American Airlines has long had a significant technology deficit. For instance, when they began adding seats to planes and that caused them to board most domestic aircraft 5 minutes earlier, it took a long time before they updated boarding passes to reflect when flights were actually boarding. Word from their IT shop was that they couldn’t get the resources approved to make the updates.
The airline mishandles more bags than any other U.S. carrier – often 50% more likely to mishandle bags than the next-worst airline – yet they’re unwilling to follow Delta’s lead investing in RFID tracking to improve. CEO Robert Isom explained that they don’t have consistent technology across their hubs and upgrading would be too hard and costly.
We just have to realize as well we operate the world’s largest airline, hubs at every different level of technology, so any time we say we want to do something we have to say can it apply everywhere? Otherwise it really is just a test.
In July 2022, a scheduling platform glitch let pilots drop thousands of assigned trips, suddenly leaving 12,000 flights unstaffed for the month. A pilot union spokesperson blamed AA management for “fail[ing] to keep the IT system running properly.” Also that month, the airline suffered a data breach when hackers accessed employee Microsoft 365 accounts via phishing, compromising personal data of at least 1,700 customers and staff, showing the security need for heightened IT investment.
They are supposed to introduce a new app soon. The current one lags United’s (the world’s best, by far) and Delta’s and still pushes customers onto mobile web for many transactions.
I’ve hoped to see significant technology investment to support their planned premium pivot.
American Airlines Will Move 20% – 30% Of Its IT Operation To India
I’ve confirmed that American Airlines is moving 20% – 30% of its IT operation to Hyderabad, India. There’s been some exaggeration online, claiming that ‘all’ of IT is moving. And I haven’t been able to substantiate that it reaches fully one-third or 40%, but it is clearly significant.
Kumar Exclusive was first to report the specifics of American Airlines IT outsourcing plans.
CORRECTION: pic.twitter.com/m5Gr9IAbId
— Kumar Exclusive (@KumarExclusive) March 4, 2025
UPDATE:https://t.co/EC9nbjKGqL pic.twitter.com/IBpzZz77fT
— Kumar Exclusive (@KumarExclusive) March 4, 2025
Aviation watchdog JonNYC, though, pointed to signs of this back in August of last year.
Someone sends: pic.twitter.com/vDXpaOdIEv
— JonNYC (@xJonNYC) August 7, 2024
American Says They’re Committed To IT Investment
American Airlines shares that they’re largely insourcing work from vendors and that their Hyderabad operation will be employees of a subsidiary of American Airlines Group. They continue to be “committed to investing in technology” and suggest they don’t see this primarily as about lower costs.
“American Airlines has 150,000 team members, 97% of whom are based in the U.S. We are a global business, though. American operates in more than 60 countries around the world, and for years, we have had team members and contractors across the globe to provide 24/7 support for our customers and operation.
We continually evaluate our vendor relationships, and we have recently decided to terminate our relationship with some underperforming vendors and bring several third-party IT contracts in house. Some of that newly insourced work will be performed around the world to more efficiently and effectively meet the needs of our airline around the clock.
American has increased its IT spending and its U.S. IT headcount every year since 2021 and we remain committed to investing in technology to support our customers and operation.
Hiring in Hyderabad began in late 2024, with American initially sending some U.S. staff to establish the office, and then recruiting local IT professionals which are available at a fraction of U.S. labor costs. American’s Chief Digital and Information Officer Ganesh Jayaram has touted the Hyderabad hub as a way to “strengthen American Airlines’ IT capabilities” and keep the company “ahead of the curve” technologically. The hub’s location also places American closer to key outsourcing partners and IT vendors in the region, as well spreading operations across time zones (which has both benefits and coordination challenges).
The IT efforts are part of American’s broader “re-engineering the business” efforts which have largely been talked about in terms of lower costs (‘not spending a dollar more than they need to‘).
Will This Mean Cost Cuts Or Better IT?
It’s possible to outsource and improve IT performance. With the right partners (rather than just cost savings as the aim), finding IT talent in India can mean buying more IT than you could in the states based on available talent and with the lower cost you can afford more of it. This comes after outsourcing call center jobs, though, where the goal was cost savings.
- If they’re dropping expensive, unproductive vendors
- And moving roles to where they’re less expensive
- Even an increase in IT staff should be less expensive
- Moving several hundred IT roles to Hyderabad, if each costs $50,000 less, would save tens of millions saved annually.
If they can do this without loss in quality they should do that! And they should plow the savings back into addressing their technology deficit and product deficit.
On the other hand, it’s clear from social media chatter and from some IT staff I’ve heard from that there’s trepidation over the moves, and if key IT talent leaves due to the morale issue the airline could hollow out its knowledge base.
Transitioning to new employees also entails potential loss of significant knowledge meaning it could take longer to diagnose and fix problems, risking hits to reliability.
Delta, United And British Airways Are Among Global Airlines That Outsource IT
Such moves are not uncommon. United Airlines established its India Knowledge Center in 2015. It’s located about 20 miles from the Delhi airport and with an office in Bengaluru. United’s IT is broadly improved over the past decade.
On the other hand, outsourced IT is one of the things Delta was criticized for when its operations melted down over the summer following the CrowdStrike outage.
American’s joint venture partner British Airways suffered a series of IT meltdowns after aggressively outsourcing its tech operations. In 2016, BA’s parent company IAG eliminated hundreds of UK IT jobs and outsourced the work to contractors (including Tata Consultancy Services in India and a data center operator) in a bid to cut costs.
Then on May 27, 2017, British Airways’ entire worldwide IT system crashed, grounding the airline’s flights for days. BA had to cancel 472 flights in London over one weekend, stranding 75,000 passengers. Bookings, flight check-in, call centers and the mobile app all shut down. This overwhelmed savings earned from the outsourcing effort. While the airline’s CEO blamed a power surge, the airline later sued the outsourcing firm managing its data center.
In August 2019, BA was hit by another major IT systems failure which forced the cancellation and delay of hundreds of flights, as well as a massive data breach in 2018 with investigators citing “outsourcing, a profusion of overlapping IT systems, and legacy infrastructure” as factors that left BA vulnerable. More recently, British Airways IT systems melted down in November. The airline claims problems were fixed faster because they’d learned their lesson and increased IT spend. Although their systems again went down in December.
American’s Move To Offshore IT To Hyderabad Entails Risk And Reward
Ultimately, it’s likely that American Airlines will realize some immediate cost savings from outsourcing 20% – 30% of its IT operation to India. I’d guess this should improve its financials in the eight figure range annually, at least.
However the test will come over the next several years – if they can avoid major IT incidents while improving their technology, it will have been the right move. However, the change brings significant failure risk because of the transition in knowledge, responsibility, and oversight and comes down to how much is actually invested and how well-executed this is.
Let’s just skip ahead: Offshore, then automate, everything. Once the robotics catch up, there won’t be much a need for trades people and even nurses. Soon enough, there won’t be jobs left for anyone. Just the super-rich on their mega-yachts and in their bunkers. We’re going to need a lot of ‘wars’ to give us something to do with all this ‘free’ time–until ‘we’ll meet again…’
British Airways did this and it led to the worst IT outages in airline history.
But God, was it cheap!
@L3 — So true! Won’t anyone think of the majority shareholders!! *clutches pearls*
“CrowdStrike has entered the chat.”
Smart move. Most of my career I negotiated, implemented and managed IT outsourcing agreements which included off shore services. The first agreement I was involved with was the EDS-System One (Continental and Eastern Airlines) agreement in 1990.
It is all about the service levels negotiated, penalties for poor performance and diligent oversight. Most F500 companies now outsource some of their IT. BTW my experience with Indian support is that it is high quality with focused and dedicated employees at a price point well below US workers.
I’m a CEO. I have worked with India IT for decades. It’s crap. I have 10,000 stories. You save money but it’s horrible to manage and deal. Bad move.
@AC — ‘1990,’ you say? I happen to like that year. Anyway, thank you for your services as a mercenary selling out US workers so that the executives and shareholders could profit further at the expense of customer satisfaction and our overall domestic decline. But, hey, at least for a few decades, the quality of life in India has improved–for some. Woop.
@Mike — Anyone can be a ‘CEO’ in-name. Alas, I agree with your sentiment. Bad move, but it’s happening anyway. Then all to be automated. India and Indians will lose on this in the end, too.
Donald Trump on line one, sir….
Bad move. AEP did this and what a mess. Come on Mr. President, let’s put penalties on companies that do this. If you have loose staff then you have poor management. Replace upper management to save money.
Maybe AA the folks in India can help fix the antiquated booking system. Having to manually enter the names, birthdates and frequent flier numbers of my family of 6 each time I make a new booking means that when the fare and routing is the same I often choose United or Delta just because the booking process is so much easier. At a minimum when I enter their frequent flier numbers it should then autopopulate the rest of the info. Somehow the site used to do this but doesn’t any more (for me at least).
cheapoair is based there as well
On the other hand, I worked for consulting shops back in the day that did very brisk business fixing IT messes after the offshore contractors were thrown out…
Penny wise, pound foolish.
They are just starting to understand that have fallen so far behind in so many areas and the farther they fall, the harder it is fix…
This is not going to create the ‘instant fix” that they are hoping for.. Changing IT is going to cost far more than they expect and take a lot longer to get results especially since once current core IT pros see the handwriting on the wall and start to leave the company.
The only thing that happens quickly and is very (if not impossible) to reverse is losing customers to better competitors which they seem to be doing a very good job at.
I have seen this many times before. The “on-paper” salaries look great and give the appearance of huge labor savings. More people are eventually hired to compensate for knowledge and productivity losses, eventually consultants are brought in to fill other labor gaps and pretty soon the overall cost is higher than when you started. The executives who made the decision have already received their bonuses and it becomes someone else’s problem.
So much for Don the Con’s protestations about maga and, keeping jobs in America?!!!
I’m surprised they didn’t do this decades ago like most major corporations did. While it does have its challenges, it greatly reduces IT labor costs which makes shareholders happy.
I think the line about AA refusing to approve budget to update boarding passes is kind of the entire story in a nutshell.
This is about savings, and it won’t end well.
Moving IT jobs to India ya say? This is going to stink and when it inevitably glitches out and melts down, a lot of people are going to get a good whiff of the stench.
My prediction is any future growth of the dept will likely be in India. That destroys career opportunities for existing US employees except a few near the top who end up overseeing more people. Those without opportunity leave and there’s a snowball of lost expertise. That’s exactly what happened to my company — it was “only” 20% or whatever
“American Airlines has long had a significant technology deficit.” says @Gary in a mastery of understatement :-).
If this is just IT work that is being outsourced, then it *MAY* work, as long as there is no customer contact. I’m sorry, but most folk struggle when talking to an Indian on the ‘phone. I successfully outsourced customer facing and accounting functions to the Philippines. When you spoke to our employees you knew they weren’t American, but they had great attitudes and the voices weren’t heavily accented.
Based on the observation that the existing IT department, is, at best, lacklustre, I think the fair thing is to give it a go and see if it works. But I would want a plan for a swift and effective pullback were the implementation to go off the rails.
I’ve worked with Indian IT and as one poster said it often crap. Number one is the time difference. In most cases these IT people are required to be available at any hour. Ever try to explain something complex to a tired person at 2AM their time? There’s also language issues in which confusion happens. Also, if these people are working for home they’re often holding down two jobs to make ends meet.
Offshoring for very technical stuff like building Integrations might make sense but customer facing software, never.
Sometimes it pays off to move operations to a lower cost region. Other times you find out that your I/T organization figures out they have power and decide they want decision making votes for how the company is managed and company direction. You stop telling them what you want and they start telling you what they are willing to do and what responsibility they will accept.
One of the major, yet unreported, iodic moves (and there were legions) was USAir dumping the leading-edge IT technology AA pioneered with SABRE which served as an industry standard of service, efficiency and innovation. Like everything else these bottom feeders brought to AA system after system failed.
Just when someone says AA’s IT can’t get any worse, AA says “Hold my beer”
Following BA’s legendarily horrible IT decisions? What could possibly go wrong?
Indian IT personnel are nothing more than yes-men and women that lack the critical understanding and innovative thinking that’s needed in complex IT environments. So many more of them can be employed for the same cost as one US resource, so with that competition they all attempt to justify their position/employment/importance over actually doing the difficult analysis needed. It’s really frustrating to deal with, let alone communicate difficult IT concepts that they’ll truly understand (rather than just nod their heads yes).
with respect to any IT worker, Good IT in the US is largely foreign anyway (walk around any US3 IT department; they were not born in the US) and the good ones certainly aren’t working for AA, DL, or UA. US Airline IT is just about the bottom of the barrel of Fortune 500 IT talent.
Why not outsource? Maybe you’ll get some decent talent.
1. CLEARLY any sort of blanket statement re: generalities and absolutes has exceptions. So when someone says that Indian IT is crap –> yes, there are a handful of exceptions, but for the part, it’s f*****g crap!
2. @Julie, why do you think it is that “[g]ood IT in the US is largely foreign anyway”? Because the pay is much better here than in India. In other words, the top-notch IT folks have all come here to the US while the second-, third- and 95th-rate IT workers are still in India. (Before you complain, see #1 above.)
3. @CB –> Agreed. I have never had to say, “May IO speak with your supervisor?” more times than when I am speaking with an IT or Customer Service rep overseas. It’s frustrating and a waste of everyone’s time.
4. If AS can post my miles to my MP account even before I can retrieve my luggage (I’ve flown AS more than 100x and they’s only missed that 20 minute guarantee twice, once @ LAS and once @ SFO), why does it take AA days if not weeks to post my miles to my AAdvantage account? (I’m still waiting for my miles from flights I took last month.)
Of course I could go on and on, responding to each and every comment already posted, but in the Race To The Bottom, can’t we just declare AA the winner and move on?