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Four ways airlines are changing – for better or for worse (+video)

Virgin America ranked as the No. 1 US airline in the latest annual survey. But airline carriers continue to see a decline in customer service. Still, the industry continues to provide Americans with a safe and relatively cheap way to travel.

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The 25th annual Airline Quality Rating (AQR) report went public Monday, and its analysis of the US airline industry revealed what most travelers would expect: The situation, in many ways, is glum.

“As an industry, performance in 2014 was worse than the previous four years,” according to the report, which noted that the latest industry score is equal to that of 2009. “The return of the AQR score to a level seen five years ago does not send a positive message to consumers that see an industry enjoying positive economic times.”

But is commercial aviation as bad as we think? Airlines may have dropped the ball on punctuality, comfort, and general customer service, but the industry has also continued to provide Americans with a safe and relatively cheap way to travel the country and the world.

Here’s a look at some of the ways the airline industry has changed in recent years – for better or for worse.

Customer service quality is declining

Anyone who’s ever flown coach on a commercial airline will know that it’s almost never the smooth sailing they show on those in-flight ads.

Data from the the AQR report, which was a joint project by Wichita State University (WSU) and the Arizona campus of Embry-Riddle Aeronautical University, supports the experience. The researchers found that the US airline industry as a whole declined in four core standards: on-time performance, involuntary denied boardings, mishandled baggage, and customer complaints.

Even Virgin America, which the report ranked the best airline in the country for the third year running, showed only minimal improvement in performance.

Part of the problem is the sheer number of people that fly on commercial airlines. In 2014, there were more than 660 million passengers on domestic flights alone, according to the latest data from the Bureau of Transportation Statistics (BTS).

“When you look at the past 14 years, you find that the airline industry performs most efficiently when the system isn’t stressed by high passenger volume and high number of airplanes in the air,” Dean Headley, associate professor of marketing at the W. Frank Barton School of Business at WSU, told the Wichita State News. “With continued capacity limits and consolidation, one would hope that a less congested system would perform better.”

“We did not see that in 2014,” he said.

Airline dynamics are changing

In the years after Sept. 11, 2001, airlines operated on low profit margins, largely a result of rising fuel costs, which account for any carrier’s top expense. As late as last year, executives such as Tony Tyler, CEO of the International Air Transport Association, said that net profit averaged just over $5 per passenger.

In the US, a decade-long series of bankruptcies and mergers has left only four major carriers behind the bulk of American commercial aviation today. Which means that even as as fuel prices fell throughout the last year, and the industry posted record profits – airlines in the US made a combined $8 billion in the first three quarters of 2014 – airfares remained stagnant, USA Today reported.

Many carriers have also continued to charge for services such as checked baggage, in-flight dining, early boarding, seat selection, and reservation cancellation.

“All that is just what you'd expect when there's less competition,” Harvard Business School professor Benjamin Edelman, who follows the airline industry, told USA Today.

Fares are up, but still cheap

Still, a look at the bigger picture shows that even accounting for added fees, airfares have dropped by about 50 percent since the 1980s, when airlines were first deregulated.

In 2013, The Atlantic’s Derek Thompson lauded the democratization of the airline industry as well as the ease with which the average American can now find budget-friendly flights, thanks to the Internet.

“In 1965,” he wrote, “no more than 20 percent of Americans had ever flown in an airplane. By 2000, 50 percent of the country took at least one round-trip flight a year. The average was two round-trip tickets.”

He added: “In 1974, it was illegal for an airline to charge less than $1,442 in inflation-adjusted dollars for a flight between New York City and Los Angeles. On Kayak, just now, I found one for $278.”

Mr. Thompson also argued that those much-maligned fees “for bags, WiFi, food, headsets, unaccompanied minors, the emergency row, and practically everything that cannot be simply described as ‘one adult sitting with a back-pack in one middle seat’” are not only necessary but cost-saving.

“After deregulation, airlines wanted to guard their slim profits in an online world of transparent prices,” he explained. “One solution was to offer cheap basic fares and tack on fees later for amenities that most customers would demand.”

Flying is safer than ever

The recent spate of high-profile airline crashes in the news doesn’t change the fact that flying is the safest it has been in the history of commercial aviation.

Without minimizing the impact of airline accidents on real people, the International Air Transport Association reported that there were 12 fatal accidents out of 38 million flights for all aircraft types in 2014 – or 641 deaths in 3.3 billion journeys – compared with an average of 19 fatal accidents per year in the previous five-year period.

(The figures don’t include the crash of Malaysia Airlines Flight 17, which the IATA classified as an act of aggression.)

Narrowing the scope to the United States improves the numbers even further. In fact, up until the tragic deaths of two teenagers on Asiana Airlines Flight 214 in 2013, the US had enjoyed four and a half years of fatality-free flights. Excluding acts of terrorism and suicide, commercial aviation was the safest mode of transportation in the country from 2000 to 2009, with 0.07 fatalities per billion passenger miles, according to a 2013 study in the journal Research in Transportation Economics.

“A person who took a 500-mile flight every single day for a year would have a fatality risk of 1 in 85,000,” according to the study.

Still, as IATA CEO Tony Tyler said in a statement: “Any accident is one too many and safety is always aviation’s top priority.”   

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