

  • Report this Comment On April 13, 2013, at 7:27 PM, CEOsurvivor wrote:

    After 27 years of flying for this company, and surviving over a dozen CEOs, my advice to Mr. Smisek is to go on Undercover Boss, walk a mile in our shoes, management has never been more out of touch at the "NEW UNITED" and nothing will improve without the front line employees being valued and rewarded, with an industry leading contract. Employee loyalty is earned, never demanded.

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