published Thursday, March 3rd, 2011

Now-profitable Delta dogged by flight delays

By Kelly Yamanouchi

c.2011 Cox Newspapers

ATLANTA — As Delta Air Lines trumpeted its first annual profit since 2007 and handed out profit-sharing checks to employees in recent weeks, a lingering issue bubbled beneath the surface at the huge carrier.

While racking up a $593 million profit in 2010, Delta also delayed and canceled so many flights that it came in near the bottom of industry rankings for on-time arrivals, according to federal statistics. At 77.4 percent, Delta’s on-time rate was worst among the big network airlines.

Delta’s flight cancellation rate last year was its worst since 2005, and it had the highest rate of consumer complaints. It also landed near the bottom of the Airline Quality Rating survey, compiled from many of the same measures.

The disconnect between profits and service measures wasn’t lost on Chief Executive Richard Anderson, who told employees in a recent weekly message: “We’ve gotta concentrate our emphasis on producing great performance for the airline, particularly focusing on completion factor and on-time.”

In some ways, it’s no surprise Delta could perform well financially during a year when its operational performance took a dive. The airline credited its merger with Northwest Airlines for both driving profits and causing flight delays and cancellations over the summer.

During the integration of the two airlines, “we have done our best to make sure our customers don’t pay the price,” said Delta president Ed Bastian. “Sometimes you had to live through some of our teething pains.”

Raul Arce, vice president of travel and transportation at IBM, said the rebound in the economy may have been a bigger factor than any impact from its service woes.

“They’re getting just a bump,” he said. “People are traveling.”

Another factor: Because of the hub system that still dominates U.S. air travel, many fliers -- such as those in Atlanta -- are yoked to an airline through its frequent flier program or have few other choices, particularly if they travel internationally or on business. Such fliers also tend to be the most lucrative.

At Hartsfield-Jackson Atlanta International Airport, Delta and its partners account for about three-quarters of the market. AirTran, soon to be absorbed by Southwest, is a distant second with about 18 percent. Delta is the only carrier on many routes from Atlanta, and the largest carrier on many others.

Mo Garfinkle, an airline consultant and CEO of GCW Consulting, said geography and frequent flier miles drive loyalty.

“If you’re in Dallas, you’re going to be loyal to American,” Garfinkle said. “If you’re in Atlanta, you’re going to be loyal to Delta.”

Atlanta traveler Phil Bush thinks “some of us are in so deep with Delta that we are likely kind of stuck with them.” As a diamond-level elite frequent flier on Delta, the perks of upgrades and airport club access are big factors to Bush.

Similarly, Walt Frank, a frequent flier on Delta, said flight delays “frustrate me a lot ... I’ve had a lot of trouble with Delta because of their inability to maintain schedules. Has it driven me away yet? No.” That’s because frequent flier programs “do a pretty good job of keeping someone tied to a particular airline.”

Even for those who are not frequent fliers or don’t fly out of an airport dominated by a single airline, other factors trump on-time performance, according to a study last year by IBM Global Business Services.

“Price consistently ranks as the most important decision factor,” the study said, followed by schedules and routes. On-time performance was far down the list.

To be sure, some travelers remember when they are mistreated and take their business elsewhere. But Spirit Airlines’ CEO Ben Baldanza in 2007 notoriously highlighted an attitude in the industry toward the phenomenon, through an e-mail mistakenly sent to a customer in response to a request for a refund for missing a concert in Atlanta after a flight delay, according to a USA Today account of the incident.

Baldanza wrote that “we owe him nothing as far as I’m concerned,” according to USA Today. “Let him tell the world how bad we are. He’s never flown us before anyway and will be back when we save him a penny.”

Frank said he has heard about the acknowledgment Anderson made to employees last year after a rough summer. But, he added, “I’ll note that (Anderson) has not apologized to passengers for that.”

Delta says it has increased training for customer service employees and added maintenance bases. It has hired more than 1,000 airport customer service employees, more than 600 reservations agents and about 300 maintenance employees, the airline says.

Delta also said its network of flights from Atlanta is “unparalleled,” with services like premium seats and in-flight entertainment to offer a product “that cannot be matched in the market.”

Still, Bastian said “we know that we’ve got to step up our investments, and this summer we’re going to be much, much better when it comes to performance.”

Delta’s goal for on-time performance in 2011 is 82.1 percent. The boost from last year’s 77.4 percent might not seem like much, but spread over Delta’s system it would translate to thousands more on-time flights.

About 37 percent of Delta’s delays last year were due to a national aviation system delay, according to federal data. Another 32 percent were due to circumstances within Delta’s control, such as maintenance or crew problems. The remainder were due to late-arriving aircraft, weather delays, security delays or diversions.

“I think it’s fair to say that all the big airlines have had their ups and downs in terms of operational consistency and performance,” Garfinkle said.

Thunderstorms at Delta’s largest hub in Atlanta often contribute to delays, but another chokepoint is its hub at New York’s John F. Kennedy International Airport, where congestion routinely delays flights. Delta also picked up hubs in Minneapolis, Memphis and Detroit as a result of the Northwest merger.

When a storm hits the New York hub, “they can’t isolate the problem to New York because those planes are going to Atlanta, to Denver, to Minneapolis, to wherever,” Garfinkle said.

Chris Mangiapane, a frequent flier who blogs about his travel at planereality.com, said he flew more than 250,000 miles last year on about 22 different airlines. Avoiding delays, he said, is “really just luck ... It doesn’t seem to matter what airline it is.”

It would be impossible for a major airline like Delta to reach on-time performance in the mid-90 percent range because so many factors are beyond the airline’s control, Garfinkle said. “It’s never going to happen,” he said. “It would be like batting .600 in baseball.”

Garfinkle said he doesn’t remember any “mass customer defection” due to operational performance that has lasted longer than a short period of time due to strikes or labor slowdowns.

“It’s not that (airlines) don’t care” about customer service and operational performance, Garfinkle said.

“But really customers are more driven more by frequent flier programs and that’s been the strongest form of loyalty, of customer retention, than anything else. Customers put up with a lot to get those frequent flier miles.”

Kelly Yamanouchi writes for The Atlanta Journal-Constitution. E-mail: kyamanouchi(at)ajc.com.

Story Filed By Cox Newspapers

For Use By Clients of the New York Times News Service

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