Proof at American Airlines That Quality Product Matters for Selling Tickets

At an employee town hall last week American Airlines Vice President of Planning Vasu Raja reported that as they put the Boeing 767 on more domestic routes it’s doing well — because it offers a better first class than most of their domestic flights.

We’ve been taking those 767s and flying them more domestically where they’re in markets such as New York, we’ve done it to Vegas and things like that. It’s actually done quite well because customers like the bigger premium seat.

This is actually a startling admission. He says that even on flights outside of the premium transcon routes like New York JFK – Los Angeles and San Francisco customers care about more than just schedule and price. A better premium product can drive revenue.

It’s also the most obvious statement – could’ve had a V8! – but one foreign to many airline executives.

This seems like the most obvious statement in the history of earth but it runs counter to the airline’s domestic Oasis retrofit strategy of squeezing space out of first class seats (indeed ripping out perfectly good seats and putting in less comfortable, less padded seats).

It might once have been true that passengers made decision on schedule and price, and those are two very important factors. Most people didn’t know about what differentiated an itinerary beyond those things. That’s changing thanks to Google and RouteHappy. And the most frequent customers do know the difference. and that can be enough to move the needle.

American’s joint venture partner British Airways finally discovered that brand matters a lot for profitability, and with as far as theirs has fallen they believe they have tremendous upside investing there.

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. It says a lot about that airline that they can hold two contradictory views like “let fly premium seats domestically and it will improve results” and “oasis won’t affect the brand and revenue” simultaneously.

    That’s some pretty epic lack of awareness right there

  2. I am curious – my understanding is that if AA swaps an aircraft with a true premium product out for a standard domestic configuration, the passenger has no recourse per the CoC – they are paying for transportation or whatnot and are not guaranteed a product. Does this overt statement that AA is commanding a premium for the product give them any exposure, or provide the customer any ground to stand on, in cases of product downgrades due to swaps?

  3. Airline seats have been filling up with the good economy, so it hid the impact of the AA (and UA, for that matter) brand quality going down. And it is true that schedule and price are the major factors. But price and schedule being equal, a knowledgeable flyer will opt for the better service, better plane and better seat. Now that these are all discoverable on the internet, there are more knowledgeable flyers than ever. And if things are not equal, the bad brand will not command a premium – the good brand can command one, within reason. The weak brands will discover this the next time the economy contracts and flying drops.

  4. Also suggests that for some domestic routes, people still prefer twin aisle aircraft over single aisle – even if they’re older as AA’s Boeing 767s very much are!

  5. They’ve had a bias to making hard product capex investments. It’s the soft product where I don’t see any sign they understand the impact.

  6. “And the most frequent customers do know the difference. and that can be enough to move the needle.”

    It’s so simple.
    This. This. This. This.

    Maybe, just maybe, the folks in the back judge primarily on price and schedule, while the folks in the front judge primarily on schedule and comfort?

    How hard is it for AA to understand this?

    DL seems to not only take the above into account, they go further by providing passengers throughout their aircraft a better experience – in the hopes of driving people from the back of the plane to the front.

  7. “Proof* that seat-back TV’s don’t matter in customer perception of ‘premium.’ ”

    The 767s are the farthest thing from a modern interior that AA flies. Yet Gary constantly tells us planes have to have PTVs for customers to like them. Which is it Gary?

    *if by “proof” we mean guesses and conjecture.

  8. @Bob agreed, and to previous posters re: soft product – I can bring a sandwich and a laptop on board, but there’s nowhere to run from leg cramps and possible DVT when stuck in a bad seat. Soft product and shiny entertainment are nice to have, of course, but hard product is where the rubber hits the road. Despite the apparent surprise of those quoted in the article, in 2019 it’s certainly the case that frequent travelers, myself included, will run a couple google searches if it makes the difference in avoiding 6 hours/week in a torture device…

  9. As people become less and less loyalty captive, they start getting about quality as well. We are flying DC- Providence and back from Boston in ‘F’ on AA because it was direct, but otherwise they would have been my last choice as an ExecPlat (which will be my last year after 7 years).

    Can never use my systemwides, impossible to redeem miles, it’s not worth 15k in spend for first class lounge and an extra bag when we buy J tickets everywhere.

  10. A better economy product also sells tickets.

    Back when JetBlue had a legit superior economy product, I would often pay more to fly them domestically. Even though I depend on United miles for travel to Europe, I’d still forgo accruing them just to sit more comfortably for a couple hours. Even paying more to do so….

    The same can be said on many EWR routes to Florida where United competes with Spirit. I have absolutely no problem paying more to avoid Spirit. The problem these airlines run into in their race to the bottom, is when the Spirit product ends up damn near equal to theirs. At which point, you choose on price alone. Or just opt for Spirits big front seat, and call it day.

  11. Gary,

    Yesterday, I flew in F on one of the last MD S80s that American has.

    It had legroom. The seat had padding, the seatback had lumbar support. Takeoff and landing were butter smooth.

    I’m planning some long haul flights in business to keep my EP status.

    To confirm your article’s theory: I’m flying business to get a 2x EQM multiplier. I’m flying on AA paper to ensure I get 100% EQD credit.

    But I am flying JAL metal because comfort and service matter.

    Maybe Doug P. can improve AA by just reselling other carriers on AA paper and stop pretending that service matters within AA.

  12. Doug is the wrong CEO for this company. Period. He has no idea what to do with this.

    By the way many of the comments above I think are spot on. LAX-JFK in economy is far better on the 76X on Delta then on AA 321T. If UA throws a couple more 787-10’s on LAX-EWR, AA is really going to look bad.

    My AA upgrades are worthless and have been sitting in my account for years etc etc. If we/I’ve said it once, its been said a million times – as the FF programs and perks fall away, it frees us to just fly the best offering.

    Lifetime Gold but I’m barely on AA metal anymore. I’ll say it again – Tipsy D is the wrong guy for a company with this history and potential.

  13. I flew San Francisco to Charlotte on first class (an airbus) and thought “is this first class?”, really? I flew Cathay business and it was much better, a lot much better.

  14. I’ve put on 25 pounds over the past 20 years sadly
    I’m larger and need more room.Sure I’m trying to eat less and get smaller no easy task
    I left United and American many years ago as they took out first class and did away
    with 767 transcons They were comfy in every class
    The brand has never been the same .
    The A321 in coach was a one time thing like a metal bus stop seat
    I was in discomfort all the way from New York to LA horrible
    First Class was very good but still cramped felt like was in a lie flat coffin

  15. @John Jones,

    Perfectly said!

    @Steve,

    Yes, as noted in my reader comments posted in one of Gary’s other VFTW posts within the past day or two (re Allegiant’s CEO Maury Gallagher’s arrogant, condescending, and self-serving comments that passengers don’t care about aircraft interiors or their airport experience), I mentioned that Delta’s 767s (-300s only until the ancient and threadbare 400s are updated, that is) are among the reasons my partner ditched United after several unacceptably bad (dirtiest plane ever; 10-abreast, “densified” Boeing 777s even in E+; LAX-EWR flight aboard IFE-less 737-900 in 30” pitch row) trans-cons on that airline in mid-2017 for Delta, which is the airline he now insists on flying (with another trans-con next week).

    So for sure, Delta’s 767s (again, -300s only until the -400 cabin refresh is completed as those very long in the tooth dinosaurs resulted in negative feedback from two bookings made within the past few months; I’ll see for myself soon as I have upcoming flight booked on a DL 764…) and its once daily Airbus A330-300 are more attractive versus United’s ancient 757s or American’s Airbus A321Ts – and perhaps ANY narrow-body as for sure I know I’d pick Delta’s wide-bodies for trans-cons hands-down versus a narrow-body in ANY airline.

    Just as have for our upcoming trans-con where we didn’t even consider looking at another airline with Delta’s wide-bodies easily trouncing options on other airlines.

    And after the 764 cabin refresh/renovation is completed (assuming DL keeps operating 764s JFK-LAX after they have new interiors), all the more so!

    As to United adding 787s (or 777s) to its trans-cons, for premium cabins, including international PE that would be a welcome upgrade that might put American at a disadvantage versus UA and DL once the 764s are updated, but for Economy Plus and Main Cabin, 9-abreast 787s and 10-abreast 777s don’t fly in our home – or for 98% of the bookings I make for family and close friends as my motto is “friends don’t let friends, family & loved ones ever fly a hideous and atrocious densified Boeing 777 or 787!” as we won’t subject ourselves or anyone we care about to those sadistic torture tubes for any flight longer than 3-hours.

    We really don’t.

    Over the past two years, I’ve made/recommended dozens of bookings for flights around the world (>$50k in overall fares) and after my partner flew United’s 10-abreast 777s on three EWR-SFO trans-cons even in E+ in 2017 and asked to NEVER be booked on those (horrible) airplanes ever again when they have 10-abreast configurations for economy/ E+ travel, only TWO itineraries included flights aboard densified Boeing 777s (one UA international itinerary last year; one flight later this year on Austrian Airlines).

    Otherwise, every itinerary that included wide-bodies has been either 9-abreast 777s (Korean & Turkish Airlines); Airbus A330s/340s; Boeing 767s; or Boeing 747-8s for economy class bookings.

    Anyhow, I know, a bit of digression there 😉 – but the point is this:

    For economy class pax (and remember that’s the vast majority of flyers – 85% – without which NO airline can exist!) Delta’s 767s and Airbus A330s are a far better trans-con option than American’s A321Ts; United’s super ancient Boeing 757s; any “densified” 9-abreast 787 or 10-abreast 777; and likely ANY narrow-body model for those 5-6 hour slogs!

    I mean hello! 18” wide seats at 2-4-2 for the 333s & 17.9” wide seats at 2-3-2 for the 767s, and all with seat-back IFE (remember United’s densified domestic 777-200s are streaming to PED only for everyone except biz class and Alaska eliminated Virgin America’s seat-back “RED” IFE) versus United’s densified Boeing beasts or any 3-3 narrow-body makes Delta’s trans-cons tops for us!

    As noted, for our upcoming trans-con flights, we didn’t even consider any other airline but Delta since it allowed us to sit together window-aisle pair both directions and completely avoid being stuck in a 3-3 narrow body for up to 6 hours – which itself is a vast improvement in overall quality for any flight versus other airlines that operate planes with narrow-body 3-3; 3-3-3 787s, or worst of all, 3-4-3 777s configurations!

    Too bad Delta doesn’t really tout its use of passenger preferred wide-bodies on NYC-LAX/SFO trans-cons.

    Maybe after the old and tattered 767-400s are replaced with renovated versions, or its other more modern wide-bodies Delta will get the word out that it flies more Passenger-preferred wide-bodies for trans-cons than anyone else!

    But for sure, its wide-bodies are why Delta my partner switched to Delta for his trans-cons in mid-2017 – and ever since.

  16. I made my reservation back in March. Treating myself to 1st class from Los Angeles to Minneapolis, Aug 15th -22nd. With a layover to change planes in Phoenix, I am taken out of 1st and moved to the back! I’m told they are very sorry but there is nothing they can do and refund me $95. How does that make it all better? It has been a long time since I flew with AA, will really think it through the next flight

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