More baggage-handling mistakes, fewer on-time flights, but, surprisingly, fewer complaints—that’s the story of the airline industry last year, according to the 2007 Airline Quality Report.

On-time arrivals dropped to 75.5 percent in 2006, down from 77.3 percent in 2005, according to the 17th annual report, co-authored by Brent Bowen, director of the Aviation Institute, University of Nebraska at Omaha, and Dean Headley, associate professor of marketing at the W. Frank Barton School of Business at Wichita State University. Hawaiian Airlines had the best on-time record (93.8 percent), followed by Frontier (80.7 percent) and Southwest (80.2 percent). Atlantic Southeast (66 percent), ATA (69.4 percent), and JetBlue (72.9 percent) were the worst.

Not only were more passengers late to their destination, but fewer found their luggage once they got there. The report found that the airlines mishandled 6.06 bags per 1,000 passengers per month in 2005 compared to 6.5 mishandled bags per 1,000 passengers in 2006. Hawaiian Airlines had the best record with 3.14 bags mishandled per 1,000, followed by JetBlue and Northwest. Atlantic Southeast was the worst with 17.37 mishandled per 1,000, followed by American Eagle and Comair.

“The stress in the airline system is across the board,” said Bowen, in a news release. “Passengers, airline staff, airline corporations are as stretched as we have ever seen them. Seeing declines in industry performance isn’t surprising in this environment, and it will be difficult to change the trends we have seen.”

Added Headley: “We’re back to full passenger volume similar [to where] we were before 9/11. We also have about 18 to 20 percent less seat capacity in the system now,” he said. “It’s just a very complex system with high volume, and it just doesn’t hold up well to the pressure.”

Nonetheless, the number of complaints to the Department of Transportation dropped to 0.88 per month for every 100,000 passengers in 2006, down from 0.89 per month in 2005. Southwest, JetBlue, and Frontier had the fewest complaints per month. United, US Air, and Mesa had the most complaints per month.

In terms of overall quality rankings, Hawaiian Airlines ranked No. 1 among the 18 largest airlines, based on scores calculated from 15 elements of airline performance. Hawaiian was followed by JetBlue, Air Tran, Frontier, and Northwest. The bottom five were Atlantic Southeast, American Eagle, Comair, Mesa, and SkyWest.

James May, president and chief executive officer at the Air Transport Association, the trade association for the U.S. airlines, said the report focuses “on the symptoms rather than the root causes of passenger and airline frustrations. The vast majority of customer-service issues arise from weather and congestion flight delays that lead to misconnected flights, lost luggage, and related complaints,” May said in a news release. “These delays are inextricably linked with the government’s outdated and inefficient air traffic control system.”