Airlines publicly tout their frequent flier programs and commitment to customer experience, but the reality is few deliver on these promises. Between relatively low supply of passenger seats, consolidation of the industry and the grounding of the Boeing 747 Max taking additional capacity out of the air travel system, airlines can overcome most CX problems without them affecting their businesses. Those airlines that do focus on CX see some benefits.
An April 2017 incident illustrates the point. Passenger David Dao Duy Anh was injured while being forcibly removed from a fully boarded, sold-out United Airlines flight to Louisville, Ky. He had refused to give up his seat when requested and officers forcibly removed him from the aircraft. One day after videos showing him being dragged off the plane spread around the globe, shares of United Airlines' stock were down 5% in premarket trading. But any negative effects were short-term.
“Many people called for everyone to boycott United Airlines — which some people did do. This did cause a relatively small short-term problem ... which caused there to be a relatively small drop in sales for the weeks after the incident. There was also a slight dip in the stock price of United, although this did recover quite quickly,” said Alexander Pask, founder of International Aviation HQ. In the long-term, it hasn’t been much of an issue as most people have forgotten about it, Pask added. There is also the added consideration that United is the only provider for some routes, which meant most people flying to those locations have to use United or travel by train or car, which most people don’t want to do.
Airline Oligopoly Limits CX Impact
“Airline competition exists in an oligopoly structure,” said Demetra Andrews, clinical associate professor of marketing and coordinator of introduction to business administrative courses at the Indiana University Kelley School of Business. “The products offered are very similar, but not identical.”
Paul Levinson, professor of communications and media studies at Fordham University, added that in situations like the airline industry, unless a provider ranks very near the bottom or very near the top of Net Promoter Scores and other CX metrics, any difference in customer CX is likely to have very little effect on the company’s business performance. In businesses with a better supply of providers, customers are more apt to consider CX in making purchase decisions, but that isn't as much of an option when choices are limited.
"Publicity is an unpredictable two-edged sword,” Levinson added. “Sometimes even the worst publicity can pique public interest and help the recipient of the publicity. Way back in the 1970s, the government of France, in an effort to reduce alcohol consumption. ran a big ad campaign in which they showed people drunk, out of control, passing out in the street. The result of the campaign was an increase in alcohol consumption."
While the 2017 removal incident certainly didn’t help United, neither did it necessarily hurt.
Some consumers may have found themselves flying United Airlines out of necessity, rather than preference. This may be particularly true given United’s strong presence in the high-traffic O’Hare airport, Andrews said, pointing out that United Airlines parent company (United Continental Holding, Inc.) held 15% of the domestic market share in 2018.
Additionally, research firm Statista reported a consistent passenger load factor for United Airlines that hovers around 83% and that did not appear to be materially or persistently impacted by the 2017 incident, Andrews said. “These statistics suggest that, despite the low satisfaction ratings, United Airlines is maintaining its market position.”
Even though United ranked near the bottom of J.D. Power’s 2017 North America Airline Satisfaction Survey (with only Air Canada falling below it) with 719 of a possible 1000 points, the Dao incident seemingly had little impact on the scores.
However, Andrews pointed out that United Airlines’ satisfaction rating in 2016 and 2015, the two years preceding the incident, were also low, 675 and 665 in 2016 and 2015, respectively. These represented the lowest ratings among the “Traditional Carriers” (J.D. Power 2016 and 2017 North America Airline Satisfaction Surveys).
“The surveys suggest that United Airlines may have been having issues prior to the 2017 incident involving Mr. Dao. Since the 2017 incident, United Airlines’ satisfaction rating has increased to 723. However, it remains the lowest rated of the traditional airlines (J.D. Power 2019 North America Satisfaction Study),” Andrews said.
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Airlines Differentiating on CX Reap the Benefits
However, if an airline or other company in an industry with a limited supply of products for customers chooses to focus on being the best in terms of CX, that can also provide benefits, according to Levinson.
In the airline industry, Southwest Airlines typically ranks at or near the top of CX rankings, according to Forrester’s report Improving CX Through Business Discipline Drives Growth. The result: 46 consecutive years of profitability in a business that was plagued by losses and bankruptcies until the industry consolidation a few years ago.
Watermark Consulting’s 2019 Customer Experience ROI Study (Airline Industry Edition) added that Southwest had ranked at or near the top of J.D. Power rankings for seven years. Southwest and other market leaders Jet Blue and Alaska Airlines had enjoyed a 316.1% return between 2011 and 2017.
All of these airlines focus their business on CX, said Jon Picoult, founder and principal of CX advisory firm Watermark Consulting.
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