Legacy carriers like Delta Air Lines (NYSE: DAL ) may be the new darlings of airline investors, but travelers don't feel the same way. For many years, passenger surveys have routinely shown that most Americans prefer to fly low-cost carriers, particularly JetBlue Airways (NASDAQ: JBLU ) and Southwest Airlines (NYSE: LUV ) .
Once again, JetBlue and Southwest soared high above the competition in the J.D. Power 2014 North America Airline Satisfaction Study, released last week. JetBlue and Southwest don't have free first-class upgrades or posh airport lounges for frequent fliers, but they get the basics right. That's enough for them to earn consistent accolades from customers.
A blowout victory for low-cost carriers
JetBlue Airways took the top ranking in the customer satisfaction poll for the 10th consecutive year. Its score of 789 was well ahead of the low-cost carrier segment average score of 763 and blew away the traditional carrier average score of 683.
While JetBlue doesn't offer the same level of service as most of the network carriers, it does have plenty of complimentary amenities to keep customers happy. The carrier attributed its long winning streak in the J.D. Power poll to perks like a free checked bag for all customers, satellite TV and radio, leather seats with the most legroom in coach, and unlimited snacks and non-alcoholic beverages.
Southwest Airlines wasn't far behind with a score of 778. While Southwest doesn't offer the same level of premium amenities as JetBlue, travelers seem to appreciate its hassle-free attitude, as seen in its "Bags Fly Free" and no change fee policies. Southwest has also introduced in-flight entertainment recently, streaming live and recorded TV and movies to customers' personal devices.
Convergence in the traditional segment
Meanwhile, Delta Air Lines has maintained its reputation for offering the best service among the three big network carriers. (It was outscored only by the much smaller Alaska Air (NYSE: ALK ) within the traditional carrier segment.)
However, Delta's score of 693 would still have put it near the bottom of the low-cost carrier list. Hopefully, most of Delta's disgruntled passengers were bargain-hunting leisure travelers, and not high-value corporate customers.
Furthermore, Delta's lead over its two big legacy carrier peers is shrinking. While Delta's score rose 11 points compared to the 2013 J.D. Power survey, all of the other traditional carriers posted bigger gains. As a result, Delta's score is just a shade above the traditional segment average and far below the low-cost carrier segment average.
It's all about the fees
Fees seem to be the main area where JetBlue and Southwest are distinguishing themselves against best-in-class legacy carriers like Delta Air Lines. The J.D. Power study found that airline passengers are becoming more tolerant of paying fees for common things like checking baggage. However, they still feel happier when they get a "bundled" fare at JetBlue or Southwest.
This can also be seen in the lower scores for low-cost carriers like AirTran -- which is actually a subsidiary of Southwest -- and Frontier Airlines, both of which charge for checked bags. Those two carriers received scores of 706 and 676, respectively. That's much more in line with the traditional carriers' scores.
Foolish bottom line
While airline investors have earned huge gains over the last two years in legacy carrier stocks like Delta Air Lines, most people still report having a better experience with low-cost carriers: particularly JetBlue and Southwest. JetBlue and Southwest also managed to deliver customer satisfaction scores slightly above the averages for other travel industries like hotels and rental cars.
Happy customers are likely to become repeat customers. Thus, the high customer satisfaction scores at JetBlue and Southwest bode well for JetBlue's ongoing high single-digit growth rate and Southwest's plans to return to growth next year.
Low-cost carriers haven't really been in vogue with airline investors since before the Great Recession. However, due to their consistently superior customer satisfaction marks and long-term growth potential, JetBlue and Southwest are likely to generate better performance for their shareholders in the long run.
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