The report ranked the 14 largest U.S. airlines. Rankings were based on four categories: on-time performance, customer complaints, mishandled baggage and denied boarding performance.
Virgin America also did the best job on baggage handling and had the second-lowest rate of passengers denied seats due to overbookings. When asked why he chose to fly Virgin America, Joel Nelson of Seattle said, "I like the seats, I like the free television, I like the cheap WiFi. Service is really great."
The study, which uses analysis from the Department of Transportation, said customer complaints rose a 20 percent. United Airlines had the worst performance overall, and its consumer complaint rate nearly doubled last year.
According to the study, Hawaiian Airlines' on-time performance ranked at 93.4 percent. Express Jet and American Airlines had the worst on-time performance.
Southwest topped the list for fewest consumer complaints, with just .25 complaints per 100,000 passengers. In comparison, United Airlines had 17 times more complaints, with 4.24 per 100,000 passengers.
Overall, airline performance in 2012 was the second highest in the 23 years that Wichita State University in Kansas and the University of Nebraska at Omaha have tracked the performance of airlines. The airline's best year was 2011.
"Over the 20-some year history we've looked at it, this is still the best time of airline performance we've ever seen," said Dean Headley, a business professor at Wichita State University in Kansas, who has co-written the annual report.
The industry's shift to charging for fees for extra bags, or sometimes charging fees for any bags, has significantly reduced the rate of lost or mishandled bags. Passengers are checking fewer bags than before and carrying more bags onto planes when permitted.
The industry's mishandled bag rate peaked in 2007 at 7.01 mishandled bags per 1,000 passengers. It was 3.07 in 2012, down from 3.35 bags the previous year.
The Associated Press contributed to this report.