Airlines: Flying low

Customers remain key, but legacy airlines are eyeing the bottom line first

Customers remain key, but legacy airlines are eyeing the bottom line first

On the surface, the landscape of the airline industry seems to have changed little over the past three-and-a-half years. For the most part, the domino effect of difficulties set off on 9/11 hasn't shown signs of slowing down. Security concerns are still at the forefront in the media. Oil prices continue to stay at record highs, leaving some airlines fearing eventual bankruptcy. Employee relations remain strained as contracts are renegotiated. And the legacy airlines continue to compete tooth and nail with the popular low-cost carriers. One glance at these problems makes it clear why many airlines have spent most of their time focused on financial issues that threaten them from all sides.

"The thing about the airline industry that colors everything is these cataclysmic financial losses it's had since 9/11," says David Fuscus, president and CEO of Xenophon Strategies, the Air Transport Association's AOR. "The thing that's in the forefront of airline executives' minds is survival more than anything else."

But another battleground has reemerged in the form of the customer. And while airline executives are justified in their intent to get in the black, the past year has served as a much-needed reminder that customer satisfaction - or lack thereof - is a story just as big as the financial one, especially when it's unaddressed. "I think that everyone in the industry wants to focus more on the customers," says Fuscus, "but the depth of the financial damage that's been done to the industry is really forcing everyone to focus on finances."

Legacy carriers

Possibly no other airline understands that as well as embattled US Airways, which at press time was in discussions with America West to combine the respective seventh- and eighth-largest US carriers. US Airways filed for bankruptcy protection for the second time in September. By Christmastime, bad weather, staff calling in sick, and a decline in baggage handlers because of a labor contract change were blamed for the airline logging approximately 72,000 claims for damaged or lost luggage.

"We've been in the news a little bit more than we would like on subject matters that PR people don't particularly like, whether it be restructuring, labor negotiations, or operational problems," says Chris Chiames, SVP, corporate affairs. "It's typical that when we're in intense labor negotiations and nerves are frayed, the coverage is going to scare off customers. When we have an operational problem, it's going to get the press' attention, and we have to get through the immediate challenge that's facing the company, such as concluding labor negotiations, and then quickly get back to business."

Realizing the importance of the customer's perception of the airline, US Airways began a new campaign earlier this month to improve its image called "All together. On time," which would focus on improving its marks in customer service. The program aims to have all first flights leave on time each day, close the doors five minutes before departure, and have captains conduct checks 15 minutes before takeoff.

"The internet and the growth of online travel have put the customer in charge like they've never been before with regard to purchasing decisions and individual preferences," says Chiames. "We're seeing that more in our communications to customers, as well, and we're trying to convey that we know what's important to them."

US Airways isn't the only airline that felt a backlash from customers. In February, American Airlines announced that pillows would be removed from first-class and coach cabins on all domestic flights, except transcontinental flights and those to Hawaii, a decision that garnered much media attention. In an industry climate where airlines use perks and luxuries to differentiate themselves, the fact that American saved an annual $375,000 by removing the pillows meant little to passengers - and did nothing to establish brand loyalty.

"It's the old adage that if you can't take care of your customer, somebody else will," says Christopher Elliott, National Geographic Traveler's ombudsman and a nationally syndicated columnist specializing in airlines.

"Domestically, except for in-flight television, there aren't a lot of perks [on any airline]," says Michael Boyd, president of aviation consulting firm The Boyd Group. "In terms of frills or anything to attract new customers or brand loyalty, there's been very little out there because it costs money, with JetBlue as one of the exceptions."

Low-cost airlines

Ranked number one for 2004 in the Airline Quality Rating Report, JetBlue continues to offer its customers the same features as it did when it launched five years ago, including leather seats equipped with TV sets. And like the legacy airlines, it has a sophisticated frequent flyer program, TrueBlue, in which customers can book flights faster online and receive notice of special promotions and fare sales - but, most appealing, earn free flights by accumulating points each trip.

Southwest Airlines' newest customer-focused initiative includes the low-fare alert system, Ding. "It's the latest new way in which we're making it all about the customer," says Linda Rutherford, Southwest's director of PR. "It's definitely a low-fare environment." The downloadable icon sits in the customer's computer system tray, and alerts travelers to fare specials that are even lower than the airline's already-discounted internet specials.

Rutherford says keeping the airline on the radar for reporters remains a challenge - especially when they tend to be focused on problems in the industry. Offering positive incentives doesn't guarantee that the media will communicate the message to customers.

"We're trying to make sure that we break through the clutter of the reporting, which is focused on the turmoil, both financially and operationally, to show how Southwest Airlines is continuing to try to evolve the low-fare model," she says.

Another low-cost airline, AirTran Airways, tries to differentiate its brand from the low-cost carriers by appealing to small- and midsize-business travelers, who appreciate the importance cutting corners has on their bottom lines. Because the price tag for having televisions on board can amount to $1 million per plane, according to AirTran, it opted to install XM Satellite Radio, which it says is a more cost-efficient form of in-flight entertainment. "We've built a culture where we try to keep costs down," says director of marketing Tad Hutcheson.

Delta subsidiary Song finds itself in the unusual position of not only having to differentiate itself from the competition, but also from its parent company. It says it has achieved that through its approach to targeting customers.

"Song was really born out of customer research," says Tim Mapes, the airline's VP of marketing and customer experience. "We actually try to reflect [the customer's] lifestyle in the form of the brand, in the form of the customer experience, and in all communications around it." For example, while the meals available on Song are not free, the diversity of the offerings, the quality, and the capability to pre-order food on the website before the trip prove to be major incentives, says Mapes.

But, he adds, it takes more than frills to keep a customer coming back. "It's increasingly off the airplane that we find there are richer ways to deepen the relationship with these customers and see that we're talking with them, not at them. At the end of the day, the human interaction that takes place between a flight attendant, a gate agent, or a reservation sales agent determines the quality of that customer's experience."

The legacy airlines agree. "Whether it's the check-in procedure on the airplane or retrieving baggage at the end of the trip, it's the whole experience that counts," says John Lampl, VP of communications at British Airways.

Regarding the increasing influence consumers have on the airlines, Elliott says, "I think what we're seeing now is that if customers have a problem with an airline, they're increasingly unafraid to take their grievance not just to the media, but to start posting things online. What the internet has done is democratized the media; now it's not just a few people controlling it, but anyone who wants to can get a domain name."

"The idea going forward in PR is to make sure that the public does not get misinformed by the media," says Boyd. "The challenge is to clarify a lot of the misconceptions the media publishes,"

But as the power of the customer rises proportionately to the financial woes faced by the airlines, there's no easy solution.

"I don't think that there's going to be a really big focus on customers where you're starting to increase perks in a way that would help attract them until the industry's back on its feet financially," says Fuscus. "I think companies are in survival mode now. If the price of oil comes down, and there's a firming of ticket prices so they can begin to have some semblance of financial health, I think you'll see a much greater emphasis on doing more of the consumer PR that's been more traditional in the industry."

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