CHARLOTTE, N.C. -- If there is one thing that airlines despise, it is finishing last in on-time performance.

That's why American ( AMR) has been scrambling to improve on its 2008 results, when its on-time results were 19th out of 19 airlines tracked by the U.S. Transportation Department. It was also 16th in complaints and 11th in mishandled bags.

June was the low point, as just 58.8% of American flights were on time, marking the fifth consecutive month when the carrier was last or next to last.

"We were struggling," says Mark DuPont, vice president for airport services planning. "So after we made it through the summer, we started looking at a number of adjustments."

In mounting a systemwide improvement effort, American is seeking to follow the lead of US Airways ( LCC), which went from last among network carriers in 2007 to first in 2008. It is not unreasonable to think that United ( UAUA), second to last among network carriers in 2008, will be next to try.

For American, results so far have been positive. On-time performance climbed steadily from August to December, when American was third among all carriers and second among network carriers, as well as ninth in complaints and 10th in mishandled bags.

On an absolute basis, arrivals within 14 minutes of schedule were at 70.6% in August, 81.5% in September, 83.6% in October and 84.4% in November, before falling back to 70% in December due to weather. Most carriers are showing improvements in absolute terms, as the industry chops capacity.

"The skies are less crowded today, so business travelers have a little higher expectations, so it's even more important for a carrier like American to get this right," said Kevin Mitchell, chairman of the Business Travel Coalition, an advocacy group. "Schedule reliability is among the most important things to a business traveler."

Mitchell said business travelers clearly noticed American's poor performance earlier in the year, but "complaints were muted" because American wasn't the only carrier with problems. Rather, the entire industry was plagued by congested New York airspace, several fleet-type groundings by the Federal Aviation Administration and concerns about record high fuel costs. "The frustration was there, but everybody was having problems," Mitchell said.

American concedes it was late to make adjustments. In 2005 and 2006, it focused on improving revenue. For instance, to conserve fuel, its airplanes flew more slowly. Likewise, it encouraged rising load factors but didn't necessarily allocate more time to board aircraft.

Initially, lower industry capacity and good weather in American's hubs blunted adverse operational impacts. But in 2007, flying and air traffic-control delays increased, weather worsened and American finished 17th in on-time performance. The trend continued into 2008.

"We were a bit slow to adjust our system to the things in the world that were changing around us," says Mark Mitchell, managing director for customer experience. "We hadn't kept up with the changes in load factor and air traffic control and the rough year for mother nature."

In 2007, American had begun an effort to improve the customer experience, upgrading service areas such as boarding, cabin cleanliness and cabin maintenance. It asked employees around its system to devise improvements. Then in 2008, it began an effort to improve operations. Many changes took effect in September, as the fall domestic schedule was cut about 12%.

Among the changes, American increased flying times to allow for air traffic-control delays. It increased ground time at various airports. It added a fully staffed spare gate in each hub, reducing cases where airplanes sit on ramps awaiting gates. It enhanced its crew-pairing strategy, reducing complexities by jointly scheduling flight attendants and pilots. It added docking guidance technology in hubs, enabling pilots to park at gates during storms when ground handlers must seek shelter. Other changes included:
  • As oil prices reached a record high of $147 a barrel in July, American ceased flying slower to save fuel. "Flying slower meant arriving late," Mitchell says. "It's fair to say our leadership saw that we couldn't sit around and let our brand erode."
  • To enhance baggage handling, American put portable computers with advanced software in hub baggage carts. Information on delays and other issues is constantly updated. "Before, you pulled a sheet of paper off a printer, handed it to a driver, and he or she would see what gates to go to and go from there," says DuPont. Occasionally, a dispatcher radioed updates.
  • To better manage diversions to alternate airports, American introduced technology with color coding to highlight diversion information, including whether passengers were offered food, on screens across its network.
  • The colors change as the delay increases. Had American possessed this tool in 2006, the plane carrying future consumer advocate Kate Hanni would not have sat on an Austin, Texas, runway for nine hours.
  • The carrier also upgraded delay management software, so that essential information on alternative flight options is pushed to gate agents, who previously conducted seemingly endless searches for flight information. Another tool can rebook 150 flights an hour on its own and provide information to agents before passengers read it on gate display boards.

"When a flight is delayed, if we provide the right information and alternatives, a customer will give us credit for a well-handled delay -- well beyond the credit we would get for being on time," says Mitchell. "Our (satisfaction) scores go off the charts."