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This Surprising Airline Is Tops in Customer Loyalty

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I know it might seem something of a stretch with few people enjoying the process of flying, but certain airlines are simply better than others at driving customer loyalty.

There are a number of factors that anger fliers, ranging from the length of time it can take to get through security, to dropping off a bag, or even getting your ticket. For airlines, at least some of these are well beyond their control, such as getting through security. This means the other service-oriented factors of flying, such as ensuring on-time arrivals, checking in bags efficiently, and even pricing the flight competitively compared with peers help drive customer loyalty and allow certain airlines to stand head and shoulders above their peers.

Source: Hakan Dahlstrom, Fotopedia.

As you might imagine determining which airlines drive consumer loyalty better than others can be difficult to measure, which is why I'm sure glad we have Brand Keys, a research firm that measures consumer engagement and loyalty for 555 brands across 64 categories.

One thing to keep in mind here is that Brand Keys' research is comprehensive for the airlines it covers, but that it doesn't cover nearly all airlines. In fact, compared to the 15 most commonly flown U.S. airlines we examined last week based on fleet age, Brand Keys covers a mere six: American Airlines and US Airways -- which are now American Airlines Group (NASDAQ: AAL  ) -- plus Delta Air Lines (NYSE: DAL  ) , JetBlue (NASDAQ: JBLU  ) , Southwest Airlines (NYSE: LUV  ) , and United Airlines, which is part of United Continental Holdings (NYSE: UAL  ) . The good news is these are among six of the largest airlines in the country, so it'll give us a good bead on which airlines are making smart moves within the sector.

However, rather than simply diving into which airlines led the pack and which one flew in dead last -- which I am going to get to -- let's first examine why customer engagement and customer loyalty even matter in the first place.

Why customer engagement and loyalty matter
Within the airline industry consumer loyalty can be difficult to come by. Consumers are easily put off by the long waits and cramped quarters of traveling by plane, so the little things like ticket price, credit card perks, and any sort of free perks can really make a company stand out.

Source: Southwest Airlines.

This brings us to our first factor: customer engagement. To first get that consumer to fly your airline you need some sort of combination of positive peer, friends, or family review, an attractive ticket price, or some notable perk that stands out above the crowd. Southwest, for example, allows passengers two free checked bags, which is a fantastic motivator to bring in new customers who dislike baggage fees.

But it's not just enough to bring that customer in -- the airlines need to devise methods to keep that customers coming back over and over. For many airlines, the solution lies within mileage reward credit cards, which offer patrons the opportunity to earn point which can be used toward free flights in the future. Since these points typically only work with the host airlines and perhaps its partners it encourages consumers to stay loyal to a particular brand.

Both engagement and loyalty are crucial for the airline industry, since it runs on such tight margins. Airlines constantly need an influx of new customers to drive top-line growth while retaining a good percentage of existing fliers to pad their cash flow.

The winners and losers
Now that we have a better understanding of how customer engagement and loyalty factor into the equation, let's have a look at Brand Keys' rankings for the airline industry.

According to Brand Keys, the rankings were as follows:

  1. JetBlue
  2. Southwest Airlines
  3. Delta Air Lines
  4. US Airways
  5. American Airlines
  6. United Airlines

You read that right; in a sea of veritable majors, JetBlue came out on top in terms of customer engagement and satisfaction.

JetBlue FlyFi launch. Source: Anthony Quintano, Flickr.

JetBlue and Southwest dominate
JetBlue certainly isn't the cheapest airline by any means, but it offers one of the newest fleets of aircraft ,which provide plenty of entertainment features (e.g., Wi-Fi and television programming) for passengers. Furthermore, JetBlue offers the ability for passengers to check their bags for free, providing an enticing perk for new customers.

According to data from FlightStats and the Department of Transportation, JetBlue wasn't batting 1.000 in 2013, with a fairly low ranking when it came to online arrivals compared with other major carriers, but it was among the best when it came to few mishandled bag complaints, and it was the top dog with the fewest bumped passengers.

Because of JetBlue's smaller size in comparison with its other peers listed here, it has flexibility that some of the majors just don't have. This flexibility, coupled with its newer fleet and free bag check-in, certainly affords it a good public perception.

Right alongside JetBlue is the champion of the people, Southwest Airlines. Southwest has done a good job for years of emphasizing its two free checked bags as a way to drive traffic, as well as its ability to hit off-route markets, which many of the majors have simply avoided. With consistently high rankings in annual airline surveys and the company ranking above all other airlines last year in terms of receiving the least amount of complaints, it's no wonder that Southwest has little trouble bringing in new customers and keeping its fan base loyal. 

The "also flews"
Seeing major airlines such as Delta Air Lines and American Airlines Group bringing up the middle of the pack isn't too surprising. Keep in mind that while these companies do have leverage given their size, they also have almost no route flexibility because of their hubs, and they often have a mountain of debt from the purchase of new planes and the ongoing maintenance of existing planes.

Delta Air Lines, for instance, has the second-oldest fleet of the 15 largest U.S. airlines. In its defense, Delta has done exceptionally well with its on-time performance, and ranked at the top of the list in 2013 in terms of fewest cancelled flights. It also has been working diligently to upgrade older aircraft with modern amenities like WiFi and TV programming to make flying more enjoyable for its passengers. But, Delta also sports $8.2 billion in net debt, which can make it difficult to purchase newer planes, and could make it a bit of gamble for investors.

American Airlines Group, similarly, has a number of questions to answer for, including its $20.6 billion in debt. Both companies (American and US Airways) ranked at the absolutely bottom in terms of two-hour tarmac delays last year, and were two of the three worst when it came to flight cancellations. Neither fared exceptionally well with baggage handling, either. Because of its size, American Airlines Group is attempting to rely on its credit card program to drive loyalty, but public perception of the enormous airline, and its consistently mediocre ratings across a gambit of categories, tends to turn off both new and previously loyal consumers.

The worst of the worst
Bringing up the so-called caboose, however, is United Airlines, which also shouldn't come as a complete surprise if you follow the sector. United Airlines ranked dead last in the 2013 Airline Scorecard presented by The Wall Street Journal, with the company bumping the greatest amount of passengers of any major airline, and ranking second-to-last in cancelled flights, mishandled bags, and complaints.

We also have to keep in mind that major airlines aren't going to be able to compete with regional or even national airlines based on price usually. They're going to rely on their perk rewards to drive return customers. The problem for United is that the other aspects of service mentioned here aren't up to par, giving fliers unfamiliar with the airline few reasons to fly United, and leaving existing customers questioning whether or not they want to stick around. These consistently low rankings are worrisome for United in that they could translate into weaker profits if its costs aren't tightly controlled.

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Read/Post Comments (10) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 20, 2014, at 7:19 PM, exconVince77 wrote:

    As a retiree of United/Continental, I'm not surprised. Dave Barger, CEO of Jetblue, is a Continental alumnus. I worked for him at Newark Airport in the 90's, and we always focused on customer service. Under Gordon Bethune, CEO of CAL at the time, we went from worst to first and received four JD Power Awards for customer service. Dave Barger was instrumental in supporting this effort in Newark.

    When Jeff Smisek became CEO at Continental, not only did customer service take a hit with management second-guessing everything from $10 meal vouchers to closing the aircraft door one minute late in order to board connecting passengers, but he also lied to the CAL employees by insisting no merger was in the works, right up until the day it was announced!

    The reason I retired was because of the overbookings, cancellations, and having to deal with many (justifiably) irate passengers.

    If any of you fly United, please remember the agent in front of you wants to help you, but very often their hands are tied by a mediocre, isolated and disengaged upper management led by a man who saw a multimillion dollar payday for himself.

  • Report this Comment On April 20, 2014, at 11:04 PM, AcuraT wrote:

    This ranking is no surprise. JetBlue and Southwest are discount airlines much smaller than the legacy carriers, particularly JetBlue. JetBlue does have massive operational problems every time there is a snow storm. Every time they say they have fixed it, then a snowstorm hits JFK and they are stuck canceling nearly everything they have. Try it once - you will see how great it is.

    Delta is not so surprising - they are the farthest along with their merger. Their old fleet has been reported a dozen times on this website, and they still have few operational issues. Why? Because they have backup aircraft at all their hubs. This has also been reported elsewhere on "The Fool."

    American and USAirways are just starting to merge - their outcome is not known yet, and their operational issues until the merger is completed is an unknown. They could fall to last eventually but for now, they stay ahead of...

    United. In dead last. Who did not see that coming? Their merger has been fraught with issues. Jeff Smisek underestimated the difficulty of taking on a broken airline (United was essentially reverse taken over by Continental as their management team was better). United had an ancient fleet that was run down. United had bad hubs with inferior equipment. United was a near bankrupt airline that was a mess. Continental had the strong hubs, the newer planes, the better union contracts. Merging the two has been a nightmare and a half. They may evetually fix it, but taking last in this survey is the least surprise of them all.

    In other words, anyone who follows the airline industry could see this from a mile away. And this discounts the excellence that Alaska Air offers (too small for this survey).

  • Report this Comment On April 21, 2014, at 1:11 AM, 18RC wrote:

    ALL the 6 major airlines have downgraded there comfort and service and greatly increased their fares and associated fees. So the public doesn't like or enjoy flying on any of them.

  • Report this Comment On April 21, 2014, at 8:20 AM, Inspectigator wrote:

    The airlines that are run primarily by cutting costs are predictably at the bottom. The airlines with innovative management are at the top. Unfortunately, the push to lower cost has lowered pay below what can attract workers. Raising pay will happen and workers will apply, except for pilots. There are very few young Americans bothering with flight school, and it takes 8+ years and $200,000+ for a young person to become qualified to apply for an airline pilot job. The major airlines are easily poaching pilots from the smaller airlines, the smaller airlines with their winning formulas of innovation and customer focus are losing pilots quickly. I predict huge profits will allow the major airlines to significantly improve their product, but not their management style.

  • Report this Comment On April 21, 2014, at 9:09 AM, markczz wrote:

    Not surprised by the results. The missing piece of the article is the real gap between the top 2, JetBlue and Southwest, and the rest of the field. Other studies like the Net Promoter score show the gap to be massive.

    One comment, the comments hitting JetBlue for snowstorm cancellations are not considering that ALL the airlines from the affected airports cancel their flights. My experience is that Southwest even goes past the storm as they don't leave any planes in the affected cities and it takes them a day to get restarted. The problem JetBlue has is the concentration of flights in New York and Boston, where about 60-70% of their flights have one of those cities at either end of their flights.

  • Report this Comment On April 22, 2014, at 8:10 AM, Tyeward wrote:

    I´m a little skeptical about reports like this. In the age of fortress hubs, it´s a bit hard to lay claim to customer loyalty vs not really having much of an option when wanting to get from A to B. If you want to fly from Atlanta to Stuttgart and it´s on a constant basis (just an example), who else do you have as an option really other than Delta? It´s not really about loyalty anymore. It´s more about ease of convenience between point of origin and destination, and who is able to provide that for you. Out of DFW, you don´t fly to Frankfurt via United through one of their hubs because it make sense to just hop on the American flight from DFW direct to FRA (or Lufthansa). You do it on a regular basis because it just makes sense (if you are looking to make sense that way). I fly between Frankfurt and Philadelphia quite often to get to Buffalo, NY, and it´s not out of loyalty. It´s just that it´s more convenient to connect through Philadelphia to Buffalo. If they had a good awards program (USAirways/American) then that would have been great, however that wouldn´t really be the reason for my choice of Philadelphia. If there was another airline that had better connecting times between Frankfurt and Buffalo, I would have chose them.

  • Report this Comment On April 22, 2014, at 9:08 AM, semsem5 wrote:

    I stopped flying American to the Caribbean and Domestic and switched to JetBlue because of the new aircraft, great legroom and decent entertainment system, all lacking on American which also eliminated inflight catering to the Caribbean.

    It's surprising that Delta that has the worst frequent flyer program of the majors has more loyalty.

    American is now following Delta and will also have a crummy program.

    So far United is the best for international awards.

  • Report this Comment On April 22, 2014, at 9:11 AM, 24copper wrote:

    I've worked for United for 38 years. In the past 5 years, I've never seen a passenger involuntarily bumped off a flight. I wonder if those bought off...take a bump...are still complaining they got "bumped." to Accurat above:...don't know where you get your fact from. It was Continental that was months away(thy had about 5 months cash reserve) from from going bankrupt---which they could not actually do..and would have had to shut down. So, United, with billions in cash, rescued CO and those of you working for them should count your blessings. Management at CO does not how to run a "major" airline and all the good people who got shook out from both sides went to Delta.

  • Report this Comment On April 22, 2014, at 9:59 AM, Silverdewdog wrote:

    I guess Brand Keys neglected to include Alaska Airlines in their survey. They are second to none!

  • Report this Comment On April 22, 2014, at 12:39 PM, kbartlett wrote:

    I just returned from a trip from Costa Rica. I used Delta for this trip. I had problems with the flight there (their first flight was late, which made me miss their second flight, my suitcase arrived the day after ) and had problems with the flight back (our departure time was changed 5 times and we arrived 3 hours later than the original time) I will never fly Delta again!

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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