Airline Gripes: Rip-Off or Reasonable? IBM Consumer Travel Survey Reveals Most Reported Travel Inconveniences Leading Up to the Holiday Rush

ARMONK, NY - In a new IBM (NYSE: IBM) survey, U.S. travelers report on the fairness of various airline fees, the frequency of “travel inconveniences” and industry practices that earn their loyalty in the current environment. Consumers cited the biggest airline “rip-offs” to be baggage fees (78 percent), additional charges for redemption of miles (76 percent) and first class ticket prices (58 percent). Surprisingly, 70 percent of travelers deemed general cabin ticket prices as reasonable, and half of all travelers thought fuel surcharges were valid as well.
The phone survey of 1,000 consumers nationwide provides a window into important areas of focus for travel providers vying for consumer loyalty. Among the most frequently reported travel inconveniences were restrictions associated with reward travel. Travelers ranked this as a more frustrating experience than suffering through “misplaced hotel reservations.” Additionally, an important key learning was that consumers prefer paying the lowest possible price and choosing amenities a la carte.

The IBM consumer travel survey was fielded in order to better understand consumer insights. IBM works with clients in the travel/aviation industry to maximize the customer experience, and engender greater loyalty and brand advocacy among consumers.

“Travel providers must keep their finger on the pulse of consumers and be able to respond to their changing needs and demands, while balancing the associated business economics,” said Bruce Speechley, Partner, Hospitality and Leisure Practice Leader, IBM Global Business Services. “Loyalty cannot be bought -- it has to be earned. That will only be done if travel providers can serve up a consistent, differentiated experience that is more valuable and relevant for individual customers.”

In an IBM report released today in conjunction with the survey results, the company offers insights into smart strategies that can deliver a superior customer experience through innovative rewards structures. The report, entitled “Committed Customers or Captives?,” from the IBM Institute of Business Value, focuses on how providers can replace reluctant customer allegiance with genuine loyalty.

IBM Travel Survey - Key U.S. Findings:

* 78 percent of respondents agree: Baggage Fees are “Rip-Offs.”

* Respondents are split 50/50 regarding the fairness of fuel surcharges.

* 58 percent prefer paying the lowest possible ticket price, sacrificing all amenities like food, blankets, pillows, beverages and headphones.

* During a flight delay, 31 percent prefer spending time in an Internet café and value Internet access as one of the top three airport amenities.

Analysis from the responses also showed that consumers are not looking for additional shopping or service “experiences” while at the airport; they are more interested in getting from Point A to Point B. Similarly, consumers expressed a lack of interest in redeeming airline miles in airport shops or for in-flight products and services. 68 percent of those surveyed expressed a lack of interest in redeeming airline miles for products and services in airport shops or in-flight. Responses showed that cost-conscious travelers are more interested in banking their miles in the hopes of saving money and receiving discounts on future flights.

How the Airline Industry Stacks Up
The survey revealed that travelers value one-stop loyalty rewards programs (across airlines, hotels, restaurants and retailers) and yearn for all-encompassing programs that consolidate multiple rewards. Consumers ranked the cruise and hotel industries as the most highly ranked industries for customer service.

Another one of the key findings of the survey revealed that airline troubles plague consumers twice as much as hotel or car rental. As consumers become more price-conscious with softening demand, airlines will have to redouble their efforts to engender greater loyalty and advocacy among customers.

Additional Highlights:

* Credit Card companies’ loyalty programs are perceived to be best; 31 percent rated credit card loyalty programs over competitive programs offered by hotel, airline and retail providers.

* 51 percent would prefer a single points provider managing all accumulated rewards where points could be redeemed across a network of partners (airlines, hotels, restaurants, retailers, etc).

* 26 percent felt that the airline industry should emulate the cruise industry to offer greater customer service.

* Consumers value the ability to choose which airline perks are most important to them. For consumers that travel 2-4 times per year, lower price airfare and fewer included amenities are preferred. For consumers that travel 16+ times per year, an all-inclusive, more expensive airline is preferred.

New Insights into Customer Loyalty
IBM’s new customer loyalty report, like the IBM Consumer Travel Survey, revealed that customer expectations are falling with regard to their travel rewards programs. Research showed that 64 percent of travelers surveyed were likely to stay with a selected travel provider to cash in on the promise of future rewards, but only 48 percent were satisfied with the value of their rewards. Although the travel industry boasts some of the most populated rewards programs -- in 2007, a COLLOQUYtalk report found that airline rewards programs alone had more than 250 million members in the U.S., only 40 percent of travel memberships are considered active -- pointing to a gap in membership numbers and everyday usage.

The IBM report stresses the importance on improving the customer experience to deliver a compelling and consistent touch point across channels.

Key recommendations of the report include:

* Look beyond miles: Improve the customer experience -- especially in critical opportunities to delight travelers or recover from service failures.

* Choose a strategic position: Articulate the role of customer loyalty from either a product-focused, partner coalition or comprehensive rewards standpoint.

* Commit to invest: Target the right level of investment in loyalty program innovation. Use technology to strengthen the ability to gain customer insights via data mining, predict and manage unused capacity and socially connect with customers.

* Strive to improve continuously: Progress along a “value continuum” to strengthen capabilities and improve loyalty over time.

Survey Methodology
The IBM consumer travel survey analysis is based on the findings of a phone survey that was conducted by Braun Research among 1,000 U.S. adults age 18 or older from October 25-27, 2008. The total results reported are at the 95 percent confidence level with a margin of error of +/-3.1 percent. Respondents who have taken two or more personal or business trips in the past 18 months were included.

For more information on additional findings from the IBM Consumer Travel Survey and the IBM report: “Committed Customers or Captives?,” please click here.

About IBM
For more information on IBM’s travel and transportation solutions visit: www.ibm.com/travel.