“Oh, Well — There is Always Next Year”: 2015 J.D. Power Airline Satisfaction Ratings Released Today

“If you visit the corporate headquarters of Delta Air Lines, you will see the primary objectives of different departments listed on posters on the walls. One of them is to rank number one in the J.D. Power Airline Satisfaction Ratings, of which the 2015 rankings should be released within the next couple of months. Delta Air Lines ranked number two overall in 2014 — bested only by Alaska Airlines, which was never even mentioned at the Freddie Awards.”

…and twelve days after I wrote this article pertaining to Delta Air Lines not winning anything at the 2015 Freddie Awards at the Delta Flight Museum in Atlanta which contains the quote shown above, both the 2015 North America Airline Satisfaction Study and the 2015 Airline Loyalty/Rewards Program Satisfaction Report were released today from J.D. Power and Associates.

Delta Air Lines was number two again this year for the North America Airline Satisfaction Study; but it would have ranked last in the Airline Loyalty/Rewards Program Satisfaction Report if it were not for US Airways — and 2015 should be the last year it ranks, as it is now a part of American Airlines.

Here are the charts with the results for 2015:

Apparently, Alaska Airlines does indeed go “beyond” for its customers, as it is the clear winner in 2015 and won the top spot for the eighth consecutive year.

Low-cost carriers are rated in a separate chart of their own; and JetBlue Airways wound up taking the top honors:

The North America Airline Satisfaction Study measures passenger satisfaction with airline carriers in North America based on performance in seven factors in order of importance:

1. Cost and fees
2. In-flight services
3. Boarding/deplaning/baggage
4. Flight crew
5. Aircraft
6. Check-in
7. Reservation

 

Overall satisfaction among passengers who select an airline because of its reputation or customer service averages 812 points based on a scale of 1,000 points.

Alaska Airlines won the top spot in this report as well, completing a “sweep” of sorts.

It is important to note that the 2015 Airline Loyalty/Rewards Program Satisfaction Report is only in its second year; and it measures customer satisfaction on a scale of 1,000 points with airline frequent flier loyalty and rewards programs based on six factors in order of importance:

1. Ease of redeeming points/miles
2. Reward program terms
3. Account maintenance/management
4. Ease of earning points/miles
5. Variety of benefits available
6. Customer service

 

Remember that I was told by no fewer than two employees of Delta Air Lines prior to the start of the awards ceremony of the 2015 Freddie Awards that “if Delta Air Lines did win an award that they were not doing their job correctly.” I am not sure that that statement applies similarly to the 2015 Airline Loyalty/Rewards Program Satisfaction Report — primarily because the Freddie Awards are based on nearly three million ballots which are cast annually and voted upon by frequent fliers; whereas the 2015 Airline Loyalty/Rewards Program Satisfaction Report is based on the research which suggests that passengers conduct prior to joining often translates into increased satisfaction with their subsequent experience…

…but that overall satisfaction — among the 14 percent of passengers who select their airline loyalty and rewards program because of online reviews is 813, while satisfaction among the 21 percent of passengers who choose their program because of its reputation is 803 — is based on frequent flier loyalty programs; and that does not necessarily translate into profits.

I decided to compare the first quarter profits of airlines in 2015…

• American Airlines reported record first quarter 2015 net profit of $1.2 billion excluding net special charges, tripling the Company’s first quarter 2014 net profit of $402 million excluding net special credits; as well as reported record first quarter 2015 Generally Accepted Accounting Principles net profit of $932 million, a $452 million improvement versus the Company’s first quarter 2014 Generally Accepted Accounting Principles net profit of $480 million
• United Airlines reported first-quarter 2015 net income of $582 million, or $1.52 per diluted share, excluding $74 million of special items; but including special items, United Airlines reported first-quarter net income of $508 million, or $1.32 per diluted share — resulting in a record first-quarter profit for the company
• Delta Air Lines reported that its adjusted pre-tax income for the March 2015 quarter was $594 million, an increase of $150 million over the March 2014 quarter on a similar basis; while its adjusted net income for the March 2015 quarter was $372 million, or $0.45 per diluted share, and its adjusted operating margin was 8.8 percent — and on a Generally Accepted Accounting Principles basis, its March quarter pre-tax income was $1.2 billion, operating margin was 14.9 percent and net income was $746 million, or $0.90 per share
• Alaska Airlines reported a record first quarter net income, excluding special items, of $149 million — which is a 67 percent increase over the first quarter of 2014; reported adjusted earnings per share of $1.12 per diluted share, a 75% increase over the first quarter of 2014 and ahead of First Call analyst consensus estimate of $1.10 per share; and earned net income for the first quarter under Generally Accepted Accounting Principles of $149 million or $1.12 per diluted share, compared to net income of $94 million, or $0.68 per diluted share in 2014
• Southwest Airlines reported a record first quarter net income, excluding special items, of $451 million, or $.66 per diluted share, compared with first quarter 2014 net income, excluding special items, of $126 million, or $.18 per diluted share which represented a 266.7 percent increase from first quarter 2014 and exceeded the First Call consensus estimate of $.65 per diluted share; reported a record first quarter net income of $453 million, or $.66 per diluted share, which included $2 million (net) of favorable special items, compared with first quarter 2014 net income of $152 million, or $.22 per diluted share, which included $26 million (net) of favorable special items; and reported a record first quarter operating income of $780 million.  Excluding special items, record first quarter operating income of $770 million, resulting in an operating margin of 17.4 percent
• JetBlue Airways reported operating income of $253 million in the first quarter, which compares to operating income of $41 million in the first quarter of 2014; reported a pre-tax income of $222 million in the first quarter, which compares to pre-tax income of $6 million in the first quarter of 2014; and reported a net income of $137 million, or $0.40 per diluted share, which compares to its first quarter 2014 net income of $4 million, or $0.01 per diluted share

 

…but none of the reports or surveys include such ultra-low-cost airlines as Spirit Airlines and Allegiant Air; but just for fun, let us look at their financial results for the first quarter of 2015 as well…

• Spirit Airlines reported an adjusted net income for the first quarter 2015, which increased 87.1 percent to $70.7 million ($0.96 per diluted share) compared to the first quarter 2014; and Generally Accepted Accounting Principles net income for the first quarter 2015 increased 83.0 percent year over year to $69.0 million ($0.94 per diluted share) — while adjusted pre-tax margin for the first quarter 2015 was 22.7 percent, up 900 basis points year over year; and on a Generally Accepted Accounting Principles basis, pre-tax margin for the first quarter 2015 was 22.1 percent
• Allegiant Air reported its 49th consecutive profitable quarter with a net income of $64.9 million at $3.74 per diluted share, which increased 89.8 percent and 101.1 percent respectively from the same quarter in 2014

 

…and Allegiant Air had been the most profitable airline in the United States, with Spirit Airlines coming in second; and according to Airline Weekly, Allegiant Air still remains a profit champion in 2015 despite enduring its share of problems.

Meanwhile, Spirit Airlines unseated Allegiant Air as the most profitable airline in 2014, according to this article written by Justin Bachman of Bloomberg Business; and curiously, Delta Air Lines was the most profitable carrier in 2013, according to this chart found at Statista — before it tinkered with its SkyMiles frequent flier loyalty program.

Also interesting is that American Airlines — whose AAdvantage frequent flier loyalty program is still based on distance and not revenue — held its own when compared to Delta Air Lines and seemed to surpass United Airlines.

Yes, I know — there are myriad factors which comprise overall earnings and financial reports…

…but all of this data suggests to me that a frequent flier loyalty program is not necessarily such a drain on the finances of an airline that its benefits need to be significantly cut — and time will tell if the revenue-based frequent flier loyalty programs of United Airlines and Delta Air Lines actually are effective in bringing in additional revenue…

…but it still would seem to me that it is not a good idea to negatively alter a frequent flier loyalty program to the point that its members consider renouncing their loyalty. Good economic times will not last forever — and neither will the boon times for the airlines. Tweaks in portions of frequent flier loyalty programs may have been necessary — after all, airlines are businesses and profits are important — but I personally would have implemented them in a way which at least retains the loyalty of members when that economic downturn arrives.

Do you remember when back in the summer of 2008, the airlines banded together and wrote an open letter — which basically asked for your assistance to restore and enforce regulations and limits to “control excessive, largely unchecked market speculation and manipulation” pertaining to oil contracts which supposedly fueled a rise in oil prices per barrel — to you, which was signed by the chief executive officers of twelve domestic airlines based in the United States at that time? You were to have contacted the members of Congress who represented you, letting them know that you are joining other Americans and the airlines in a unified front to pull together as a nation “to reform the oil markets and solve this growing problem.”

So — did you do that?!?

More importantly: would you consider doing that in the future if the airlines need your help once again?

Remember — things usually do happen in cycles…

Perhaps next year, Delta Air Lines? Photograph ©2015 by Brian Cohen.