In an employee question and answer session with pilots, posted to the American Airlines intranet on Monday, CEO Doug Parker laid out an overview of his airline and the industry.
He began explaining that American Airlines revenue was down 85% in the second quarter of 2020 (rounded to nearest 5%). He offers that “in good years” American makes ~ 10% margins (though he neglects to note that most of that comes from their credit card deals, rather not flying). And he projects:
- For the 3rd quarter, which they are about to announce, revenue will be down ~ 75% (rounded)
- The 4th quarter will be down ~ 65%, with capacity still down more than 50%
American may fly more and still not earn as much money because they’re doing lower revenue flying. With a bit of a chuckle, Parker offers that today’s passengers are “somewhat different from our normal clientele.” Then he backtracks a bit, “we love all our customers of course!”
Today’s airline customers, though, aren’t business travelers. They are “leisure customers traveling to leisure destinations.” I’ve made this same point several times a bit more bluntly: that all airline passengers are Spirit Airlines passengers now.
The airline previously shared that fewer passengers than normal are even members of the AAdvantage frequent flyer program, that business travel has recovered perhaps to just 15% of last year’s levels, and that most customers are buying the cheapest tickets available (and fares are down). As a result American does better on traffic than on revenue.
However he thinks that if American can get “back to 85% of 2019,” then they’ll “be wanting to fly all of our airplanes.” At that point they’ll at least cover the marginal cost of flying for the aircraft that remain in American’s fleet.
And he sees American making a profit at lower revenue in the past, having “become a lot more efficient,” and on this score he cites “30% less management” after layoffs.
Ultimately he believes “this is going to pass, it’s going to be a slow recovery, it’s going to be a difficult recovery but we’re well-prepared for it… it’s entirely demand driven, our company isn’t broken.” Notably then he believes they’re well prepared, and that the crisis will pass, even without the additional bailout he’s lobbied so hard for in Washington.
I feel like the pandemic is a convenient excuse for Parker. It’s never a good idea to extrapolate one’s personal experience to the world at large but I feel like I’m either in the “usual clientelle” group or at least on its margins. I do a fair amount of regional business flying where I’m not unduly cost conscious and I sometimes book late. Not a ton, but enough to typically be gold or platinum.
In the last couple of years, American has lost all of its advantages with me and I’ve found little reason not to fly Southwest. I feel as though American already was become a leisure airline.
Parker has never let a good national emergency go to waste ! I think any airline returning to 85% per virus is a dream come true as my opinion is that airlines will see across the board a 15/20% drop in overall decrease in schedules. People just are not going to travel worldwide as they did before the Corona Virus outbreak. Business travel certainly will be off more than 15/20% the same goes for leisure.
He’s such an arrogant jerk.
The current clientele For AA right now is the usual Spirit crowd. Which means fights and obnoxious behavior are up. Apparently Vegas has more fights per capita on the weekends now because hotels are being priced to low.
I have 2 friends who are AA flight attendants. They confirmed that the passengers on their flights are typically a different profile than 8 months ago.
awwww.. poor airlines… cant milk OPM flyers anymore….
Entire business model in the s*itter
@ Gary — Airlines should have cut all of these management jobs long ago. If I were running the show, it would be a tight ship! Senior management owes this to the company’s shareholders.
Quote:
“American Airlines CEO: Today’s Passengers Are “Somewhat Different From Our Normal Clientele”
I’ll just comment on the CEO’s statement.
I’ve been flying since the late 1950s, and I’ll say, “He’s damn right.”
85% isn’t happening soon. Maybe in 2023, but I expect business travel will only rise back to 70-75% even in the long-term. To reach 85%, AA will need to attract more Spirit Airlines customers. Good luck on making much profit.
He’s profiling. That’s illegal at Bushwood
No kidding today’s passengers are different…. They aren’t even Spirit passengers, they’re worse. They’ve never been on a plane before and now they’re snapping up super saver flights in the middle of pandemic, when nobody should be traveling. I want the airlines (and everything else) to come back too, but they won’t until we get the virus in check and our international routes open back up. Shame on American and United for not hard blocking their seats, running sales, and flying completely full aircraft. That’s not how we get out of this!
So, the “non-traditional” passengers are helping to keep the Airlines; and the Airline CEO’s are basically calling then shit passengers…
Parker is a pompous ass. He is however willing to add the “ different “ passenger’s dollars to the bottom line. He should realize, people may be flying American, because it is the only airline flying where you want to go, not because they are any better than the rest.
Not sure what numbers he is looking at as the flights we were on this past week were a filled. No social distancing at all and no respect!!! Will never fly any airlines that do not follow the CDC requirements of ensuring there is a seat in between passengers that are not flying together. DISCUSSED!!!
One round trip cross country trip for work in June, another next week. No, I’m not flying business class as I pay for my own tickets. From what I’ve seen, passengers are better now overall than they were last year. No, air travel isn’t as nice as it was in the 1960’s, but that’s the airlines fault as much as anyone’s. Pack us in like cattle then fly us 2000 miles off course in 27 hrs instead of the 9 hours the flight should take and you can’t blame customers for being annoyed.
I am a business flyer. I have flown all through the pandemic. I am not any different than I was 8 months ago. There are no empty seats on today’s flights. Almost no non-stop flights anymore. A cracker and a bottle of water which seems to get smaller every week. COVID changes things. Now booking more last minutes flights and AA seems to be gouging more than ever. 1 pound over on your bag and they a re wanting to up charging. The crews are great under difficult conditions… CEO is out of touch!
American Airlines is generally my very last choice when it comes to air travel. Mr. Pompous Parker is one of the biggest reasons for that statement. I prefer to be treated as a valued Customer, which has never been the case on American. But reading the comments by Mr. Parker, it is apparent why that is the case.
I have not stopped flying for work even in the heart of the pandemic when basically all airports were ghost towns and food deserts. If anything I would say most of the travel that they have is business. The problem is that businesses are tightening the belt so they are buying cheaper airfare.
I’ve had over 30 flights so far this year. The peace and quiet on flights these days is unbelievable. Yeah, the clientele is different, but the environment is sooooo much nicer. Calm, relaxed, tranquil. I’m almost willing to forego beverage service to keep it like this.
In reality, in the past the airline is as much to blame for the crappy inflight experience. Endless credit card spiels, hard sell beverage carts up and down a narrow aisle, reduced legroom on crowded planes: all in the past thankfully. It shows that people react negatively to all those airline “enhancements” whether they are Spirit like fliers or AA platinum.
But I suppose that’s what you get with buttheads in charge and even worse analysis by the travel blogosphere.
Even with a small profit and a smaller airline they still have a BIG debt problem that will need to be addressed. That was just giving his employees false hope for the future. Typical corporate spin to keep the employees moral up. The reality is the employees are just a bunch of mushrooms, kept in the dark and fed shit. AA is cleared to fly direct bankruptcy. Until it happens he’ll keep his mushrooms well fed.
Delta’s passenger revenue yield (how much someone is willing to pay to fly a mile) in 3Q is down 2% from last year.
Anyone’s willing to bet what AA’s going to be?
Rescind the furloughed employees now!!! They need their medical coverage not COBRA! Furloughed without pay is equivalent to starvation. Bring back American Airlines furloughed employees now!! #DougParker
Flyers are who pays your salary . Idiot.
Service is definitely failing onboard AA. I flew first class yesterday and knew I wouldn’t be offered any of the usual amenities, and that I would have to ask for any service at all, but when I did… which was simply to hang my jacket (yes, I was a business traveler) it was clearly an imposition to the Flight ‘Attendant’. As we deplaned, she was buried in the galley on her cell phone and grunted some sort of farewell.
It’s likely to be a self fulfilling prophecy for the airlines that give up on service.
I have frequently flown more in the pandemic than I have in the past 5 years and normally through AA but after reading this he’s definately driven away my business. As a business owner myself, this is a poor expression of his financial status. Whelp guess I’ll go book my next two flights for next month through southwest of better yet SPIRIT!!!!