Six months ago American Airlines unilaterally handed out big raises to employees. This was supposed to improve customer service, and therefore increase sales and earn the airline a revenue premium.
Indeed American Airlines laid out its belief at media and investor day last month that employees are going to be the differentiator between airlines since if an airline invests in its product, other airlines will just copy.
American gave employees raises but not a vision of where the airline would go, nor reason to respect their colleagues who stick around regardless of performance.
When American handed out these raises I suggested that — regardless of what the ‘right’ level of compensation may be — they were unlikely to make a difference in employee performance.
That’s because pay is only one part of employee motivation. Employees need to:
- Feel they are paid fairly
- Like and respect colleagues
- See themselves as a part of something bigger than themselves, on a mission
During American’s earnings call JP Morgan’s Jamie Baker asked — so it’s been six months with higher pay, where’s the better customer service?
[W]hen you decided to revisit the union economics mid-contract, you were pretty insistent or confident that you’d see a return on that investment. I’m not seeing it. And maybe I’m just looking in the wrong place, Doug, maybe the goodwill that you thought to generate is just, I don’t know, taking a longer time to filter through to better passenger service?
American’s CEO Doug Parker responds “We can’t go make a culture competitive advantage by asking our team to work for less than their peers do at other airlines.”
And that’s true as far as it goes. But it doesn’t answer the question of how do you capitalize on better pay to actually get better service and attract high yield customers?
In truth the analyst question is about revenue not service. But American was promising better – and a competitive advantage even in – service as a revenue driver.
Without better service they just have higher costs but not higher revenues or happier customers.
Changes to corporate culture take a hell of a lot of time to work through the system.
“Service” at a union company is not a differentiator because the better service never materializes. Can you show me one example of where a heavily unionized company delivers on this metric? It just doesn’t happen. Baker knows this.
Doug Parker & his executive minions have made their feelings about their paying pax very clear-self loading freight. Those feelings have filtered down to the front line staff & they take their cues for customer service from there. Truly, did anyone expect any different?? I can remember being on a US flight, after the takeover but before the merger started, & hearing a deadheading AA FA talking to the FA up front about how excited she was about all the stuff ‘she won’t have to do anymore’ once the lower US standards were adopted across the board. I can’t be the only LAA EXP who has heard from LAA staff that they are no longer ‘allowed’ to go above & beyond for pax because of the current management in place. The big raises given by Parker et al, especially since they are not tied to performance, not only reinforces the bad behavior & lack of customer service, it was actually rewarded!
@Rjb – Southwest Airlines.
Remember when AA did “more space” for the entire plane, a la Jet Blue? Hard to believe the same company.
And now that I am becoming more untethered from AAdvantage, I’ve been trying these other airlines more frequently, with nice results.
Gary, I got an email this morning from American airlines and was wondering if you think it’s a good deal. Here are the details:
Enjoy great-tasting wines delivered right to your door with American Cellars by Vinesse — six delicious wines for only $6.99 per bottle.
Join today and for a limited time you’ll receive:
10,000 American Airlines AAdvantage® bonus miles
Six delicious wines for only $6.99 per bottle plus 1¢ shipping — a savings of $116
Five AAdvantage® miles for every $1 you spend
Your included bonus: A six-piece deluxe wine tote (a $37.95 value)
All wines are guaranteed to please, and there’s no obligation to purchase more.
What do you think?
AA employees are as unhappy now with management as they were when Tom Horton was CEO.
All that money you threw around, Doug Parker, got you nothing.
@Buddy M – if you cancel after month 1 then it’s a decent deal. When I did this in the past I found the wine undrinkable by the way
Maybe it’s not that Parker ever felt the pay increase would lead to better service, but rather that he’d lose employees because they were underpaid, thus leading to even worse service than exists today. He couldn’t say this of course, and he needed to justify the increased compensation costs, therefore he couched it in terms of “better” service as opposed to “no worse” service, which never would have flown (no pun intended).
As they say, “the fish rots from the head;” so does a corporate culture manifest itself from the top down. If the pervasive attitude is to nickel and dime customers, and treat them like crap, why would any conscientious employee push against that concrete wall? Concomitantly, intelligent employees see through the BS of Parker trying to get our government to do his bidding against the ME3, so he does not have to invest in American rising to the competitive challenge. Indeed, to shake him out of that over confidant spin, AA needs a good dose of foreign competition, along with a stronger presence of Alaska and Jet Blue.
In parallel, Amtrak is attempting to execute, yet again, another reorganization to improve its focus on safety, customer satisfaction, and cost control. If that was really true, why not start with its top heavy, senior corporate management level responsible for the indifference to a culture of safety and customer service, which would certainly decrease costs? Such attitudes have only been exacerbated with the knowledge that Amtrak only promotes from within under C Suite; like re-cycling. Instead, the mid to lower level munchkins will be offered buy-outs under the threat of lay-off.
Just as we have learned from Wells Fargo, why does the Board of Directors remain oblivious, and immune, to the pathetic direction of their stewardship, as evidenced at American and Amtrak? As employees do not want to appear as wearing cordovan loafers with a tuxedo, they are quite eager to fall in line like a parade of elephants with their trunk wrapped around the tail of those in front.
In essence, as corporate culture is defined and manifested by the C Suite and the Board 7/24/365, throwing coins without changing anything else serves no purpose, whether union or non-agreement. We see the difference everyday on Lufthansa and VIA Rail Canada–pride, respect, and the fulfillment of the customer experience; so, it can be done, under the right leadership.
When I was 25, I thought that people running huge companies were competent.
Now that I am 58, it is clear that a great number of them are just utter morons.
I get my college alumni magazine and I see all these guys I used to know are now 4-star generals or college presidents or top execs with Fortune 500 companies and I think “That idiot? How the hell did that happen? Jesus H. Christ.”
We all know that Parker is just coasting through the unprecedented economic expansion that he stumbled into right? I mean, when he says that the culture changes take time, we all know that’s just his way of buying as much time as possible for a strategy that he knows he cannot deliver on. Is there anyone who isn’t seeing the obvious trajectory for Parker’s tenure? Shareholders and analysts have been asking him how he’s going to increase revenue for years, he can’t do it. All he can do is fiddle with cost, he’s got no viable ideas on revenue growth. It will take five to eight years for that reality to play itself out and for the patience to wear out, and eventually he’ll be out on the street with an ENORMOUS golden parachute, but thats where this is going.
Can anyone explain how service is measured? What, if any, generally available stats are used to measure real service. I don’t think there is a pre-departure beverage stat. On-time performance, lost bags and customer complaints don’t relate well to how I feel about the service at the airport, onboard or through call centers. Companies generally won’t release their customer satisfaction numbers. It would be nice if there was a standard measure like on-time performance that passengers could use to measure service among airlines.
@gary. Southwest is a good example. I never get to fly SWA as our cities never matched up.
@john
Service – to quote Suprme Court Justice Potter Stewart – I know it when I see it.
@gary I disliked Southwest service and employees behavior every time I tried it. In addition they have a track record of ignoring or downplaying discriminative behavior. I seriously prefer flying United (and being dragged out) to getting exposed to Southwest culture.
@toomanybooks. EXACTLY.
Remember when Steven Jobs had to save Apple from bankruptcy due to the mis-management of John Scully. Right now, management at AA, UA, and Delta are attacking customer loyalty programs (including credit cards related points) and claiming that this will not affect future revenue. It is just kind of hard to take their argument seriously. By comparison, Amazon is giving people more for their money every day. It is easy to see how their revenues will continue to increase over time. Maybe we should hope that Amazon buys an airline!
You make wrong assumptions being on the other end of the service business.. A minor raise to bring wages up to the promised parity level with competitor airlines is nothing to crow about. most of the raise was offset by higher “contributions” to insurance etc.. having to fight for a promised raise kind of defeats the purpose. the employees ( of LAA)have been on the bottom of the corporate muck truck for too many years to just turn around and embrace this new team from a low rate carrier. passengers complain about things like smaller seats and lowered service.. ut where do te service levels get decided? In Parkers office! Exmple the 777-200 reconfigured with 60 more passengers will be losing one more FA.. there are barely enough as it is.
the 787-900 is understaffed, but AA has decided to add one more ( needs at least 2 more for a good service).
Walk in the shoes of the employees for a while to get the real story…
pay is good, but it’s not everything.
Amazon is saving the country! NYT alone wouldn’t be able to stop the Russian coup had Bezos not bought the WashPo to replay Woodward-Bernstein almost to script. And Trump even threatened him publicly over it! Notice how the real billionaires are not the slightest frightened by the carnival conman who duped the country’s 1/3 redneck morons with a more transparent act than Mr Haney? They will probably all join in funding impeachment in a reverse coup where capitalism and the military insure our democracy as it’s battered institutions purge the traitors.
Indictments Monday: Trump, Jr., Manafort, Kushner…
Fox News may change to classical music programming Monday.
Since we have only personal observations, and no facts or studies, my observation is that AA service *has* improved.
It’s just funny how when the merger was announced, the mantra from analysts and employees was everything will be so much better. Now we hear the same whining and excuses we heard before. If someone can’t find happiness in the new AA then it’s time get another job.