A Silver Lining for Airlines: Fliers
Are More Satisfied, Survey Finds

NEW YORK -- It may seem counterintuitive, but consumers say they are more satisfied with airline service than at any time in the past five years, despite longer check-in lines and stepped-up security searches since Sept. 11.

That was one of the more surprising findings in the latest American Customer Satisfaction Index, a survey of consumer attitudes conducted quarterly by the National Quality Research Center at the University of Michigan Business School in Ann Arbor, Mich. The survey for the first quarter, scheduled for release Monday, shows that consumers gave the airline industry an overall score of 66 out of a possible 100, up from 61 last year and its highest score since 1997.

But while the rise is clearly welcome news to an industry that has consistently received low marks for customer satisfaction over the years -- and which was hit hard by a decline in travel after the Sept. 11 attacks -- economists believe the improvement may say as much about changing attitudes of American travelers as it does about service at the airlines.

"These days, travelers are more tolerant and are less likely to get upset when they have to wait in long lines to go through security," says Joel L. Naroff, an economist in Philadelphia. "People just want to get from here to there safely; the rest doesn't really matter as much any more."

That's not to say that airlines aren't doing their part. More flights are arriving at their destinations on time, fewer pieces of luggage are lost and planes are less crowded, albeit because some fliers have been afraid of flying. Still, for those who continue to fly, the end result is that the travel experience has become a little more pleasant, at least after clearing security. Even Northwest Airlines Corp., the Minneapolis-based carrier that last year received the lowest overall score within the industry, made a sharp improvement in the latest ranking and ended with a score of 65.

Each quarter, the University of Michigan surveys a different sector of the economy, asking consumers about their satisfaction and loyalty to different brands. Previous surveys measured durable goods, retail trade and consumer products. The latest survey focused on service providers, mainly transportation, communications and utility companies. Those companies, airlines included, received an overall score of 70.2.

METHODOLOGY To create the American Customer Satisfaction Index, the National Quality Research Center at the University of Michigan, in partnership with the American Society for Quality and the CFI Group of Ann Arbor, Mich., conducts telephone surveys with about 16,000 customers of the companies being surveyed that quarter. Each year, that amounts to about 65,000 customers of products from about 190 companies and 70 government agencies. Sales of the measured companies constitute 30% to 40% of the U.S. gross domestic product. Companies are scored on a scale of 0 to 100. Industry indexes are constructed with company indexes, weighted by the sales of each company. The national index is made up of the industry indexes, weighted by their contribution to GDP. Different sectors are updated each quarter, so the entire index is fully updated each year. Customers are quizzed about their expectations and their perceptions of value and quality in the services they have purchased; for manufactured goods, retail stores and fast-food, quality is broken down into measures of the product and the service accompanying the product. These are translated through computer models into overall customer-satisfaction scores, which are used to predict customer loyalty.

The overall ACSI score for the entire economy in the first quarter was 73, up from 72.6 in the fourth quarter. Economists at the business school believe that customer satisfaction is tied to consumer spending and economic growth. Disgruntled consumers, say the researchers, spend less money than contented consumers. And they warn that unless U.S. businesses do a better job at satisfying consumers, spending, which underpins a huge portion of the U.S. economy, could slow.

Some economists, however, question whether the link is that direct and whether the ACSI can actually foretell spending trends for the entire economy. Carl Steidtmann, chief economist at Deloitte Research in New York, says that while the ACSI is useful in comparing relative service performance at individual companies, it's not an economic indicator. That is because bad customer service "isn't a barrier that will keep [consumers] from shopping; it's a barrier that will keep them from shopping at a particular place."

That, of course, assumes that consumers have a choice. In the service sector, consumers often lack choice, which may explain why scores in this industry remain relatively low when compared with other industries. Consumer-product makers such as H.J. Heinz Co. and PepsiCo Inc., and car brands such as General Motors Corp.'s Cadillac, routinely get scores in the 80s and 90s, meaning that customers are happy with the quality of those products.

But most service-sector scores are in the 60s and 70s. Claes Fornell, the University of Michigan Business School professor who designed the ACSI, says service industries generally score lower than goods producers for very basic reasons. "There are fewer things that can go wrong in packaging a can of soup or a bottle of soda. Also, bad consumer products don't make it because they get sorted out quickly." But in the service industry, he says, "we're often stuck with companies that don't deliver very good service and so we're less satisfied."

That pretty much describes how consumers view cable companies, whose combined score fell 4.7% to 61 in the latest survey. The decline was led by big drops at AT&T Corp., Comcast Corp. and Charter Communications Inc. With scores of 56, 56 and 53, respectively, those companies' cable operations now rank among the worst-rated businesses in the history of the ACSI.

Cable companies have always struggled to keep customers happy. In most markets, consumers have only one company to choose from, and cable operators can make customers wait in their homes for hours for a service representative or repairman. "Cable is the classic unresponsive monopoly," says Gene Kimmelman, director of the Washington, D.C., office of Consumers Union.

But despite promises of better service, the cable companies keep scoring lower. The worst offender: Charter Communications, whose ACSI score plummeted 15.9%. The company declined to comment. AT&T and Comcast, meanwhile, said their problems were related to the demise of Excite At Home Corp., which provided high-speed Internet service for their cable customers.

Excite At Home's failure forced AT&T, Comcast and other cable operators to rapidly switch customers to other networks, causing interruptions in e-mail and other services. AT&T and Comcast both say other surveys indicate customer satisfaction has improved significantly now that they have switched to other networks.

Phone companies, meanwhile, were a mixed bag. Overall, they improved their ACSI scores, with Sprint Corp. and BellSouth Corp. leading the pack at 74 each. But there also were signs of unrest, particularly among customers of local phone companies. Local carriers often score lower than long-distance companies because consumers have fewer choices. And while rates for long-distance service have in some cases dropped, bills have continued to rise for many local carriers.

Qwest Communications International Inc.'s ACSI score of 56 was the worst of the bunch, down 8.2% from a year earlier. An analyst noted the company serves a wider geographic area than other phone-service providers, including hard-to-reach rural regions with little competition. A company spokesman said Qwest recognizes it has had to clean up service problems since merging with U.S. West, a regional Baby Bell, in 2000, and has spent "billions of dollars" to improve satisfaction. He said the company's own internal measures of customer service are at their highest levels in seven years.

Verizon Communications Inc.'s local service also fared poorly, falling 8.2% to 67. A spokesman said the company has reduced wait times for service orders, and that its internal data show customer complaints were down 30% in the first quarter of 2002 compared with the year-earlier period.

A few service-sector companies did shine in the latest survey, however. The two highest-rated service providers are the big package-delivery companies, rivals Federal Express Co. and United Parcel Service of America Inc., with scores of 82 and 80, respectively. The U.S. Postal Service had a respectable showing of 73.

Among utilities, the figures were all across the board. Atlanta-based Southern Co., the largest utility in the Southeast region, scored a high 81. At the other end of the category, Pacific Gas and Electric Co., California's largest utility, which filed for bankruptcy-court protection last year following an energy crisis, scored a low 58. PG&E Corp.'s latest score was better than a year earlier when the San Francisco utility eked out just a 49. Mr. Fornell said wide variation in scores for companies that essentially sell the same service is purely a reflection of the level of customer service that one company provides over another.

Write to Constance Mitchell Ford at constance.mitchell-ford@wsj.com and Patrick Barta at patrick.barta@wsj.com

Updated May 20, 2002 1:13 a.m. EDT