The 2015 Airline Quality Rating report (covering 2014 airline performance) was released earlier this month. It provides a handy scorecard for how U.S. airlines are doing across 4 key customer service metrics.
- On-time percentage;
- The rate of denied boardings (i.e. how often passengers are involuntarily "bumped" to a later flight);
- The rate of mishandled baggage; and
- The number of official complaints filed with the Department of Transportation.
Anyone who's been following the airline industry in the past few years can probably guess which major airline came in at the bottom of the rankings -- again. Among the 9 mainline carriers included in the AQR survey, United Continental (NYSE:UAL) took the bottom spot for the third year in a row.
Ratings get worse
United Airlines received a score of -1.62 for its performance in 2014, which was significantly worse than the industry average score of -1.24. (Smaller negative numbers are better.) This was worse than its score of -1.43 from 2013.
The number of bumped passengers stayed roughly flat at 1.17 per 10,000 for United last year. However, the carrier's performance deteriorated for each of the other metrics. More flights were delayed, more bags were lost, and customers filed more official complaints.
United Airlines executives have admitted that the company's operational performance and customer service were not up to par in 2012 and 2013. However, they have insisted that operational performance is improving. The 2014 AQR survey casts some doubt on that claim.
To be fair to United, all of the year-over-year deterioration in its AQR score came in Q1 2014. United had to deal with unusually severe winter storms in several of its hub markets during that quarter, which took a toll on its customer service performance.
That said, while weather isn't within an airline's control, some airlines respond better to weather-related problems than others. Furthermore, the number of formal complaints filed with the DOT regarding United rose year over year in each of the last 6 months of 2014. From the perspective of its customers, United was still on the wrong track even at the end of the year.
It gets worse
The only airlines that United managed to beat out in this year's AQR survey were the 3 regional carriers included in the report. These were American Airlines regional subsidiary Envoy, and SkyWest (NASDAQ:SKYW) subsidiaries ExpressJet and SkyWest Airlines.
Unfortunately for United Airlines customers, ExpressJet and SkyWest Airlines are United's two biggest regional affiliates. As of the end of 2014, ExpressJet and SkyWest operated a total of 425 planes under the United Express brand. That accounted for 75% of United's regional fleet.
ExpressJet and SkyWest Airlines received AQR scores of -2.12 and -1.84, respectively, last year. Thus, while United mainline customers were getting subpar customer service, passengers booked on its regional flights were in even worse shape.
This isn't sustainable
While United did start making progress along some customer service metrics as 2014 progressed, it's still dogged by an unusually high customer complaint rate.
This isn't sustainable. Low-cost carriers are starting to ramp up their growth, and the recent cheap oil environment is likely to reinforce that trend. The same is true for foreign airlines from the Middle East, Asia, and Latin America.
If travelers think they can get equivalent or better service from other carriers at a lower price, they are likely to desert United in large numbers. United needs to make big progress on all aspects of customer service in the next few years if it wants to safeguard its long-term pricing power.
Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.