American Airlines has the best business class seat, overall and on average, of any US airline. Delta’s suite with doors is confining and they fly too many Boeing 767s with narrow seats. United doesn’t have enough planes with Polaris business class seats yet, and those seats aren’t as good as American’s or Delta’s new product. Yet American doesn’t get credit for this. They’ve also done a lot of get high speed internet spread out across their domestic fleet.
In contrast Emirates has a fairly poor business class, with angled seats still across most of their Boeing 777 fleet, and they have more Boeing 777s than Airbus A380s. Business class on the A380 isn’t a great seat, though it is flat with direct aisle access. Yet the airline enjoys a top notch reputation, in part because of a first class that creates a halo effect over the brand (the A380 first class cabin is dense, but has showers) and in part because of strict service standards.
American’s CEO Doug Parker thinks Emirates offers showers because they’re subsidized, but Emirates has earned more money from actually flying planes than American has over the last several years and Emirates gives business class passengers less than American does. Yet Emirates has the better reputation.
The challenge American faces is that it suffers from a reverse halo effect and lack of service standards.
- Coach has gotten worse. Most passengers experience the airline in coach. Eliminating seat back video screens from the domestic standard product, pushing less padded seats closer together, has created a poor reputation for the airline. How can their business class be good?
- Employees are unhappy, though relatively little is asked of flight attendants inflight. The operation suffers too from unhappy mechanics who seem to be slowing down the airline. American needs to put contracts to bed but that alone doesn’t come close to solving the problem. And their number one service priority is ensuring flight attendants don’t have more work to do yet have reduced staffing on many international flights.
Great employees need to feel they’re fairly compensated but that’s just table stakes. When fellow employees shirk responsibilities without consequence that creates a toxic environment, in which there’s little point in investing substantial effort in the job. Employees need to like and respect their colleagues. They also need to feel like they are on a mission that’s greater than themselves and more than a paycheck. The airline though lacks a mission statement and their product sends mixed messages to employees about whether they are supposed to be offering a premium product or a low cost carrier product.
Customers used to put up with a lot from the airline because they were valued as loyal customers. The AAdvantage program was the differentiator for the airline. The program was great for award travel, great for upgrades, and rewarding across the board. That changed three years ago. American voluntarily surrendered their competitive advantage, and isn’t going to take it back.
Former airline executives Scott Kirby and Andrew Nocella overruled the AAdvantage team and decided to follow Delta’s and United’s leads directly in instituting a near-exact copy of revenue-based mileage earning. Customers earn fewer miles from flying, so the reward component doesn’t provide much reason to fly. And award availability vanished under US Airways management.
American and other airlines sell more premium seats than before, making upgrades tougher, though domestically American’s first class product has gotten worse — less legroom, less comfortable seats, worse food — making it also less worth paying for.
I’ve described American Airlines as having “greater potential to be better than it is today than any other US airline.” I think that’s correct.
Here’s how I’d approach ‘making American Airlines great again’:
- Compete in major markets. American has largely abandoned New York and isn’t a major player in the Bay Area (where even Delta is building a focus city in San Jose). They don’t have as many takeoff and landing slots in the New York region as Delta – US Airways management sold much of their New York LaGuardia operation to Delta – but they don’t even use what they have effectively, squatting on slot with flights like New York JFK – Baltimore. (This summer New York JFK has been undergoing runway work, and waived some slot usage requirements, so American reduced their schedule — while neither Delta nor JetBlue did the same.)
Though it’s the largest and most premium aviation market in the country it’s also highly competitive, and tough to earn a profit flying. American’s approach has been to back off of competing, but that’s meant that the airline offers fewer flights for New Yorkers — fewer flights on which to pitch credit cards, fewer flights that are attractive for award redemption and encourage credit card spend.
American loses money flying overall, and earns their profit entirely by selling miles to banks so it makes no sense to cut themselves off from the most lucrative credit card markets in the country. They need to maximize their New York presence and build up their presence in the Bay Area to take advantage of credit card revenue opportunities.
American Airlines Terminal 8 New York JFK
- Bring back a premium domestic product. The best domestic premium product in the U.S., outside of markets with lie flat seats, has been Virgin America’s recliners with leg rests. Those are going away. Neither Delta nor United offer anything special up front. American’s standard was 40 inches between first class seats on their Boeing 737s. The new ‘Oasis’ standard reduces that to 36 inches, takes away underseat storage (despite not needing the space for seat back entertainment systems), and offers less padding.
A premium product should feel premium. On Virgin America you could easily get up from the window seat without disturbing the person in the aisle. Restore some of the first class legroom and consider foot rests. Bring in people who pay attention to the details in meal service, vary the meals more often than rotating them once a quarter and sticking with the same food for a year, pay attention to presentation.
Part of the premium domestic product is more than first class, it’s extra legroom coach too. American’s Oasis configuration squeezes legroom there too. The airline needs more Main Cabin Extra seats and those seats should have 34 inches of pitch.
American Airlines Oasis Domestic First Class
- Add cheap seat back screens. American says 95% of customers bring their own devices, and that may be true if you count cell phones. Many families don’t have one tablet per person, either. Too many aircraft still lack power – and will for the next couple of years – to charge phones. And customers are rarely told they have to download the airline’s app to view streaming entertainment.
A seat back screen makes an older aircraft look new. Customers like and use seat back entertainment (I do not). It used to cost $1 million per plane to install, but streaming to tablets installed in seat backs cuts that by two-thirds. This alone will go a long way to changing perception of the airline.
Customers Think Lack of Seat Back Screens Mean Planes are Old, Product is Cheap
- Offer award space on their own flights. I often see premium cross country New York JFK – Los Angeles or San Francisco flights with mostly empty cabins in first class, a cabin that’s become a nonrev travel perk. Yet they don’t release seats. There are almost never business class saver awards to Europe or Asia on American Airlines flights including flights that ultimately accommodate employee travel in premium cabins.
American’s joint venture partner British Airways offers a minimum number of first and business class award seats on their flights when loading schedules, and their parent company is the most profitable airline group in Europe. American should keep award charts, and offer saver award space on flights where they don’t expect to sell all of their premium seats. That’s not ‘giving away the seats’ — on the contrary the airline’s entire profit comes from selling miles to banks, so customers need to stay motivated to earn those miles or the whole game collapses.
- Develop a customer-focused mission statement and use it in decision-making and employee communications. Make clear that the focus of airline decisions should be on adding value to the customer in order to earn loyalty and a revenue premium.
Too often the airline seems to care more about its operation than customers (indeed, passengers almost feel like ‘the thing that gets in the way of running the airline). Departing on time is important – not as important as arriving on time – but the airline needs to get the little things right in order to make it possible. Ensure gates are sufficiently staffed so upgrades and standbys are processed on time, ensure flights are catered. Don’t just yell at employees to push planes back exactly on time no matter what, whether everything has been done or is in place.
And communicate clearly with customers. Update delays as early as possible, board when you say you are going to and update expectations so that customers can remain productive in the club they’re paying to access instead of hovering around a gate with no aircraft.
For Halloween CEO Doug Parker was Boy George lip syncing Karma Chameleon with a giant chameleon running around in the background (he says ‘this is how we’re making culture a competitive advantage’)
- Shed the bottom 1% of their workforce the way that unionized Southwest does. The huge dispute with their mechanics is actually a great opportunity. The Transportation Workers Union acknowledges to me that they have shirkers among their members. The TWU and IAM do not want changes to ‘scope’ – the ability for American to outsource jobs as current members retire. Scope changes aren’t necessary if the airline can reduce the cost of in-sourced labor, or get greater productivity for the price.
Delta makes a profit on its maintenance operation. With greater work rule efficiencies, American can market their maintenance services to other airlines. They can maintain a more reliable operation without increasing head count. But that only works with work rules and a willingness to shed unproductive staff and rewarding greater productivity.
- Improve the operation keep crews with planes, so that when an aircraft is delayed that doesn’t cascade into delaying more than one downline flight. Increase block times — that’s expensive in the short run, but right now American just needs to stop the spinning. Focus on getting each step along the process right so that planes are able to push back on time and that there’s a gate and staff to meet each aircraft so it arrives on time, too. In other words, D0 isn’t the only metric that matters (Delta by the way focuses on A0).
Right now high revenue customers prefer the product that Delta offers, despite the airline’s deficiencies. Customers are willing to spend more to fly Delta, and American has a premium problem. Offering a clear mandate to employees to focus on customers, providing a quality reliable product, and focusing on customer loyalty could change that.
None of these steps are outside of American’s reach. None of them are unprecedented. Improve American’s operation, improve the domestic premium product, offer reasonable award availability to sustain the driver of the airline’s profitability and the carrier could be not just the largest in the U.S. but also the best.