After comments by American Airlines CEO Robert Isom at the Bernstein Strategic Decisions Conference this week, where he explained changes that he planned to make after the ouster of Chief Commercial Officer Vasu Raja, many customers and readers of this blog have speculated that the airline would right the ship. After all, Raja was famous for his belief that network is the product.
Would the high cost airline, which desperately needs to convince customers to pay more in order to earn a profit, finally focus on delivering a higher quality product? Don’t bet on it.
- Isom was clear, speaking for the first time since the announcement of Raja’s departure, that they planned to stay the course – aside from reversing course on penalties for agencies that didn’t adopt the airline’s preferred technology and from walking away from corporate sales. In fact, there’s been nothing wrong with American’s plan – the problem was just one of execution.
I do believe that the strategy that we’re pursuing that we laid out in Investor Day are the absolutely right ones. Now one of the things that is very clear is that we’ve driven some customers away. We restricted some customers from actually our product. Those are kind of things that we have to be attentive to.
It’s one thing to have a plan and that plan can be the greatest player in the world. You can have the best people operating it, but execution is critical.
- Raja’s ouster was a result, ultimately, of a contest between him and CFO Devon May – known to be even tighter in customer investment than his predecessor Derek Kerr.
- Isom’s first instruction to employees on becoming CEO of the airline was to not spend a dollar more than they need to. He told investors at the conference that cost-efficiency remains key:
I will tell you that my view is that we have done an exceptional job of running a reliable airline. And I know that, that has been something that’s been hard to do to get back after pandemic and we’ve held ourselves accountable to it and we delivered. It’s hard to run a very cost-efficient airline in this business. I’ve tasked our team with doing that, and they have delivered.
To achieve profitability, Isom says, the “philosophy hasn’t changed.” American remains committed to Sunbelt flying, and using regional jets to connect passengers through hubs.
There are analysts suggesting American will now improve its soft product, but the ways it will do that are the things they’ve already announced – faster wifi on regional jets (given the important role that Eagle carriers play in their strategy), new business class on new planes (but no plan announced to offer it on any existing planes other than Boeing 777-300ER, removing first class), and a new soft product that includes updated meals, blankets and amenity kits (and eliminating pajamas from the longest flights in business class). This is a very cost-controlled update.
New Business Class Amenity Kit
This is still an airline that reminded flight attendants in the fall not to provide elevated service to coach passengers; not to give them blankets, pillots or treats from business class, because surprise and delight is anathema to ‘consistency’. No meaningful effort was being made, of course, to ensure a consistent customer experience in premium cabins – such as that predeparture beverages are provided consistently.
AA: pic.twitter.com/UN8aVpAbsZ
— JonNYC (@xJonNYC) November 7, 2023
American Airlines remains the U.S. airline with the greatest potential to be better than it is today. But it has high costs, and those are only going to go higher with a new flight attendant contract. They’re still living off of 2019 wages. That means they need to earn a revenue premium. They’ve believed that reliability alone would lead to profits, but they’ve improved reliability and shown that that is mere table stakes.
The airline’s Chief Commercial Officer before being taken over by US Airways was Virasb Vahibi. He talked about the ‘circle of the customer’ where all parts of the customer journey should feel premium. That doesn’t mean expensive but that paying attention to all of the details mattered, down to the finish and stitching of a seat. US Airways management came in certain that ‘nobody buys a ticket based on the color of a seat’ and that’s true in isolation, but cutting those little things creates a cheapened product and overall effect that people pay less for.
It also turns out to be more expensive. When your view is that a seat is a seat, and cost is paramount, you bolt those seats to the floor of an aircraft without thinking through how passengers will stow their bags. American lost under seat storage in first class, didn’t think through how galleys and lavatories would work in their new domestic product in 2017, all because they were too cheap to build mockups – and wound up having to retrofit their recently-retrofitted planes to fix their errors.
American Airlines today has a premium economy seat that in most cases lacks a footrest, because they want to squeeze seats together they offer only a foot bar protruding out from the seat in front. But that’s a product that isn’t worth as much as competitors. They removed business class seats from planes, which Vasu railed about back in 2018 – an inability to sell the premium products people wanted to buy.
We’re going to see more business class seats. But they haven’t shown that there’s a mindset shift beyond ‘not spending a dollar more than they have to’ (except in commissioning consulting reports from Bain and overpaying their CEO). Letting go Vasu Raja does not signal a shift to premium, that’s served both Delta and United far better.
American Airlines, just like all airlines is nothing more than a ride on a city bus. They get you from point A to point B. The glory day of flying are over. If you use cash or points and get a bigger seat up front you get a little better service and a few trinkets. But at the end of the day, you still get to point B.
The travel agents didn’t slow their sales of AA tickets because they didn’t like AA’s soft product. They slowed them because they didn’t get a cut. I think AA is smart to focus here on restoring those travel agency sales.
If he was any kind of “leader of men”, he would take 1 million in salary and forgo the rest until the employees are settled, the customers are happy and the airline makes money.
.
For me, he is just a greedy corporate trough feeder at the moment.
Having started really traveling a lot for business in 1999, I’ve been a loyal AA fan for many years. After traveling millions of miles on the airline, naturally, AA.com is my first choice for getting to a destination. However, many of the recent changes that were an effort to cut costs also made me rethink the dedication to the airline and started seeking other airlines since AA removed amenities for those that would be loyal, raving AA fans. I would pay more for a ticket to fly AA than SWA or Delta or any other carrier to leave at a better time or not have to make a connection or to just rack of the points for the perks. But after a year of not being able to use Business Extra points that were eventually eliminated to increasing the miles required for Exec Plat among other things even taking away Airpass, really? As a small business owner, I do like to conserve but I travel a lot and AA was that constant for me. I could rely on the flight, I know the routines, the gate agents and even the flight attendants that fly the same routines. But hey, there may be fewer road warriors like myself and thus they need to make the changes to stay relevant but some airline is going to take care us that want to fly, and fly often enough.
Bottom line is AA isn’t making money from flying. Thus, their strategy is broken.
*They need to enhance First Class so they can get a premium ticket price.
*They need to rebuild the east coast and west coast business since these markets contain many affluent travelers who no longer fly AA.
*They need to figure out how to compete for Asian business
*They need to find a way to work with Jet Blue before both entities enter bankruptcy.
@chopsticks – AA was underperforming before they cut off agency and corporate, they were hemorrhaging frequent business travelers even before the pandemic. They had a revenue problem before and still will.
For an international flight attendant, Virasb Vahidi was a dream of an executive. He gave us so many tools to work with, and it was a joy to serve the passengers in first and business class with the vastly improved catering, and the hard products on aircraft that were state of the art at the time, like the 777-300. You can’t imagine how rewarding it was to see happy passengers and it was fun going to work again, after the travails of 9/11, Carty and Arpey.
America West came in and destroyed everything, and they don’t care, which we all know.
I wonder where Mr. Vahidi is now.
At six foot three, I despise footrests. Even on 32″ pitch higher up EK, footrests just job me in the ankles and shins. How about just handing out free footrests to those short passengers who complain non-stop on tiktok about lack of space, anyway.
Regardless, I’ve experienced satisfactory flights on the few AA I’ve taken, both Intercontinental wide body and domestic single aisle. All AA routes being equal; some AA routes are more equal than others?
Also, now that I’ve OW Emerald status, I may take a couple more AA flights in 2024.
Another time to tell stories on taxpayer subsidized execs and taxpayer food stamps for crew.
I may be wrong, but I think a big part of the problem at AA as well as the rest of the carriers is that they think that they offer “products.” They offer “services,” not “products.” The shift in thought is subtle, but meaningful. Look at the Asian carriers as an example. Their Y service is much better than US carrier’s Y service.
I think it’s a big part of why the industry has turned into a bunch of flying Greyhounds. If they go back to the service mentality I suspect there will be some improvement.
Phil C. has nailed it. Succinct, to the point and absolutely correct.
Next beer is on me.
Premium? DFW-Maui, I asked the AA FA to help me lift the leg rest. “We don’t have them.” AA has beautiful pictures of its special meals from DFW and ORD non-stop to Hawaii. We got exactly what Coach had. Special mention of cheese and fruit trays mid-flight. Cheese, four thin slices, 2 inches wide. Fruit, couple grapes and pieces of orange. Return, 9p, meal in a box handed at takeoff, 2 slices of processed turkey, on stale bread from a bag. Alas, no cheese or fruit. I’d been on DL Premium ATL-EZE four times a month earlier, meal not what was shown on the website, but edible, small plate pre-arrival, leg rests, more room. A reminder why, flights heading E, I fly from DFW to ATL to avoid AA. No pre-flight anything, FA’s were ‘get this over with, get behind the curtain.’
Robert Isom’s vision…cheap, poor quality, uncaring. Uncomfortable cabins. No vision for the future other than to be at the bottom.
Horrible leader, fellow employee.
Get rid of him and others at the top.
Could care less about the customer and employees.
It’s a lost cause with Isom at the helm.
The door bats aren’t even as wide as my feet, they just slip off.
Darn spell check- foot bars, not door bats.
@Alan writes: “American Airlines, just like all airlines is nothing more than a ride on a city bus. They get you from point A to point B.”
For your information, American Airlines uses deluxe city buses to travel to and from the airport cities listed below, such as PHL to ACY. The Wi-Fi was inoperative on my last American Airlines trip from PHL to ACY on their bus. American Airlines does not offer bus service between other airports.
American Airlines advertises:
A new and convenient way to travel
Travel in comfort between regional airports and Philadelphia (PHL) airport with Landline. This premium motorcoach experience offers many of the same amenities as a flight and is booked just like any other connecting flight in our network. Check your bags and clear security before your journey begins and relax in leather seats on your way – with complimentary entertainment, Wi-Fi and power at every seat.
Eligible airports
Service is available for PHL connections to / from:
Allentown / Bethlehem, Pennsylvania (ABE)
Atlantic City, New Jersey (ACY)
Lancaster, Pennsylvania (LNS)
Benefits
Earn AAdvantage® miles on Landline connections
Convenient access to our global network through PHL
Connect to and from 2 new destinations with American: ACY and LNS
Check your bags and clear security only once, with seamless bag transfer between plane and shuttle
Enjoy free Wi-Fi and entertainment on your way, with power at every seat
Recline in comfortable seats and relax instead of driving.”
There is a section in Marketing 101 on Channels of Distribution. Yes, ticketing is damned important to make sure you can sell through. However, as Gary notes, you must have a product and staff to deliver it. No matter the constant aggravation from the unions, you still must treat your employees so that they are proud to go to work. And you must give them the tools with which to deliver a consistent and competitive product to the customer.
Lastly, the totally aggravating inaccurate delayed status of flights just deflates everything else. When an airline tells you boarding is in 10 minutes and the equipment has not yet arrived, customers perceive the airline just doesn’t care. Surely Operations has room to improve immensely.
I’m just shocked that Gary suddenly remembered Virasb Vahidi. Tends to happeb when I and a lot of others bring it a lot over at a.net.
As for premium seating AA can’t do anything since they have a widebody shortage and facing delivery delays. They absolutely should restore the 788s to 28J and convert the other 789s to 51J as the lack of premium capacity (who ripped J out of the 78Es again?) have clearly hurt them before and after 2020.
The level of incompetency and disdain for customers, employees and investors of Doug Parker’s legacy is unparalleled. They have created the environment where entire enterprise unhappiness inevitably gets passed downstream to customers. Now that they have lost their South American partner and reward availability on Cathay is non existent, with BA frivolous “fuel surcharges” of close to $1,000 on award tickets – there is zero appeal to any benefits AA offers. I have been used to suffering through flying on AA, but at least knowing that you’d get benefits internationally.
Why anyone with choice of flights that are funded by their employers and customers as well as themselves would even consider American defies logic.
On a personal note: I hate footrests. Major benefit of non economy seat is to stretch your legs. Foot rest just take so much space that you can no longer do that. A huge no no.
None of this is very encouraging, nor does it point to American becoming more consistently and sustainably profitable (sustainable profit in the industry essentially doesn’t exist and can’t but it is a metric to strive for). American’s fundamental problem is the focus on DFW, CLT, and the sunbelt and the perception the airline creates, through initiatives like not offering anything plus to economy passengers and service levels by the book, is largely of its own making. Profitability is found in driving market share and most of all, the pricing power, in key hub markets. Delta does this in ATL, MSP, JFK, SLC, and LGA, and probably DTW, which boosts profitability and helps to subsidize the losses it likely produces in SEA and LAX. United does it to a lesser extent consistently but it still does it where it matters (EWR, SFO, IAH, ORD). This is part of what creates the cash flow that allows for marketing spin creates the illusion that UA and DL are providing better service overall. American doesn’t do this and that feels like a big pillar of its problem. Not the debt load, which, by contrast, AA is paring down over time and really stems from the 2011 re-fleet which was badly needed. Had they not done it, they would be in worse shape.
USAir and USAirways after it, pre and post-merger with HP was an awful airline with basic service and no premium anything. It nearly went into liquidation in 2004 and was saved by America West, itself a regional airline with no expertise in big, global corporate travel. Unfortunately, the legacy of these two companies beats in the heart of American, which hobbles it.
@A220HubandSpoke – I don’t spend much time over there! Seems obvious when you’re talking about American Airlines Chief Commercial Officers, current vs past management, I’ve mentioned him several times over the years here from the time he held the position to current. Though a quick search of the blog shows you’ve mentioned him in the comments *here* so I don’t know what airliners.net has to do with it.
Fwiw I’m fastidious about giving credit, and while I don’t think any is due here, is it possible that your recent mentions in the comments here had him in the back of my mind? I cannot prove otherwise.
A220
If you’re curious who took J seats off the 788, it was Patrick Quayle and his group at aa when he built the premium economy strategy at AA before moving to United
I usually book F on domestic. I’m EXP and AA always seems to be $60 -$70 or so more than UA or DL on same route. No way I’m paying extra $$ for AA without screens, when seats and service on others is about same, or better. AA want more revenue, but not from me until they can compete on what they offer.
I love that Vasu is out due to internal power struggle. Typical internal officer level drama. I don’t think it’s ever a good idea to drive away business travel – and I happen to know my corporate travel ppl felt betrayed. That’s a sign of tunnel vision that might be best handled with a pink slip. He had a bit of a cult leader vibe. (I think that is a positive.). You have to wonder how he could ever get Isom to go along with shoo-ing away any business.
I don’t dislike regional jets because they have WiFi and the one row of first. Those are the best seats in First domestically x the transcon. Also, I always get upgrades with ExP on regional jets so it’s actually one of the better values I get from “loyalty.” I do hate regional jets when I have to bus to the remote gates at LAX. That is an awful experience.
My guess is that the long term outcome will be a cheapening of AAdvantage. This team is about cost and rebates to consumers are a cost.
I recently flew a round trip from DFW to Kauai and a few weeks later to Barbados both times in 1st or business. For significantly more $, I got a slightly bigger seat, a hot towel, drinks and a wonderful meal that I would gladly pay $5 for at a fast food restaurant.
Not to mention lazy incompetent TSA personnel And they wonder why people hate flying
It’s Isom that needs to go. He’s destroying AA. I actually miss Parker. Isom doesn’t care about customers or employees and doesn’t give any indication that he knows what he’s doing. After the fiasco of this weekend I don’t know how they can think operations are reliable either…
Gary has repeatedly told us, AA is inherently a higher cost structure operation. As such, it needs to compete on quality. But, AA’s management is clearly focused on cost control.
Consider what Pam wrote: she will pay more for X, just add it to the airfare. I’m in the same place. If I’m paying $6k for a TATL F ticket, don’t nickel and dime me by separately charging for WiFi. Just add it to the airfare. As a CK, AA’s attitude has absolutely alienated me.
I lay the blame squarely at the feet of The Board. These people are stunningly inept at their job, continuing to embrace the AmericaWest ULCC mindset of the nitwits they continue to keep around. I may loathe Scott Kirby but at least the guy leads (mostly in the wrong direction) rather than just manages his airline. That’s a lesson American could learn from.
Easily the worst of the US Majors with the surliest FA’s and ground personnel I’ve encountered while flying. Ironic, since I can remember when AA was stellar and it was the Airline favored by celebrities and top executives. What a Fall for them.
Booked AA for a direct flight from Nashville to Phoenix – first class – on return trip time kept getting backed up from 3:30 to 5:30 to 8:30 and finally cancelled due to not having enough crew – pilots were flown in from California but no flight attendants available. Supposed to leave on Wednesday and first available was on Friday morning. Had to fly economy as first was full and also had to change planes in Dallas. Flight two hours late getting into Nashville. Luggage shipped ahead so we had only the clothes on our back for two days. So much for booking a direct flight in first class. Staff was very helpful with rebooking but only so much they could do.
Not needing to spend a money more than needed is why US fliers and points travelers prefer US partners when flying internationally. People are always posting about their flights on international carriers and the extravagant service you get; no one posts about luxurious Delta, United, or American flights cuz they suck a**.
I recently flew AA from PHIL to MSY. The flight was diverted to Charlotte NC due to a non urgent warning light. We were detained for 4+ hours with no idea when we would depart and no food vouchers. AA customer service at the airport was rude, nasty and ignorant.
We finally departed and arrived 4 hours late.
Contacted AA and received an insulting $25 credit. I was flying 1 st class!!!
No wonder AA has one of the lowest customer service ratings.
LMFAO. Cost efficiency?!? Oust the $34M CEO..
Can you say “Re-arranging the deck chairs…”?
One thing AA does better than DL is the lounge experience. Now, hold on…yes food and drink is probably better in DL’s lounges, BUT, you can actually GET INTO an AA lounge unlike DL with long lines and severely limited access.
It seems that AA should bring back Virasb Vahibi. Also, fire Robert Isom.
Oh, does this mean El Paso is back on the plans?
They have another big problem… crew shortages. I fly twice a week and up until this week I’ve always flown American. My last three trips faced multiple cancelations and countless delays resulting in an average 8 hour delay in getting to my destination. On Friday they canceled all flights that would get me home due to not having crews so I jumped on with Delta and will likely never go back.
I am a 2 million miler, which equates to 20 years of EXP status and I can attest that my loyalty to AA went south following 2018. My perception of AA’s business strategy is to transition from one of the premium U.S. major carriers to an over priced discount carrier trying to compete with Sprint and Frontier on service. AA has changed to viewing and treating their passengers as only revenue mile generators rather than customers, which seems to have occurred since the airline’s bankruptcy and the USA acquisition.
Let’s be very honest, Robert Isom has been a huge red flag for this company. The worse off of the big three. The passengers who bailed out American deserve a better service and the employees who worked through a pandemic deserve a raise. He’s too busy lining his pocket with 31 million dollars and for what? What has he truly done to earn it? Hopefully they will sweep corporate after the last few years of disastrous decisions and new blood might be able to make wiser choices and bring AA back to their former glory days.
AA counter reps are now telling customers the dates in the emails AA sends confirming your flight & electronic boarding pass, are not the true dates of your flight. As customers spend their money on other airlines, I’m sure AA will start crying foul & look to the tax payer to bail their incompetent behinds out
The reason I stopped flying AA was them holding the American tax payer hostage for a bailout when they decided to buyback stock vs paying down debt. United and Delta paid their debt down during the profitable days. Doug just wanted to reward shareholders.
Multiple comments on how AmericanWest maybe festering within the corporate hearts of AA. Maybe this can add another perspective on ULCC behavior but actual mindset. Past life was part of team that was pitching Automated Response systems to companies (yeah, flamers line up on the left…). Had a face to face meeting with Corporate & Telecom head. Was trying to cost justify lost revenue by delays in handling calls & lack of agents. His response? I shut down the incoming lines so that they don’t even hear recordings – that way they can try later! I was flabbergasted! A few more questions and I realized this guy didn’t care and would never care. I closed my notepad and walked out. I mentioned to my colleagues that they won’t be in business for more than a year longer. I was right… He’s probably at AA…
the inevitable comparison between AA and DL – polar opposites of profitability among the big 3 – boils down to just one issue – labor relations.
All of the talk about sales channels, onboard product and lounges means nothing if employees have deep-seated animosity for their employer which is exactly how many AA employees feel about their company.
Corporate clients know it and THAT is why DL has succeeded in its march into NYC, BOS and LAX and won so many corporate travelers and contracts that used to be loyal to AA.
As much as some people want to believe that DL makes enough money in ATL, DTW, MSP and SLC and subsidizes its coastal hubs, you need only look at AA’s shrinkage in the coastal hubs EVEN AS DL has continued to rebuild its interior hubs to see that DL has the most balanced approach to its network.
AA, DL and UA ALL need large amounts of corporate revenue in order to be profitable. UA gets its largely from its hubs but w/ very little penetration of the rest of the country. AA and DL cover the US – DL just uses a much higher percentage of mainline aircraft.
Add in AA’s inability or unwillingness to settle w/ its FAs – who still will likely not improve service anytime soon – and AA is in no position to regain lost corporate sales in 2024 even if they changed every one of their wayward sales channel decisions tomorrow.
The “network is the product” as keystone strategy would have worked better for me if AA had maintained and built a better network rather than try to be USAir in all but name with hubs at PHL, CLT and even DCA at the expense of service in NYC and in Chicago.
Execution of the strategy is the problem? Yes, but just not in the way that the management of the company is suggesting. And they approved the strategy. And they were in charge of managing and executing the strategy.
Network matters. But if the service on the network is like Greyhound buses, the network is literally not going to fly.
I’ve been loyal to AA for 3 years now. I take approximately 50 flights a year. I fell for their loyalty program and even bought a hundred shares of their stock.
I’m about to make the jump to Delta.
Isom talks about hemorrhaging money… can AA find a CEO with a $2 million salary and save $36 million?
Email me, I’ll do it for a million.
More blah-blah-blah cost-cutting blather from Isom. I let my Executive Platinum status fall to Platinum Pro for this year. They really marketed hard to me to buy back up for $2319, they must have given me that offer 12-15 times. You are out of your mind if you think your status is worth that much. Fewer and fewer chances to get upgraded into a (domestic) premium cabin that offers less and less. My last two Systemwide Upgrades? I just let them lapse. They barely ever make space available in advance on any route other than JFK-LHR, and even when I’d use them, the 77Ws and especially 772s are total clunkers these days. I flew a 772 domestic from PHX-JFK and the first/business class seat overhead light wouldn’t turn off and the adjustable seat wouldn’t adjust, the flight attendant apologized and was clearly embarrassed as she laughed along with me that “this plane is a bit of a beater, eh?” So much for having all that debt to own the “most modern fleet” in the U.S.. If this was infrastructure or public transit, the discourse would be gravitating towards terms like “deferred maintenance,” which is generally seen as bad.
Mr Isom is way in over his head. He’s a minor league player. Has no leadership qualities and is running the airline into the ground. The board of directors has only one member with airline experience and he drove North West Airlines to Bankruptcy. OH yeah Isom was there also at that same time. The glory days of American Airlines are gone.
I worked at American for over 34 years… American hasn’t had a plan since Bob Crandall handed the reins over to Don Carty.
This is what happens when you have airheads running an airline since CEO Robert Crandall retired AA was under Airheads CEOs from Donald Dorky to Isom once the most prestigious Airline a very Proud work force to become something no different from a ULCC but with huge Hubs and overpriced so many huge mistakes being done since 1997- Present a new Chapter 11 it’s very clear in the Horizon cause ppl Won’t pay more for them period they are a Joke.