When airlines are profitable, who should be the primary beneficiary of those profits: the travelers, whose contributions to the companies’ coffers made the profits possible; or to the airlines’ shareholders, who expect a return on their investments?
According to a BusinessWeek article published this week, carriers in the U.S. enjoy the highest profits (good for their share prices) and deliver the shoddiest service (bad for flyers). The article’s headline says it all: “Where Do U.S. Airline Profits Go? Away From Travelers, Toward Investors.”
What might be called the populist view of business is that a company’s first responsibility is to its customers. If there’s extra money available after the enterprise’s core costs have been covered, most of it should be used to improve the product or service. If such investments reduce profits, then so be it.
That, according to BusinessWeek, is what Cathay Pacific and Singapore Airlines and Emirates do: They spend heavily on upgrading the planes and seats and food and other items that directly affect the travel experience. That’s why those airlines are consistently rated among the world’s best carriers. And it’s why their profits are lagging those of U.S. carriers, that deliver markedly lower levels of service.
- For the 2nd quarter of 2014, Singapore Airlines earned $39 million, and ANA earned less than $3 million. Cathay Pacific’s profit for the first half of its fiscal year was $45 million.
- For the same period, American’s profit was $864 million, and United’s was almost $800 million.
- In the latest Skytrax world airline rankings, Cathay Pacific was first, Singapore was third, and ANA was sixth.
- Not a single U.S. carrier was ranked among the Skytrax top 20.
Unfortunately for American travelers, the top-rated airlines can’t fly domestic-U.S. routes. If they did, the competitive pressure might force American, Delta, United, and the rest to spend more on their customers.
For now and the foreseeable future, it’s investors 1, customers 0.
Reader Reality Check
What should U.S. carriers do to improve the travel experience?
This article originally appeared on FrequentFlier.com.
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