Customer Satisfaction & Employee Satisfaction: Do they Go Hand in Hand with a Profitable Airline?

Is it really the high cost of fuel that is forcing the changes we’re seeing in the airline business today? Or is it something more fundamental? Something so basic most of us learned it in Kindergarten. Treat people as you would like to be treated. Play fair; be honest, trustworthy and loyal to those around you. When your industry has lower Customer Satisfaction ratings than the Internal Revenue Service you have a fundamental problem that overshadows any business climate no matter how severe.

Business school professors who have educated our current crop of leaders often like to pose this conundrum: Which do you put first, your employees, your customers, or your shareholders? Is the answer really all that difficult? Or is it simply common sense? No less than Southwest Airlines mercurial founder, Herb Kelleher has weighed in on this topic. To Mr. Kelleher the answer was no mystery. According to Mr. Kelleher,

“You put your employees first. If you truly treat your employees with respect, they will treat your customers well, your customers will come back, and that’s what makes your shareholders happy. So there is no constituency at war with any other constituency. Ultimately, it’s shareholder value that you’re producing”.

Given the price of fuel, one would think that airlines would embrace the concept(s) brought forth by Mr. Kelleher. Instead what we see is report after report in the media that would indicate the exact opposite approach from the airlines. We see skycap lawsuits, labor negotiations taking nearly three years with no contract in sight between US Airways and its pilots. For customers the saga continues as US Department of Transportation performance statistics steadily decline & customers are at the breaking point with delays and unresponsive carriers. Traditionally bad labor relations continue at United and Northwest Airlines as profits rapidly disappear. American Airlines recently settled a lawsuit with its Boston based skycaps over tip income and new fees implemented that negatively impacted their income. In short Customers & Employees have borne the brunt of the wear & tear on the system.

Yet with all of the above, Southwest & Continental have superior profit margins, superior customer satisfaction records and excellent labor relations (at least with regards to direct employees). Continental and Southwest are very different companies when it comes to their business model, yet both are the hands down leaders in customer and employee satisfaction. To this author it is more than coincidence that the two carriers with good company/employee relations have had superior financial performance over time. The common denominator is the airlines’ treatment of both customer and employee.

Like the tragic events of September 11th, this latest fuel crisis in the airline industry will continue to mask the core issues at hand in the quest for a stable industry.

The core issue is two fold. One is the Millions wasted daily in operational inefficiency generated on a minute basis by the airlines. Most airlines have ignored the number one cost metric in the airline business.

If you guessed minutes, time defined in 60-second intervals, you’re correct. They are the #1 resource and #1 cost-driver in any airline operation. Controlled and skillfully utilized, they can be the difference in profit and loss. Yet, they are squandered by the thousands every day. One airline, Southwest Airlines is a slave to driving cost out of their business by feverishly turning aircraft and saving minutes. This increases aircraft and labor utilization, while improving the customer experience with a very high rate of on-time departures compared to other airlines. By being a slave to the clock airlines save money. Reduced taxi time, hassles of missed connections, all of which improves the customer experience and helps lower cost.

While all of this is good for the company and customer where does the employee fit in? What of the man or woman slinging bags in -40 degrees in Minot, ND? How does he or she factor into the equation? To many employees the answer is they don’t factor in. Many are disillusioned, financially strapped or new to the business, some at wages less than Wendy’s pays. Turnover is rampant at some carriers and as many as 50% of prospective new hires can’t pass the background check. Of those that do as many as 40% don’t report to the first training class. This endless revolving door is far more costly than a few cents more an hour to help keep quality people that are capable of development. Yet the executives, usually making six and seven figures per year, tell employees that they should consider working for their airline as “a job and not a career.”

What about those who do not work directly for the airlines? Who looks out for the thousands of Skycaps, Cleaning crews, those who work with TSA at security checkpoints and many others throughout the airport? They are hired by the airlines through various outsourcing contractors often on a low bid basis. Does this practice increase or decrease the odds of the customer getting good service? Outsourcing is neither a panacea nor a Pandora’s Box. It is a reality and how the airlines manage their relationship with outsourcing providers is a critical element in how well airlines perform on operational & customer satisfaction issues. Do airlines establish minimum standards of pay & benefits for the contracted workers as part of their bid package? If not, should they? One could argue that it’s imperative in a business where every minute counts and staffing is essentially a 24/7/365 operation. In order to operate a peak levels, airlines need to have all of their employees working together whether they are outsourced or not. To date we see the opposite at almost every carrier even the “good ones”.

Secondly, how is it that different companies can pay the same wages and deliver distinctly different service levels to the customer and different levels of performance internally? The answer sadly is management. Lip service towards training and development of the employee and a corporate culture that fosters empowerment and growth is no longer enough. It’s another rather simple solution in that if people are happy at work it’s far more likely they will be eager to be part of the team and eager to help provide a positive customer experience. This allows management to create a superior work environment which in turn leads to higher productivity and lower costs. This is far more effective then removing snacks from flights and charging for extra baggage when it comes to generating profits. Workers that are lead instead of managed working together can be more productive and enthusiastic. Their energy leads to change and innovation and often significant cost savings, improving the bottom line. We see this all the time in other companies such as NuCor Steel and Costco, with a proven track record of superior employee relations. Yet with the notable exceptions it is conspicuous in its absence at major airlines. Companies, like countries, that fail to learn the lessons of history are doomed to repeat them. The airline graveyard is littered with the wreckage of Eastern, Braniff, and others who failed to make the employee a part of their value proposition and paid the ultimate price for their arrogance. Travel industry giant Hal Rosenbluth and former Continental CEO Gordon Bethune sum things up nicely.

“The Customer Comes Second: Put Your People First and Watch ‘em Kick Butt.”
Hal Rosenbluth, Rosenbluth International

“But I like to think that a lot of managers and executives trying to solve problems miss the forest for the trees by forgetting to look at their people — not at how much more they can get from their people or how they can more effectively manage their people. I think they need to look a little more closely at what it’s like for their people to come to work there every day.”
Gordon Bethune, Continental Airlines

About the author:

Robert Johnson resides in Mystic Island, New Jersey and is a Corporate Sales Trainer, Co-Chairman & founding member of Frequent Flyers Organized & Concerned about Unacceptable Service (FFOCUS). Bob travels extensively for business and logs over 120,000 mile per year. If you wish to contact Bob you can e-mail him at bob@ffocus.org or visit the FFOCUS web site www.ffocus.org.

Editorial Disclaimer: The opinions and views expressed above do not necessarily reflect those of the organizations in the Reaching Higher Coalition, or other sponsors and partners of HowWasYourFlight.com.

photo credit: TheeErin