Numbers sometimes just don’t make sense.
For example, in June Delta Air Lines brought 79.9% of its flights in on time, according to the U.S. Department of Transportation’s very forgiving definition of “on time.”
By comparison, American managed to bring in just 67.1% of its flights on time. United was barely better with a 70.2% on time performance in June. And Southwest, which years ago perennially awarded itself a trophy for running the most on-time airline in the nation, got 75.1% of its flights in on time.
Meanwhile Delta cancelled only 0.6% of its scheduled flights in June; Southwest, 2.0% of its flights; and United, 2.2% of its flights. American? It cancelled a staggering 4% of its flights in June, 7,218 out of 180,658 scheduled, more than Delta, Southwest and United combined, and likely disrupting the travel of over 1 million passengers.
Yet if you look it up online right now, you’d think American’s customers are as happy as Southwest’s customers, and that both airlines’ customers are much more pleased than those of either Delta or United.
That’s because American and Southwest both have “Net Promoter Scores” of +3, while Delta has a NPS of -2 and United’s sits at -8. That’s according to the scores assigned to each carrier by customer satisfaction research company Customer Guru.
Beyond that, Delta, which by some measures has moved ahead of American to become the world’s largest airline, is way, way out-performing American on Wall Street.
Granted, American has had to deal with major labor relations problems not only with its mechanics, who a court recently ruled were so upset with management that they engaged in an illegal slowdown designed to disrupt the carrier’s operations and make it look bad to its customers, but also with its pilots and flight attendants, who also aren’t happy with their current deals and perceived treatment by management.. American, like United and Southwest, has had a relatively small but not insignificant number of Boeing 737 MAX jets – 24, or about 140 flights a day worth of flying - out of commission since they were grounded in March over safety concerns after two deadly foreign crashes involving MAX jets.
So, what gives with those seemingly upside-down Net Promoter Scores? One would think that Delta and Southwest, and arguably even United would have better NPS numbers than American these days. But they don’t.
To understand that, you first must understand what the NPS metric really is. It was invented in 2003 by a Harvard Business professor and has only begun to receive serious attention from many companies in the last few years. Investors for the most part still seem to be ignoring it.
Basically, researchers ask customers of various brands within any business category one question: “Based your experience with this brand how likely are to you recommend it to others on a scale from 1 to 10?” Though customers aren’t told what those numbers mean, any score of six or below is counted as a negative recommendation. A score of 7 or 8 is counted as neutral: the customer may not recommend the company or product but they likely won’t bad mouth it either, and they could be persuaded to rate it lower or higher depending on future experiences with the same brand. Only scores of 9 or 10 are counted as positive, or “promoter” recommendations. Then the researchers tally the positive and negative scores, convert them to percentages and subtract the negative percentage points from the positive percentage points. In theory the resulting score could range from a high of +100 to a low of -100.
You’d think, at first glance that a score of zero would be the definition of mediocre, but it’s not – for two reasons. First, because all scores of 6 and below are considered negative, and because scores of 7 and 8 essentially don’t count, the scale has built-in negative weighting. Thus, a score of, say, +25 is merely okay, not great. Even a score of +50 likely isn’t high enough to satisfy companies with very high customer satisfaction standards.
And second, nobody really wants to be merely mediocre in terms of customer satisfaction. Humans inherently understand that such a performance means they’re probably leaving too much money on the table and could improve their profitability by spending a little more and focusing more effort on improving their product quality and/or customer service satisfaction.
From that, we can conclude that none of the airlines mentioned above should be happy with the kind of Net Promoter Scores published earlier this year by Customer Guru. And that’s certainly not surprising, given how much and how frequently complain about the sorry state of air travel today.
But what we can’t reach any conclusions about is why Delta, which at the moment clearly is the top-performing U.S. airline in virtually every category that matters (financial, operational, and customer satisfaction), has an NPS lower than American and Southwest.
Well, that’s because it doesn’t really. At least it doesn’t in its own market research and NPS calculations.
Paul Jacobson, Delta’s chief financial officer, told analysts and investors at a conference in Boston last week that Delta’s NPS now is “around 50%,” and way above the score in the +20 range it was in a year or two back. A quick check with Delta’s public relations staff clarified that Jacobson was, in fact, referring to Delta’s internal NPS scoring, not to any of the various NPS ratings posted online by market research companies. And yes, Delta’s quite happy with its internal +50 NPS score; so happy with it in fact, that it’s not likely to invest a whole lot more company money in service improvements because it believes doing so at this point would bring back diminishing returns.
Okay, that’s a logical argument, at least if Delta’s own internal NPS scoring reflects reality more than the NPS scores given it by Customer Guru and others. (NPS research, rather obviously, has not yet become completely standardized or foolproof).
But what’s concerning is not so much Delta’s new-found satisfaction with it’s customer service performance, which Jacobson attributes to the company’s positive corporate culture and actual efforts to make customers feel more satisfied with the level of service they get vis-à-vis the various prices those travelers pay for their tickets and related services. Rather, it’s American’s rather obvious indifference to its low NPS.
In comments made at the same Boston investors’ conference last week American President Robert Isom began his presentation by saying the airline won’t allow its labor problems and the grounding of its 737 MAX planes to be an excuse for its poor operational performance this year or its sagging stock price tied to its financial underperformance.
"We’re not as far along as we had wanted,” Isom said. “We certainly haven’t produced the kind of margins and earnings that we had hoped. But the point I want to make is there are no excuses. It is our job to get our arms around this."
Only, he then proceeded to make excuse and after excuse, most of them directly or indirectly tied to labor issues and the MAX groundings, for why American is coming up so short. Not once did Isom accept on behalf of management any responsibility for at least some of its costly disconnect with labor. Nor did he get within a country mile of admitting that American might be alienating consumers in droves by being so singularly focused on jamming more seats into already-cramped planes and finding ways of making its lowest-priced seats so unbearable that lots of customers begrudgingly will pay a little extra for better service at bit more comfort.
Nor was there any acknowledgement that perhaps American’s management has misjudged the market and its customers’ disgust with being forced to choose between greater discomfort or offensive upcharges.
To be sure, Isom noted that American’s market share and share of total industry revenue are in slight but steady – and noticeable – decline. But that, Isom said dredging up one of the excuses he’d already American can’t use, is because it can’t grow capacity as fast as it had planned because of the groundings. And its revenues and profits aren’t as big as predicted, he said, because - you guessed it - its mechanics’ shenanigans and the grounding of its MAX planes have disrupted operations and run some customers into its competitors’ planes.
Nowhere in his presentation was there:
· Recognition that maybe American’s management in its intense focus on squeezing customers’ pockets – or their bodies - ever-tighter that it had lost focus on something as fundamental as creating a semi-satisfying experience for those customers (nobody expects any airline to be singularly focused on satisfying customers)
· Understanding shown that getting a much higher percentage of customers to their destinations on time (even if it means finding a way to make peace with labor at a somewhat higher price) would go a long way toward earning American higher customer satisfaction and Net Promoter scores
· An admission that while American’s problems with on-time performance certainly were exacerbated by the mechanics’ job action the airline’s on-time failings started long before union members began acting out and, in fact, have been a constant problem since at least the 2013 merger of U.S. Airways and American, to form today’s American. Indeed, both of those carriers were on time performance laggards even before their merger.
Isom did try to convince investors at the conference that American now is over the hump in terms of “re-fleeting,” or replacing about three-quarters of the old, worn-out planes it was operating when its merger with US Airways was completed nearly six years ago. American, he said, has spent nearly $30 billion on new planes over the last six years, including about $6 billion this year. But next year, he said, American’s cutting that back to just $5.2 billion and then about $5.1 billion or so in 2021.
Yes, that should allow the airline to produce greater cash flow in the years ahead; something that’ll please investors. But that assumes that travelers by then won’t be so turned off by American’s sloppy, chronically late operations and its uncomfortable and inhospitable service quality that they’ll still want to fly on American.
Spending less in future years on new planes – even as some rivals increase their fleet spending – won’t do a thing to improve American’s service quality and on time issues. Those problems are not irreparable, but neither issue is likely to get fixed until management recognizes that its decision-making and strategic approach are at least part of the problem.