A Report Card on the Nation's Airlines
By SCOTT MCCARTNEY

Last year was a tough, sloppy one for U.S. air travel. Despite improving financial performance, carriers and their customers suffered declines in the quality of service, plagued by everything from more misplaced baggage to more late departures.

While US Airways Group Inc. had robust earnings, it also had some sizable problems in customer service, ranking last among the 10 biggest airlines in the rate at which bags were lost and the frequency of consumer complaints. The same could be said for Continental Airlines Inc. -- strong financial performance with lots of growth, but a black eye from ending up in last place in both on-time percentage and the rate that it involuntarily bumped passengers from flights.

On the other hand, JetBlue Airways Corp. posted a small loss for the year but mostly strong customer-service rankings: best in baggage, bumped passengers and canceled flights (and yet next-to-worst in flight delays). Northwest Airlines Corp. was also strong in customer-service measures, while it still works through its reorganization in bankruptcy court.

Only Southwest Airlines Co. was on top of a 2006 scorecard both financially and in its operating performance. Still, Southwest showed some problems of its own -- baggage handling, for example, was worse than the previous year and after many years leading the industry, Southwest was only No. 5 in terms of the frequency of mishandled bags. It was No. 1 in on-time and fewest complaints. Rankings were established by reviewing Department of Transportation data for 11 months (December numbers should be out tomorrow, but aren't likely to sway standings).

Even though airlines started making money again, a lack of employees and broken-down equipment added to travel woes last year, suggesting that carriers need to spend more now that they are making more. Planes were more full last year. Ticket prices were higher. Flight delays increased. More bags got lost. And security hassles rose exponentially after liquids were banned from airplane cabins, then permitted in small quantities under rules still not uniformly enforced or even understood by federal security screeners.

While the bigger, older airlines have narrowed the financial gap between themselves and newer low-cost carriers, they haven't caught up in customer-service issues. JetBlue, Southwest and AirTran Holdings Inc. were at the top of the industry among major carriers last year.

At the bottom were Delta Air Lines Inc., UAL Corp.'s United Airlines and US Airways based on combined standings for on-time, lost bags, bumped passengers, consumer complaints and canceled flights.

In the middle, AMR Corp.'s American Airlines enjoyed a huge financial turnaround a and good on-time performance, but more lost bags and complaints. The company says its managers are making customer-service improvement a big push this year. American has told its employees that its internal survey data showed the company has moved from ninth place to seventh place in customer service -- still a long way to go.

Airline service is often a test of how companies and employees react to adversity -- bad weather, perhaps, or tons of additional baggage checked because of new security rules. Often carriers have to balance tradeoffs and choose among various ways they could inconvenience customers. Continental says, for example, that it chooses to hold flights in order to connect bags. That pushes its flight delays higher, but improves its baggage ranking.

Delta wasn't the absolute worst in any DOT category, but it was next-to-last in baggage, bumped passengers and canceled flights. The airline, which like Northwest is trying to emerge from bankruptcy reorganization this year, has faced operational problems as it cut its schedule, shifted more to international flying and grappled with issues at Atlanta's airport.

United emerged from bankruptcy but still tallied financial losses for the year, and it ran into some service problems as it tried to make its operation more efficient -- squeezing more flights out of its airplanes each day, for example. On-time percentage declined, and consumer complaints rose. United says that while it did see some impact as it made changes, "performance is improving now," a spokeswoman says. The airline also created a new division to focus on customer issues, such as complaints. "Our customers deserve a much higher standard from us,'' United says.

Analysts say that over many years, bad service can hurt an airline's business, and carriers with reputations for outstanding service, like Singapore Airlines, attract more customers because of it. Once it repaired its service reputation in the 1990s, Continental garnered a lot more traffic from business travelers who generally pay higher fares than the "backpacks and flip-flops crowd" the airline relied on when its service was lousy.

But in the short term, customer-service woes often don't have much impact. Many cities have limited options since one or two airlines often dominate airports and many travelers are locked into corporate contracts and frequent-flier programs. Customers tend to be swayed more by flight schedules and fares. "Customer service has to swing to extremes to translate into profitability," said J.P. Morgan analyst Jamie Baker.

JetBlue, which was best in the industry in terms of baggage handling, fewest bumped passengers and fewest canceled flights, was next-to-last in on-time performance because of problems introducing a second aircraft type to its operation and congestion at New York's Kennedy Airport, its home hub. JetBlue says it and other airlines are working with the airport and the Federal Aviation Administration to reduce JFK delays, and the reliability of its Embraer 190 airplanes has improved.

The baggage bunglers of the year were US Airways, Delta and American, in that order. US Airways mishandled about one bag for every 130 passengers -- roughly one on every flight.

US Airways says the problems stem mainly from baggage meltdowns in its Philadelphia hub. The carrier says that during its financial difficulties, US Airways didn't spend on equipment, leaving old equipment now prone to breakdowns. The company is spending $20 million in Philadelphia on baggage equipment and overall infrastructure.

"We have made improvements but still aren't where we'd like to be, obviously," a spokesman said.