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  • The Effects of Poor Customer Relations

  • American Airlines struggles to please its customers, partially due to its inability to fly on schedule. Only 68.9% of American Airlines flights arrived on time between November 2007 and November 2008, an industry low (1). It also led the industry in 45+ minute and flight cancellations (2). Most consumers are aware enough to realize that American Airlines is not a very reliable company. This harms its sales, along with stiff competition from budget airlines such as Southwest and JetBlue. And, of course, volatile gas prices never help a company whose costs are already spiraling out of control. These factors are crippling American Airlines. In 2008, it managed to lead the industry with over $23 billion in total revenue (3). Yet, it also posted the second-highest losses, at over $2 million (3). Southwest Airlines, which is reputed for its affordable prices and quality customer service, recorded only $11 billion in 2008 revenue (4). Yet, it earned $178 million in net income - the only company with a positive bottom line (4). So how does poor customer service tie in with uncontrollable costs? Inefficient customer satisfaction practices lead to unhappy customers. Constant customer complaints are costly because American Airlines must devote considerable time, money, and human capital to handling them. Displeased customers often create negative publicity. They become more outspoken with their complaints, giving the company an unfavorable public reputation. This can prove deadly in a competitive industry, as customers have many alternatives to switch to. Lost sales are the last thing American Airlines needs, especially in the middle of a recession. _____ 1.http://blogs.wsj.com/middleseat/2009/01/23/american-exec-on-time-performance-sub-par-in-2008/?mod=yahoo_hs 2.http://online.wsj.com/article/SB123119880352955507.html 3.http://www.sec.gov/Archives/edgar/data/6201/000000620109000004/ar01218k.htm 4.http://www.sec.gov/Archives/edgar/data/92380/000009238009000002/ex99_1.htm
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