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Can the legacy airlines win back customers?

Posted Sep 23 2008, 01:12 AM by Matt Koppenheffer
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Falling oil prices will no doubt provide some breathing room for America's airlines, but bigger questions still loom for the big legacy carriers like Continental, American, and United.

In recent years, competition and costs -- both from fuel and outside fuel -- have caused most of the US's major carriers to cut back on many of the perks that made flying more comfortable and enjoyable. The effect has been that flying on Delta is mostly indistinguishable from flying on Continental.

My wife and I just returned from a trip to the Caribbean and our experience on American only underscores this point. The planes were old and shabby with fixtures that made me feel like I was flying in a small town diner, the employees were uninspired at best, and if we wanted a bite to eat on the four-hour cross-country flight, choices were limited and we had to break out our wallets. In fact, the only way I really knew that we were flying American was the fact that at the end of the flight the flight attendant announced "we know you have a choice in carriers, and we thank you for choosing American." Trust me, I wasn't choosing American.

The problem is that, similar to me, most travelers these days are choosing a price, not an airline. Without anything really differentiating the flying experience from carrier to carrier, the legacy carriers are only escalating the cutthroat price war. They're simply not giving travelers any reason to want to fly on their airline.

Now I have to point out that I'm talking primarily about the legacy carriers here. Younger airlines like Southwest, Virgin American, and JetBlue have realized the need to differentiate and offer perks, services, and atmosphere that makes fliers actively choose them as an airline. Don't get me wrong, price is still the primary factor in most cases, but when prices are similar, the smaller airlines give customers a reason to choose them even if the ticket is slightly more expensive.

The number one concern for investors in airlines will continue to be oil prices -- if oil stays high, it will be hard for air carriers to report pleasant results. Comparing across airlines, though, members of The Motley Fool's CAPS community clearly prefer the younger breed. Southwest, JetBlue, and AirTran all carry two-star ratings on CAPS (out of a possible five), while the legacy carriers are at a rock-bottom one-star across the board.

CAPS member sdbri, who recently rated Southwest's stock an outperformer, said "Southwest is well run, efficient, with a committed work force. It's been expanding market share as other airlines falter and give way, burdened by legacy costs." Joerancho67 added that Southwest is an "O.K. house in a bad neighborhood."

Finding CAPS members bullish on the legacy carriers is tough. Most CAPS members sound like RoadRunner91910, who gave AMR a thumbs down last month:

The airlines have shown exactly how to make a difficult situation even worse i.e. abandoning all perks that made airline travel more than just a mean of getting there and then charging for items (C'mon charging for water!!) that were previously already part of the high cost of flying. Watch as this stock continues to due the limbo ("How low can you go").


But what do you think about the airline business? Head over to CAPS and join the 115,000-plus other investors that have already started sharing their opinions on over 5,000 stocks.
 

Matt Koppenheffer is a Top Stocks blogging partner.    

Comments

 

Have any airlines thought of raising economy fares and actually offering better accommodations and service.  Many of the European and Asian carriers make flying a pleasurable experience just as it was in the old days here in the US.  Last year we flew to Florida, full fare 1st class,  and were treated like cattle.  This winter, we've decided to go back to driving from NJ to avoid the hassle and the indifference the airlines display toward their customers.  They've lost their way.

I hate to fly.  I have been lyed to, overcharged, gouged and almost everything else.  I have purchased a vacation home in florida to AVOID the bunch of crooks.  I will no longer pay excessive salaries to part time workers (ALPA).  Do like southwest and make your pilots work a 40 hour week or go out of business!

When there is no perceived difference between carriers, then ticket price will prevail.  I travel alot for work, and have found that airline service has gone to the dogs....I mean, come-on - charging for a checked bag?  What are we supposed to do, fly naked - oh no, that is TSA's intention!  

There was a time when I looked forward to flying, but now I just dread it.  Between the ridiculous security measures (no water bottles, and TSA confiscating  my 4.6 ounce toothpasteeven though it was in the requisite 1 quart clear plastic bag) the delays on the ground, paying for water on the plane, or the $2 to $4 water in the airport - sometimes I would rather walk!  Southwest airliines and Jetblue are the best of the lot now, and like Joerancho67 said above, they are both ok houses in bad neighborhoods.  

When the airlines find a way to put customer service back in the travel experience, they will come out ahead.  People like to be treated well and feel appreciated, and the airlines have forgotten this.  

Stop Nickel and Diming me and just include all the charges in the ticket price.

Start serving some decent food and beverages instead of charging me $8.00 for a sandwich, allow 2 bags to be checked in, don't charge me for stupid things like specifying a window or an aisle seat, for headphones etc, etc.

Include all that in the price of the ticket and concentrate on making the flight an enjoyable experience instead of being a glorified street hawker selling sundries to the passengers.

In other words, bring the glamour of Air Travel back !!!

What do the airlines have to win me back?

Start operating like Cathay Pacific

I won,t fly anymore! You have rescheduling of your flight 2 or 3 times since you bought your tikets and the delays of take off, the miss connecting flights which means you spend more time at the airport then in the air, the security checks as a disable veteran who walks badly with metal in my legs who is checked from head to toe, even taken out of public view put tape on me to check for explosives resadue, asked a number of lenghtly questions and on rare occasions sniff by the dog, then released in time for the gate if I run which I cant, have half a right foot and no toes and nerve damage to my left leg and the porters in their people trans port carts look the other way when you try to flag them down. When you get on the plane you have no leg room and if the person next to you is a heavy person they spill over their seats taking some of your space. One thing I have been lucky is that they havent lost my lugage! I will go by train, bus, car or boat and give up my time in transit and enjoy my trip, I feel sorry for the people how have to fly Good Luck To All!

My husband was a Delta Million plus miler until he retired 2 years ago; also many miles on Continental.  However, the last two times he had a reason to fly, he stated that it would never happen again; even it if takes him 2 weeks to get where he is going.

Whatever happened to customer service ??? or is that now a language only spoken overseas ?

My family of 5 have been frequent travellers for years.  Most years we take two or more long trips, mostly to Hawaii or Florida.  After returning from Hawaii this summer, my husband and I agreed that we'll be travelling by car from now on.  We'll drive from Arizona to California instead.  It's not worth the degradation and hassle anymore.  We average spending $10,000 to $12,000 per trip so the airlines and hotels are losing a significant amount if others like us just give up in frustration.  

Part of the problem is the TSA where my children and I can be detained in a plastic jail for absolutely no reason whatsoever.  Once it was because the ticket agent accidentally tore off a corner of my boarding pass!  I'm not into giving up ALL my civil rights to fly on a crappy plane with crappy service.  I've got a lovely new decked out minivan in which to travel in comfort now.  And the food is SO much better!

More on the subject...  I don't necessarily fault the airline employees for my bad experiences because the airlines aren't giving them the resources they need to deal with bad situations.  We were forced to sleep on the floor of the (dark and empty) Honolulu Airport for 8 hours and all the employees could offer us were tissue paper thin blankets, some pretzles and sodas.  They weren't any happier with the situation than we, the passengers were.  Of course, that doesn't excuse one flight attendant who snapped at a passenger "This is MY galley, go sit down." after he had the temerity to ask a question as to why we'd been entombed in the plane on the tarmac for 3 hours.

Delta, American, United all ask me why I do not use their airline when I travel internationally, I tell them, Lufthansa, Emirates, Swiss Air, are hundreds time better in customer service plus their plans are cleaner, the food is better, and they treat me with respect.  The only time I fly a domestic airline is when I have to and no more.  I guess they want to be "bailed out" and be given tax payers hard earned dollars for their failures and greed too.  Like many of the comments below I prefer to drive to my destination in the US instead of flying.

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