A New Agenda For A New American Airlines CEO

Doug Parker will step down as CEO of American Airlines March 31, 2022 and current airline President Robert Isom will become CEO. He reaction of many was ‘meet the new boss, same as the old boss.’ Isom as served along side Parker for years. Before becoming President of American Airlines he served as Chief Operating Officer at American and at US Airways. He has previous experience at Northwest Airlines, which had a deservedly bad reputation for its product, service, and employee morale.

But as Scott Kirby at United shows – himself formerly President of American and US Airways – a fresh start and ascending to the CEO role affords an opportunity to break from the past. And a CEO transition is the perfect time to revisit >everything. A CEO transition coming out of a pandemic doubly so.

While Isom has in the past talked extensively about the need American has to primarily compete with Spirit Airlines and Frontier, while he’s never focused on delivering a quality product, and he had once built a reputation as ‘an operations guy’ but hasn’t delivered a top flight operation at American, let’s give him a fresh start. His history isn’t one that would suggest making a break from the past and making the right decisions for American Airlines moving forward. But American desperately needs new leadership, and he’s the one that’s been chosen to provide it.

American Airlines has more potential to be better than it is today than any other U.S. airline. They have a strong route network, a fleet of relatively new planes, and a history of excellence. They also have a loyalty program that’s marginally better than United’s and much better than Delta’s and Southwest’s.

Unfortunately they’ve managed to alienate shareholders, employees and customers.

  • Their share price, and financial performance, lagged before the pandemic. They’ve taken on more debt than competitors, so need to outperform even more.

  • They chased away many premium customers. The percentage of revenue derived from top elites fell prior to the pandemic.

  • Employees regularly express frustration that they do not understand what product management wants them to deliver, whether they’re trying to be a premium airline with a premium passenger experience or an ultra low cost carrier. The airline lacks a mission statement, and adopting ‘caring for people on life’s journey’ has been a slogan not a north star around which decisions coalesce.

  • When the airline rolled out its new standard domestic product (“Oasis”) they didn’t bother building a cabin mockup. Instead, in COO David Seymour’s words, they “taped it out.” And it functionally didn’t work. They’ve even gone back and re-retrofitted first class to make it less bad (though still much worse than before). As CEO Doug Parker didn’t even try the new standard product he was selling for over 6 months after it was in market.

This is an airline that spent years believing that they’d treat employees well and employees would treat customers well and people would love them. But they gave employees weight loss programs, not a vision of building something greater than themselves and a competitor to battle against. They introduced a sick policy that penalizes employees for taking time off and using their accrued sick leave when they’re ill. Employees – both front line and middle managers – need a clear mission to rally behind, and that’s genuinely used in decision-making. They need to identify who their customers are and have those customers top of mind as they think through the implications of every policy.

And details matter. Chief Revenue Officer Vasu Raja has become the driving intellectual force of the airline, but his vision is incomplete. He believes ‘the schedule is the product’. Schedule matters. Operational reliability matters. But it’s not enough because competitors can offer those things as well, and premium customers expect to be treated as such. American needs them to feel spending more on higher margin products is worth it, and choosing them for that higher margin spend makes sense.

Checking a box that says they have seats for a cabin, and doing a deal that provides those seats at low unit cost, isn’t enough. They need to obsess about the details and how customers will experience them. They need to ensure that when they offer seat power the power actually works. Under Isom’s operation previously they rejected a proactive maintenance program for seat power, to make sure it was actually available to customers on every flight, as too expensive. They prefer customers to discover the lack of power and report it to them so they can fix things ad hoc.

The CEO sets the leadership tone and vision for the carrier. As CEO Robert Isom needs to articulate the vision for the airline. And that needs to be a focus on the customer, respect for employees, and attention to detail in delivering the best possible product that tiers to the airline’s economic goals.

When Oscar Munoz took over at United he wasn’t an expert in running an airline. He was quickly sidelined by health issues. But as a new CEO he did two things:

  1. Spent time talking to and listening to employees, promoting a vision of United that was going to be better and something they could be proud of
  2. Announcing quick wins for customers, like stroopwafels and Illy coffee and greenlighting one of the better soft products in the industry for international business class (since the victim of cutbacks under Kirby) and new seats that would at least make them competitive.

Munoz offered United employees and customers a vision for how they could be better. He brought in Kirby who then gave them a strategy to get there. United is far from perfect but it does seem to be improving along certain dimensions.

Isom needs to make a break from the past and chart his course as CEO. He needs to listen to employees and offer product improvements to customers – not platitudes. He needs employees to take care of customers and have the tools to do so (such as sufficient gate staffing and sufficient onboard staffing, and real meals for premium passsengers). He needs to make clear that the customer is at the center of decision-making and policies that make it harder to travel on American (like same day change that won’t allow changes in routing, so customers can’t benefit from the world’s largest airline’s many hubs) must go by the wayside.

American can win. They have great hubs. They aren’t as reliant on business travel as United and don’t face as much competition in as many hubs as United does. They have the planes, the gate, the slots. They have a new aggressive scheduling – Parker’s US Airways would never operate a flight that didn’t touch a hub and he brought that aversion to competition with him to American but they seem newly willing to compete. They need continue getting the operation in order while they commit to their customers and give employees the tools to take care of customers.

This doesn’t guarantee success, but the status quo is a recipe for being the financial laggard of the industry. That shouldn’t be an option, even for a board that’s been hand picked by Isom’s predecessor for reasons other than their airline experience.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Gary writes, American Airlines lacks a mission statement. Accordingly, my suggested mission statement for my favorite airline is here to help Mr. Robert Isom succeed in his new CEO position. Feel free to create your suggested American Airlines mission statement and post it here.

    American Airlines will be the global transportation leader, getting passengers from point A to B. We will strive not to piss off our valued shareholders, employees, and customers during their investment, workplace, or journey.

  2. Give Isom some respect. He had the “backbone” to stand up to John Samuelsun (TWU union President) at a LGA town hall meeting when Parker lets Jerry Glass (outside union negotiator) do all union contracts.

  3. Did Isom sit in the seat? Shouldn’t he have had, even more than Parker.

    Is he the one who raised all TATL J rewards 335k one way over the summer?

  4. Isom also isn’t a woke fool. We won’t seem him crying about black racial grievances on a Southwest flight.

  5. When American decided that if they miss your connecting flight, too bad for you. We’ll just refund the unused portion of your ticket and let you fend for yourself. As long as this remains the mentality at American, they will continue to lose market share.

  6. I left something out of my previous comment regarding missed connections. If American could get their “on-time” performance out of the gutter, their passengers could make their connecting flights. There you have it – two huge problems with customer service at American.

  7. If they could fix their constant schedule changes and have legit connections it would be a big help. My two hour connection next month to catch a European flight went to six hours or 40 minutes. It is nearly impossible to connect from the regional terminal. As a paying passenger it sucks to wait in Philly for 6 hours

  8. Having just flown JetBlue mint LAX-JFK, won’t be taking the AA transcon anytime soon. The single seat pods are a far superior product over AA 1st at a third of the cost. Service is much better & while we’ve enjoyed Flagship dining, it’s not worth over $3000 more for the limited experience. Just hope the new partnership between the two doesn’t destroy the JetBlue experience.

  9. Mr Isom and Mr Vaja should take a paid flight on a 77W in first class. They must sit in 1D and 1G. They must stow their carry-on items in the non-existent overhead space for those seats.
    With the dining table in place, they should try to turn on their overhead light. Then, they should log in to in-flight WiFi after paying $35 . . . each way . . . on top of the $5500 ticket price. Only then can they say that the network is the product.

  10. Well said. Competence alone would be a nice change but I’m highly dubious that an acolyte of Parker’s is likely to turn American around.

  11. American’s biggest problem is that, despite being the most recent legacy airline to have gone through bankruptcy, AA has the highest unit costs (CASM) which is heavily driven by the fact that AA has far more employees to generate the same amount of revenue than DL or UA.
    Despite being a high cost airline, AA has not focused on revenue premium strategies and, as noted, has alienated their highest value passengers.
    United has seen the greatest impact of low cost carrier capacity in its key markets during the pandemic but that distinction is shifting quickly to American which has tried to go after NYC for the umpteenth time while expecting its PHL hub to simply sit on hold. AA had an enviable position at Miami as the only US carrier at the largest international gateway to a global region – but Frontier and now Spirit are going full speed ahead in Miami – and are focusing on the same markets where ULCC/LCCs have gained share and pushed down fares from FLL.
    And no one realistically can believe that AA will gain as much as AS and B6 in those partnerships.
    Vasu is simply throwing darts trying to find routes that work after years of market failures that he and those before him have overseen. AA has yet to get average fares on par w/ DL or UA in longhaul international markets where they directly compete except to/from LHR and Tokyo and some markets to S. America.

    The one thing that AA has going for it is that its operation is not as bad as alot of people think it is when compared to UA and UA is not near as good as it wants people to believe. Quality can be subjective but operational success is highly quantified. UA simply does not do as well as AA on the metrics that the DOT regularly measures and publishes – and both are just mid-tier and below continental US leaders DL and AS which are consistently at the top of the list.

    Isom has a laundry list a mile long. Getting employees behind him and what AA needs to do and what changed perception at UA under Muñoz, even if reality is still disconnected. Given Isom’s history and skills, it is doubtful that he will achieve what AA most needs .

  12. Hopefully, American Airlines will have an affiliate program in the near future, if they already don’t have one on an affiliate network.

  13. As a Captain at and having operated aircraft for all three of the airlines, HP, US, & AA, that “Dougweiser” and Isom joined … don’t expect changes, because, as the old lyrical adage, states–“Old boss…same as the New Boss”! They’ll continue to enrich themselves and eventually go somewhere else to screw things up…or retire?

  14. Gary,

    Normally I don’t disagree with your insights into the travel industry, but I have to as it relates to NWA. Northwest as a PE was by far my favorite elite status that I ever held, and I have been legacy CO PE, UA 1K, AA EP and US CP. It was a good gig, and MSP was a fantastic experience generally as was MEM. YMMV

  15. I think they should copy and paste Gary’s article and use it as a roadmap for their survival!!!!

  16. @Geoffrey Ralph Maibohm – There was a big difference between Northwest Airlines – the carrier, its employee relations, and its inflight product – from Northwest Worldperks and what they did for Platinum members. They did take care of Platinum customers and for many that made up for the deficiencies.

  17. New CEO? I hadn’t noticed. The new guy is from the same America West babboon pack that drove a once admired airline into a ditch.

    I see 10-15 more years of trying to compete with Spirit.

  18. They could shock the industry and do something consumer friendly – bring back “more room throughout coach”. Remember that? Was two decades ago but wow the legroom was incredible. They would go much attention for that alone.

  19. As a longtime AA EXP, lifetime PLT and frequent business traveler (and Citi Executive MC holder) I really like what United is doing with their hard product.

    AA’s domestic planes – except for the A321T’s – have gotten so bad after the Oasis retrofits that I have been considering other options. Was thinking Delta, but they seem to have their own issues so it wasn’t worth changing. UA was completely out of the question, but after seeing the improvements they’re making to their product I’m seriously contemplating a change.

    I was comparing AA versus UA for an upcoming long haul and UA’s configuration had several more business class seats than AA’s configuration and an equal number of PE seats. My company will only purchase PE for overseas flights, so I’d stand a much better chance of an upgrade on UA versus AA and that is enough to swing my decision to UA. It also appears UA is upgrading their domestic planes to a more premium experience versus AA’s LCC approach.

    Operationally, I’ve had several delays on AA connecting flights over the past 2 months that have caused me to miss meetings and business dinners. None of these delays were weather related. I live in Orange County and have had to start flying out of LAX in order to get direct flights to minimize the chances of getting stuck.

    Based on my long history with AA – and having good experiences in the past prior to the current management regime – I’d really like to stick with them, but it’s just no longer worth it. If UA continues as they appear to be it will be a no-brainer to switch from AA, which honestly I’d never even contemplated in the past.

  20. I guess Doug didn’t want to hang around for the bankruptcy proceedings. Rather runaway now then forced out in chapter 11.

  21. I normally find your posts to be AA bashing, but this one seems spot on. I work for AA and find the “mission statement” absolutely cringeworthy. AA’s policies prove that they do not care for customers along life’s journey, and I can assure you that the way I am treated lets me know they don’t give a flying fig about me. I really want to believe that Isom will do better, but the last 18 months have beaten all hope out of me. It’s heartbreaking.

  22. >American can win.
    @Gary, I agree100%, and I wish they would. Doesn’t mean they will.
    >Unfortunately they’ve managed to alienate shareholders, employees and customers.
    Sadly I also agree 100%. As one of the most loyal international customers AA has (IMO) it should tell you something that I am now seeking options. Which is hard since Delta, UA and BA are worse.

    Something has to change. Customer focus would be a good start, with quality cabin service, esp. in business and the laughable Flagship First as a start. And Mr. Isom, open some more of your Flagship lounges.

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