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Frontier Places Last in J.D. Power 2023 North America Airline Satisfaction Survey

But Strong Q1 2023 Earnings and Repeat Business Rate Lessen the Impact of Low Customer Satisfaction Ranking

The News:

Frontier Airlines received a last-placing ranking in the J.D. Power 2023 North America Airline Satisfaction Survey, which saw the low-cost carrier trail rivals such as Spirit Airlines, Allegiant Air, and WestJet. The North America Airline Satisfaction Study measures passenger satisfaction with airline carriers in North America based on performance in eight areas (in alphabetical order): aircraft; baggage; boarding; check-in; cost and fees; flight crew; in-flight services; and reservations.

It also measures passenger satisfaction across three class segments (first/business, premium economy, and economy/basic economy) and is based on responses from 7,774 passengers. The study was fielded from March 2022 through March 2023, and passengers needed to have flown on a major North America airline within the past month of completing a survey.

However, based on the company’s strong Q1 2023 quarter financial results, Frontier’s management believes that within its segment, price, rather than overall customer satisfaction, continues to be the most important purchase criteria. This view is supported by Michael Taylor, travel intelligence practice lead at J.D. Power, who noted that for low-cost flyers, price is the overriding driver of satisfaction.

According to the company’s Q1 2023 financial summary, Frontier generated total operating revenues of $848 million, a record for any first quarter in company history, and 40% higher than in Q1 2022, resulting in a 19% increase in revenue per available seat mile (RASM) on 18% higher capacity compared to Q1 2022. The company also generated ancillary revenue of $80 per passenger, $11 more per passenger than in Q1 2022.

On the May 3 conference call with analysts to discuss the financial results, CFO Jimmy Dempsey noted in a response to an analyst highlighting the low customer satisfaction ratings that the company has a 90% repeat business rate. “When you look at the weighting of some of these studies or analyses, they really don’t weight price like they should,” Dempsey said on the call. “And what you see is that consumers, when they buy air travel, the number one thing they look for, especially for leisure customers, is price. And so, if you weight price as it should be weighted, I think we’re a clear winner when you look at the overall value for consumers. And that’s why we continue to have such high repeat business.”

You can view the press release from J.D. Power announcing the results of the survey here. You can view a transcript of the Frontier Group Holdings, Inc., Q1 2023 Earnings Call Transcript here.

Frontier Places Last in J.D. Power 2023 North America Airline Satisfaction Survey

Analyst Take:

Frontier posted record operating revenue in Q1 2023 of $848 million, rising 40% above the same period last year, and saw a 19% increase in revenue per available seat mile, compared with the same period in 2022. Further, the company claimed a repeat business rate of about 90%, refuting the impact of low customer satisfaction ratings.

Frontier’s Push for Efficiency and Cost Savings

For years, industry analysts, consultants, and consumer advocates have stressed the importance of providing excellent customer experiences, as it has a direct impact on overall customer satisfaction, and ostensibly, repeat business and word-of-mouth referrals. I have written extensively about this topic, and covered Frontier’s decision to eschew live-agent support for a totally digital experience back in November 2022.

At the time, Frontier noted that this move was designed to promote customer efficiency; an outgoing message on the customer service line said: “Our Customer Care function recently transitioned to fully digital communications, which enables us to ensure our customers get the information they need as expeditiously and efficiently as possible.” For certain tasks, such as checking the status of a reservation status, digital channels can often be more efficient than speaking with a voice-based agent.

For its part, Frontier said at the time, “We have found that most customers prefer communicating via digital channels.” Of course, there are significant savings that can be generated by switching to non-voice support; these reduced costs can certainly help to improve the company’s overall operating metrics.

Strong Revenue Growth and Repeat Business Metrics, Despite Poor CSAT Ratings

The metrics that stand out from Frontier’s latest quarter are, of course, its strong revenue growth and the exceptionally high repeat business figure. The company says that price is the ultimately decision driver, which seems to run counter to today’s conventional wisdom that customer service, support, and customer satisfaction are as important as price. J.D. Power’s Taylor agrees, noting that when overall airfare prices increase, customer satisfaction at each discount carrier will also decrease, even if it is not the fault of the individual carrier.

According to Taylor, customers seeking the lowest airfares will put up with less-than-stellar support options, because their options at similar price points are limited, and in many cases, competitors are offering a similar bare-bones customer experience. In fact, as I noted previously, low-cost carrier Breeze Airways also does not offer live telephone support either, reflecting that carrier’s desire to save customers money and time.

Another consideration is that the “you-get-what-you-pay-for” mentality may work in this customer segment. Customers do not go to a fast-food restaurant expecting well-mannered servers and fine china, and, similarly, discount-price fliers may be willing to put up with less-than-stellar customer service and support as a reasonable tradeoff for getting low fares.

Author Information

Keith has over 25 years of experience in research, marketing, and consulting-based fields.

He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.

In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.

He is a member of the Association of Independent Information Professionals (AIIP).

Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.

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