A Decade Of Decisions That Undid American Airlines As A Global Power — Fleet Mistakes, Product Retreats And Credit Card Decline

There’s been a ton of chatter about the new Wendover Productions video diagnosing the challenges and strategic blunders at American Airlines. It’s worth a watch, but its diagnosis is far from complete and there are some factual errors in the piece which begins with the thesis that:

Since 2020, at almost every major moment when the airline’s management could have made the right or wrong decision, they made the wrong one.

This analysis opens discussing American making the wrong choices with its fleet, retiring Airbus A330, Boeing 767, and 757 aircraft at the start of the pandemic (not mentioned is retirement of the Embraer E-190s from the mainline fleet as well). That, combined with production delays at Boeing, meant that they didn’t have the planes to take advantage of the transatlantic travel boom that started in 2022.

American often blamed Boeing, rather than the aircraft retirement decision, but they actually deferred delivery of some new Boeing 787 aircraft as well. The airline’s network planning has favored:

1. more flights on smaller planes rather than widebodies, and
   
2. short haul domestic and Latin America over long haul.

That was a conscious bet on where they’d make money, not just a bet that long haul travel would take longer to recover from the pandemic.

There’s then discussion of how American tried to move its transpacific hub from LAX to Seattle but not why drawing down LAX was a mistake, which I’ll address below, and note that the video mistakenly describes American as having “long been the weakest airline at LAX” but pre-pandemic they were actually the largest by a thin margin.

And then it addresses American’s growth followed by pullback in Austin, which created an opportunity for Delta to move in and become an anchor tenant in the airport’s new terminal use and lease agreement.

The video inaccurately says that the airport was only an outstation for other airlines – Southwest today operates about 41% of seats from the airport. It also mistakes falling real estate prices in Austin for economic challenges, rather than being the result of policies that allowed more homebuilding (increased supply).

American’s attempt to build up Austin is framed as wasted time and a mistake, but doesn’t grapple with Delta coming in after them and building up the city.

And it frames the Northeast Alliance with JetBlue as “wast[ing] time, resources and money.” But this was American’s only possible strategy to catapult them into size competiton with Delta and United. And while it ultimately lost an antitrust suit brought by the Biden administration, it’s a deal that had actually first been approved by the Trump administration.

It ultimately didn’t last, but while the partnership was in effect American saw massive growth in lucrative AAdvantage and credit card signups in the New York market. Given federal government signoff on the deal, this was a smart, big swing that failed – rather than a blunder.

Then the video shifts to American’s move to stop working with travel agencies. It frames this just as a cost-cutting initiative. But it was a drive to get travel agencies to use new technology (that didn’t always work smoothly) that would allow them to sell not just tickets but ancillaries like seats that are higher margin.

One big piece of this that was a clear mistake was cutting off access to the lowest fares to all agencies not adopting the technology – but that included American Express and Chase customers trying to use their points, and that meant a big chunk of competitors’ credit card points business they lost revenue from.

There’s important nuance the piece misses, like that American’s plan to pull AAdvantage mileage-earning from some agency bookings never actually went into effect. And it takes the airline’s claim of $1.5 billion in lost revenue from the strategy at face value – rather than as an excuse that masks other problems. American has reversed its agency strategy, even paying smaller agencies 7% commissions on most domestic bookings, and says they’re on track to win back their full share of business but revenue hasn’t grown at all.

Finally, there’s a discussion of American’s failure to build back its schedule in Chicago. The city took gates away from American and effectively gave them to United. But when the video claims “American escalated this all the way into a prolonged lawsuit, but eventually they lost that, too” it’s simply wrong. American lost its long shot bid at a preliminary injunection, but the lawsuit proceeds.

More broadly, I think it’s fair to say that:

• American missed the premium trend. Delta says that the trend towards customers being willing to pay more for a better product began 10 years ago. That’s when they date the move away from schedule, price and reliability being all that mattered for an airline. Coincidentally, 2015 is also when American began reconfiguring planes to make them less premium.

  They removed business class seats from Boeing 777-200s. They squeezed more seats into planes across the fleet. They outfitted Boeing 787-8 long haul aircraft with just 20 business class seats. Their model was that they compete on price, not quality and they arranged the LOPA to match that.

  

  In 2018, as they were still removing premium seats, it was already clear to executives that they didn’t have enough premium seats to sell.

  US Airways didn’t have much premium long haul demand from its historic hubs, so they competed for connecting traffic on price. Those low prices didn’t support a top product. And the low-end product, in turn, attracted low yields.

  The DNA of US Airways management was that premium cabins aren’t how you make money at an airlines, squeezing in more passengers is. On the inaugural flight of American’s Aibrus A321T, a legacy US Airways Vice President told me they would reduce the premium component of the aircraft meant to fly between New York and both LA and San Francisco (they ultimately did not, but it was revealing of the mindset).

  

  In fact, in 2018 current CEO Robert Isom told employees their competitive focus was on Spirit and Frontier, not Delta and United. This seemed obviously wrong even then because a strategy of chasing low fare Spirit Airlines could never succeed because American has high costs and needs to earn a revenue premium in order to profit.

• American retreated from its coastal hubs. American Airlines did the math wrong on New York, and could never figure out how to make money there (not realizing that they probably already were). They looked at an operation that was smaller than Delta and United and couldn’t figure out what to do with it. Former Chief Commercial Officer Vasu Raja used to describe the challenge as “too small to win, too big to walk away.”

  In 2014 the mantra was that American would be the airline that brought people to New York rather than the airline for New Yorkers, and that’s how they would optimize their schedules. In 2018, they described the strategy as being a ’boutique’ airline in the city. They flew seemingly as little as possible to maintain their slot portfolio, and even lost track of some slots which they then lost.

  

  But American makes most of its profit from its cobrand credit card agreements. They’ve reported a 53% margin on AAdvantage. They’re earning roughly $3 billion annual profit from banks, but for full year 2024, made just $846 million. For the first three quarters of 2025, they’re at break-even ($12 million profit).

  New York – and Los Angeles, Chicago and the Bay Area, where American also either pulled back or simply lacked strength – are crucial spend markets where the airline has lacked relevance. Delta, on the other hand, now says that they schedule flights to drive credit card revenue. That helps explain Delta’s buildups in Austin and Raleigh. And Delta’s growth in New York, Seattle and Los Angeles has helped make their cobrand the largest among the airlines (while American’s has fallen from #1 to #3).

• American degraded its product and customers began avoiding it. That product isn’t just inflight meals and clubs. It’s service and policies. It became harder to standby for an earlier flight. It became harder to through-check bags on partners. And they didn’t pay attention to how employees and customers would experience their new domestic product which was rolled out in 2017 – they didn’t build a mockup and made mistakes that they needed to rectify by retrofitting planes they’d already retrofitted. Ultimately their CEO at the time didn’t even try their new standard domestic product until it was in the marketplace for over six months.

  

• American abused its balance sheet before the pandemic. They loaded up on debt to fund over $12 billion in stock buybacks. There’s nothing wrong with buying back stock when you don’t have productive places to invest profits. They’re just a tax-efficient form of dividends, and a company’s total outstanding shares should not only increase. But this put American at a structural cost disadvantage relative to competitors, when they’re already a high cost airline, and struggling to produce the revenue of competitors.

The Wendover Productions video does a nice job explaining some of the developments of American’s route network and fleet over the last six years – but the discussion that’s offered is too narrowed. There’s no mention of the airline’s soft product and service. There’s no mention of non-C suite employees or labor costs. So it’s also a bit incomplete. And consider that they’ve done a video in the past on the outsized role of credit card revenue in airline profits, it seems like a huge blind spot not to talk about the declining relative performance of the American Airlines cobrand despite far a stronger frequent flyer program than Delta.

More fundamentally, the problems American Airlines faces today aren’t new or the result of poor decision-making during the pandemic. They alienated shareholders, customers, and employees alike over the past decade. That falls at the feet of their previous CEO even more than their current one. I’m not convinced that they can clean this up without a clearly articulated vision from the top and sold from the top, which we haven’t seen yet. But the problems certainly are not new.