Why is customer service and morale so bad in the airline industry?

capJust have a look at the numbers. They show an industry that is collapsing, both figuratively and in a few notable cases, literally.

Our friend Robert Herbst, who runs the Web site Airlinefinancials.com, has done the math, and the results are pretty depressing, particularly for those of us who remember a vibrant, pre-deregulation aviation industry.

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“If you’ve taken a flight or read a newspaper lately, you’re probably aware the airline industry has serious problems from customer service to record financial losses,” he says. “Before jumping to conclusions and attributing blame, let’s do a review of what has really occurred to the industry.”

If you compare last year to 2000 for the six remaining legacy carriers, the answers are apparent:

· Total operating revenue decreased by $2.3 billion, falling from $89.2 billion to $86.9 billion.

· Fuel cost skyrocketed from $11.3 billion to $36 billion, an increase of 218 percent.

· The fuel cost for the average one way passenger fare increased by 402 percent, going from $23 to $93.

· Capacity as measured by available seat miles (ASM’s) decreased by 14.3 percent.

· Employee wage/salary expense decreased by 33.5 percent.

· The average one-way passenger fare increased by 22 percent, going from $162 to $198. This increase was below the 25 percent CPI inflation over the same time period.

· While the average air fare increased by $36, the labor wage cost for the average airfare decreased by 36 percent to $41.

· Since 9/11, over 155,000 jobs for just the airlines noted above have been lost falling from 428,000 to 272,000 (-36 percent) total employees.

· The average passenger ratio to airline employee increased from 1,139 passengers per employee to 1,413. In other words, the reservation or ticket agent, flight attendant etc., on average, now resolve issues and provide customer service to over 24% more customers than 8 years ago.

· As employees worked more for less, the average revenue generated per employee increased by an astounding 53 percent as it went from $209,000 per employee to over $319,000.

· While 155,000 jobs were lost and the average revenue per employee increased by over $110,000; general management wages/salaries as reported on DOT41 forms, increased by 44 percent as it climbed from $243 million to $350 million.


So, to summarize:

After 9/11, revenues fell and fuel costs skyrocketed. What does the airline industry do? It cuts flights, employees and fares. Airline executive reduce salaries but then give themselves healthy raises.

Herbst says there’s really no need to connect the dots.

When discussions and questions revolve around why is customer service and morale so bad in the airline industry? It seems like a rather easy question to answer after you understand what has actually occurred in the last few years.

How true.