American Airlines Chief Revenue Officer spoke virtually at the Raymond James investor conference on Wednesday. He was flanked by two people from investor relations who weren’t active. Otherwise – you could see through the glass walls of the conference room they were in – the floor at the airline’s Skyview campus appeared empty. That’s a function, perhaps, both of the slimming of headquarters employee ranks (despite massive subsidies meant to maintain full airline employment) and also that even airline employees continue to work from home.
Three things struck me about Raja’s remarks.
- Masks. Former Spirit Airlines CEO Ben Baldanza recently called my arguments against mask mandates “persuasive” but ultimately “spurious” because these mandates actually increase travel by giving customers confidence. He fails to draw the distinction between federal mandates and airline rules (which were in place for more than half a year before the government stepped in, and originally did support passenger confidence). An airline will choose masking rules if it’s better for their business, and that’s hardly the government’s role.
Raja concurred with the Raymond James analyst asking about masks that U.S. government rules will hinder the return of long haul travel. It’s one thing to be required to wear a mask for two or three hours, it’s another to have to wear one for 10 or more.
- Customer focus. Jeff Bezos says the biggest mistake businesses make it focusing on what their competitors are doing rather than what customers want. That’s historically been what current American Airlines management has done, though Raja suggests it’s an industry-wide issue. He offers, “airlines have been competitor-assessed institutions” but that success will be “delivering for the customer” if you “think about this business through the customer lens” making things easier for the customer they’ll fly you more and pay a premium to do so.
The question then is what it means to make things easier for the customer. Raja’s own historical remarks have suggested this means offering a convenient route network, rather than a comfortable product. An airline’s operation, product, and policies all need to align with customer needs. When making decisions, the question needs to be how does this deliver more value to the customer rather than how can we produce a seat at the lowest possible cost? An airline like American will always have higher cost than many competitors, so it needs to offer a product that customers choose to pay more to fly.
This has all sorts of implications throughout the operation – American, for instance, has the least friendly standby policy of the legacy airlines and that undermines capitalizing on the carrier’s strength across hubs. All of these need to be rethought.
- Latin Americans are more likely to fly American than Americans are. Raja reports that two-thirds of American customers on South America routes (unique individuals, not enplanements) are based there and not in the U.S.. They have as high a rate of AAdvantage membership as U.S. passengers do, with a greater rate of co-brand credit card penetration. Raja suggests American’s partnership strategy is less about growing connectivity, reaching destinations and therefore customers they currently can’t serve, and more about more “rounding out the customer proposition” by selling more things like local flights to their current customers.
Mask rules hinder air travel’s recovery. American’s strength in Latin America is on the southern side of the equation. And the airline needs to think differently to succeed in earning a revenue premium.
Four words that are key to AA increasing revenue premium: “Try not to suck”
Federal mask mandates provide someone to blame for the airlines.
Not sure why masks would hinder transatlantic travel — I haven’t heard of any deaths on transatlantic flights due to mask mandates.
Money to airlines was designed to keep union jobs, not management.
For me the decision about masks isn’t about what is best for business but what is best for me and my health. I do not believe most airlines or other business care much about me at all. I think of this as being like allowing car manufacturer’s to decide if they should install seatbelts and airbags based on their business model.
Restrictions in the destination, requirements for testing and being stuck in a foreign country with Covid are bigger issues than wearing a mask for 10 hours. That’s not much different than flying to Hawaii, and that requirement doesn’t seem to have stopped many people from traveling there. Not that being stuck in the US with no ICU beds in certain regions is all that much more attractive than being stuck in South American with Covid. Masks are the side effect, not the problem.
@ Nate
Wearing a mask for 14 + hours has given me pause to planning international travel.
Why the consistently snarky and condescending comments about American Airlines? It almost seems as if you have a vendetta against it. Who made you the sole judge and jury of what constitutes good service or a comfortable seat? I’ve seen raging debate after raging debate on this topic on many forums over the years, and there seems to be little objective consensus on the issue. Frankly, I’ve only flown in a relatively comfortable airline seat twice in over 55 years of travel. And there’s really not much difference between Delta, United, and American based on my experience with all of them and their predecessors. But I put it in those terms – in my experience. I don’t claim to be the sole judge or jury of what constitutes good service. I just want to get where I’m going. But … I don’t have an apparent vendetta against any airline. And I certainly am not rooting for any of them to be liquidated, as you apparently want when it comes to American Airlines. Sorry.
@Denis you should talk to your doctor. Except for a n95, a mask shouldn’t impact your oxygen intake, and even the impact by a n95 mask is marginal (and not unhealthy).
If your issue is comfort, that’s a solvable problem.
You can also take the mask off during mealtime and/or build in a connection to break up the 14 hour journey.
That being said, if you are someone looking for problems and not interested in solutions, stick your head in the sand and go on with your day.
@ Radio — Clearly you need to stop flying economy so much if you are that uncomfortable.
I just posted this on another forum:
Our company travel is at a bare-bones, critical-only level for one reason right now: the mask mandate. We have hundreds of people that normally travel several times a month, often on long cross-country or trans-pacific flights, almost always purchased within 7 days, and very often in F class.
Our business leaders have been very vocal about their disdain for masks on long flights, and have been transparent about the fact that we will remain largely grounded until masks become optional. Our travel budget is measured in the millions, and I can’t imagine that we are the only one sitting things out until sanity returns.
I’ll travel more when mask mandates are over and things feel normal – I won’t fly on Emirates or Qatar with their ridiculous hospital gowns at all until they are finished with that silly nonsense.
Steve – great! I’m so glad you and your ilk aren’t flying. Hell, I hope that mask mandates remain in place forever to keep your kind off of planes. What’s the big opposition to wearing a damn mask for a few hours? Is it really that hard? What do you think surgeons do all day? Next time you need surgery, are you going to ask your surgeon and anesthesiologist to not wear masks because if they coughed or spit on your wound, it would be okay? What on earth is wrong with you!
I noted here more than a year ago that mask mandates would be a hindrance to recovery and business travel and that is exactly what is happening. Airlines implemented them, got the US government to codify them, and now realize that, surprise, surprise, they made a mistake in getting the government involved. Not only do masks convey an image of things not being right but they are counter to western culture not just in the US but in Latin America and Europe. Finally, 18 months into the pandemic, there is still NO valid data on the effectiveness of masks as worn by the public in real world situations EVEN THOUGH the vaccine and covid test makers all have had to repeatedly submit and re-evaluate the performance of their products. Even the efficacy of air cleaners are proven – but not masks and they have been the single most implemented covid management policy.
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The majority of passengers on US airlines from both Asia and Latin America are not Americans; that isn’t news about American but about all airlines that serve those markets.
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Radio,
your personal data might not reflect it but there is solid data on the performance of airlines and, as much as you want to believe otherwise, all airlines are not the same and there is a significant difference in service between American and Delta. The DOT publishes monthly data dumps on airline performance and AAL and UAL are usually much more alike than either are to DAL which consistently is at the top of the industry not just among the big 3 but among all US airlines. YMMV
Flew 13 hours from Hong Kong to LA with a mask on the whole time. No issues whatsoever. It’s actually good to hear that some companies are grounding their sales force from traveling for whatever reason. That just means cheaper airfare for the rest of us who are willing to travel.
Coming from UA, I never understood why AA had such inflexible stand by policies with a network of its size. If you’re on the road alot that flexibility is a huge benefit. It certainly didn’t endear me to AA.
I dont want to wear a mask on a flight for 14 hours, but I also understand why there is a mandate. People can’t seem to rectify different and sometimes opposing perspectives. Sad.
They haven’t shown ability to even know who there customer is let alone what they want.
I am a different customer to them if I fly business or leisure, up front or in back, with family or not. But I am always me.
“Raja’s own historical remarks have suggested this means offering a convenient route network, rather than a comfortable product. ”
I’ll never understand this approach. It would make sense if people chose an airline for all (or most of their flights) instead of choosing an airline each time they travel.
If people chose an airline each time they travel, then an airline that only flies to your current destination is just as viable for that particular trip as an airline that also flies to 180 other destinations you are not travelling to that day.
So it seems to me that the approach “we have the most flights to the most destinations” only really works to win over a particular traveler on a particular day to the extent that you also give that traveler a benefit from being a frequent flyer on your airline, on all or most of their flights all year. (Or if you make the seat and service so good, travelers who are used to your airline will be wary of choosing another anytime they fly, but this is the approach that AA is explicitly rejecting).
And that’s the rub. AA and other airlines have weakened their frequent flyer programs so much that it rarely makes sense to prefer a particular airline for today’s travel over any other one that happens to be flying to your destination that day, even if the other airline only has one or ten or twenty routes in total.
Anyone else have a different view on this topic?
People just blindly believe things and nothing can shake them from their beliefs.
1) Masks are ineffective in preventing the transmission of this illness. They are also uncomfortable, overheat individuals and definitely dissuade people from taking long flights.
2) Hospital beds are a function of nursing staff levels. We have 73% of adults and over 90% of those over 65 vaccinated. We never had a lull in the virus. How are hospitals running out of room with these vaccination rates and the fact that Delta is more transmittable, but not more deadly? Common sense people.
All of this screams of American’s arrogance that because they’re bigger, people will fly them anyway.
That stifles creativity and focusing on the customer.
It’s not a given that the industry and industry players will always follow the leader. Jetblue for example chose to lead with Mint and has done so for over half a decade while lowering prices and arguing spending more on the product.
Even United has innovated with their Polaris seat – not because it’s the best ever business class seat, but because they created a product that was comfortable enough, and yet delivered on density. The product also looks pretty good.
What’s American’s innovation? Oh wait, Oasis.
Give me a mask if I’m in coach with two other people breathing within a foot of my face until COVID is neutralized as well as domestic F and international PE. More comforting would be a federal mandate to board only fully vaccinated passengers. J/F pods are isolated enough for mask removal for short periods but also should retain masking.
It is strange that some commenting here seem personally offended that someone would avoid travel because they dont want to wear a mask. Are we supposed to enjoy wearing masks and travel out out of a sense of duty? Isnt it a personal choice to travel or not? Very strange to get offended that someone doesnt want to wear a mask all day.
There are lots of people of all political and ethnic persuasions that arent comfortable for long periods wearing a mask. Whether you like it or not, travel wont fully recover until all the mandatory measures are gone. Well, until Democrats mandate everyone to travel lol.
Unbelievable. I am stunned by Gary’s position on against mask mandate. You have a little daughter who is not qualified to get vaccinated yet and probably is not old enough to put a mask on. I do too. Aren’t you worried about flying with her with people surrounding her not wearing masks? These young children have no other choice and they are vulnerable. I know I would not want my son to be on a flight full of people who are not masked right now. Gary can argue that death rate from COVID among children is extremely low. But there is still not enough research on how are kids affected by long COVID.
There are many researches already done and proved wearing masks correctly will protect both yourself and others. People who choose not to believe it would just ignore it.
doublejade,
there simply are no studies that show that masks of any kind work in a real-world environment by the general public including by a percentage of people that don’t and won’t wear them correctly.
If you are holding onto hope that you or someone you love will be protected by a mask, you are clinging to hope and not proven science.
The vaccines and covid tests have been scientifically tested and the manufacturers can prove the efficacy of them.
Masks as worn by the public have never been proven to be effective and there has never provided a quantitative benefit. There are accurate studies regarding the reduction of particles because of air filtration systems but no one can manage to quantify the value of masks.
We live in the 21st century, not the stone age or the Middle Ages. If masks work to stop the transmission of covid, there should be data to prove exactly how well – not statements like “might reduce” or “in combination with…” or “models suggest”
Why are people flying if they are worried about catching covid?
“An airline like American will always have higher cost than many competitors”
Why is this the case?
FF
American has tens of thousands more employees than Delta or United which generate similar amounts of revenue and have similar networks.
There are some that will try to argue about the amount of outsourcing that AA does vs. other airlines but that doesn’t hold water. Airlines report their outsourced expenses to the DOT and the larger size of AA’s mainline work force is not justified by the data it sends to the DOT.
The real reason for AA’s much larger workforce is because Doug Parker sought the support of American’s labor unions to win AA over in the USAirways initiated merger while AMR (former parent of American) was in bankruptcy.
As the last airline to merge and after the closure of multiple hubs by other airlines as a result of mergers, lawmakers weren’t interested in seeing any more hub closures. Parker has never been willing to take on the labor inefficiencies at AA – until covid when they focused on headquarters staff and then high profile moves with “weaker” labor groups like reducing the number of gate agents (covered on this site).
Being the highest cost provider results in an inability to compete with lower cost competitors – which is why Delta has continued to grow its share at LaGuardia, JFK and LAX – all airports where AA and DL both have hubs. You are also seeing Southwest’s growth in American and United hubs and you see a plethora of low cost carriers aggressively growing at Miami.
American has stated that 1/3 of its longhaul international fleet pre-covid was not profitable for even half of the year which means they cannot be as large as Delta or United in global markets.
AA has failed to address its cost problem during Parker’s entire tenure as their CEO. It is unlikely they will fix the problem now as the growth of low cost carriers accelerates in American’s hubs (as well as United’s). The difference between the two is that United is not walking away from its hubs while American is outsourcing flying in both the NE and on the west coast to domestic low cost carriers.
Have to laugh at the guy who says the business travel at his company has lowered solely because of mask mandates. Considering he mentioned transpacific flights, incredible how his company isn’t affected by having to quarantine at the destination or the fact that many countries aren’t allowing nonessential travel at all…
Bookings are slowing down as Covid numbers rise, plus school just started. Airplanes were full all summer long, allowing the airlines to charge astronomical prices. I am not sure that I see how masks are hurting the airlines. I’d still like to quiz one of them on the alcohol ban in coach. It is ok to serve it on a 10-hour international flight (a flight that gives people plenty of time to get drunk and act up) but not ok to serve to someone on a short 2-hour flight – oh, unless they are in business or first, those people don’t get drunk and show their butts, right?
@briguyx – We have physical operations in the Asian countries that we travel to, and close to 70% of the travel to Asia is for national government contracts (making the travel “essential”). In most cases, though not all, this exempts the traveler from quarantine rules. Our problem right now is getting people to agree to travel, and yes – the mask mandate is the number one most common objection according to the director of corporate travel.
To be sure, this was not something that our company has bragged about or even willingly disclosed. For the better part of a year, we were told that few people were traveling due to “safety concerns”. It was only after the head of HR sent an anonymous survey to all staff with corporate travel cards that the truth came out. The number one reason people were not traveling was masks. Covid risk was actually number four on the list of reasons, behind poor airport experience and fear of cancellation/inability to return as planned. I believe we have about 1,800 people with corporate travel credit cards but it could be more – we are always buying new companies.
For what it’s worth, we have a 60%+ vaxx rate company-wide (closer to 90% in the US…our Australia staff is the most heavily un-vaxxed, dragging the average down). To put it mildly, these are not anti-vaxx, anti-government zealots we are talking about here. This is the low-key professional class that isn’t going to make a fuss for YouTube but is instead going to quietly sit things out until this nonsense goes away – and it WILL go away, sooner or later. It’s our (and our partners, vendors, competitors, etc.) dollars that actually pay the bills for the mainlines. With the bailout spigot now closed for good due to the midterm elections, the mainlines can’t sustain current operations with leisure travel only, at least not at the current fares. And with the stimulus cash and extra UA money cut off next month, it’s unlikely that most leisure routes can absorb a 30-50% fare increase increase to cover the shortfall and still sell. This is the predicament that the airlines and indeed the larger travel sector are in right now: how to operate profitably with such a huge reduction in business travel AND without subsidies like bailout and stimulus cash.
If you take the politics out of this (which is admittedly hard to do), it’s actually quite simple: “business” – the corporate, officey kind that sustains city tax bases and T&E profit margins – won’t meaningfully return until mask mandates go away. This may be a bitter pill for some to swallow but it’s the truth and the proof is everywhere you care to look. This means that most corporate workers won’t be in offices and they won’t be on planes, traveling across the country, and staying in hotels while mandates are in place. You may think it’s silly or selfish or stupid, but it’s the undeniable truth. People from across the political spectrum understand this and all the but craziest are pushing back against calls to order re-masking (look at NY/NYC and Florida as prime examples – both refuse to implement new mask mandates). The airlines probably understand this more than anyone. They had all made plans for a mask-optional return to business travel by 21/Q4, and nobody really had a Plan B. They know that they’ll be in seriously big trouble if this continues past 22/Q1.
Since May I have taken 5 domestic flights (including one transcontinental) and 1 international trip to Tanzania on QR J. Flights are fairly full (QR J was full in each of my 4 segments!) and people are wearing masks. AA is just a badly run airline.
@_ar
Your flights were mostly full because QR cut about 40% of its schedule from Feb 20. Full-fare J flights are less than 30% of normal, and they lost $2B USD through 20/Q3. They are on track for another $3B loss in 2021.
@Steve I think that is interesting (the data from the anonymous company survey). I wonder if COVID was not as much of an issue (#4 versus #1 masks) since the people in your company have such a high VAX rate? So their concern personally about travel is not about getting sick, since the vaccines will help keep that to a minimum, but their own comfort? I am trying to get an idea of the underlying reasoning behind it. The cause/effect you state may not be what the survey is demonstrating.
I’d also question the idea that a company cares so much about its employees comfort (do they fly everyone in business class? and on the best routes/not cheapest?) that they would stop what is best for business (overseas visits) solely based on the fact people in the company don’t want to wear masks on a plane (and again, you can take the mask off when eating or drinking so, logically, pretty often on a long-haul flight).
Of course it’s nicer to travel without a mask and with no worry about spreading a virus or getting trapped in your destination (if you even test positive and get quarantined). But the reality is, the virus is still rampant, not enough people overall have been vaccinated, and its astronomically worse in most countries in the world (the vaccination rate). So, alas, I think this difficulty traveling will be around for awhile. I miss my work travel to all over the world. If I could, I would hop on a plane tomorrow and happily wear a mask to get to see the people I work with in person even if it meant 14+ hours in a mask. My work is much better and easier in person.
And as a side note, I agree that business travelers who buy expensive business class tickets (like me and you) are the thing that keep airlines afloat, and therefore what they need to cater to in their loyalty programs, planning, etc. That’s why the sooner we get more countries vaccinated and the virus under control the sooner things will return to business as normal- including mask optional flights. So, in my opinion, that is where we need to focus attention, getting the world vaccinated so more businesses feel it is safe to send people overseas.