After the American Airlines fourth quarter earnings call on Thursday, CEO Robert Isom met with employees for a ‘State of the Airline’ conversation. In his remarks, a recording of which was reviewed by View From The Wing, he recapped the strong operational performance of the airline over the holidays. While Southwest and even Delta struggled, American operated their schedules normally.
And, he says, their strong performance has continued into January. In fact he says that other airlines making strong claims being the best in performance are making it up.
I heard others claim that they may be the most on time so far this year, or had the highest completion factor, that’s all B.S. We are! … Through the first three and a half weeks of January, tough operating conditions, American Airlines has the highest completion factor in the business, the highest arrival performance in the business.
This got me thinking about why we trust the statistics that are reported by airlines. We take on-time percentage, and number of cancelled flights, at face value.
- We do see in real time when a flight cancels, it’s hard to fake completing a flight.
- These are statistics reported to the government and there are consequences for intentional fraud. Moreover there’s securities fraud if false statements induce investments. Yet there’s fraud and corner cutting all around us!
On the other hand Delta is known for refusing to classify a flight as cancelled, even when the flight doesn’t operate the same day or with the same aircraft as planned. When they want to report a zero cancellation day, they just don’t cancel flights. A flight might simply be delayed 24 hours, and operate even if all passengers were rebooked on other flights. That’s certainly juking the stats.
A new paper in the Review of Accounting Studies takes advantage of the increased scrutiny of former Arthur Anderson clients who moved to new auditors in the aftermath of Enron’s collapse to estimate corporate fraud, and finds that only one-third of frauds come to light. 40% of companies are committing accounting violations, and 10% major frauds.
The airline industry – and airline reports to the government – are not immune. In 2021 United Airlines paid $49 million to resolve criminal fraud charges in which the federal government accused them of “providing falsified parcel delivery information over a period of years and accepting millions of dollars of payments to which the company was not entitled.” And there was a coverup: “individuals at United worked to conceal United’s automation efforts from the USPS, as they knew that the data being transmitted was fabricated.”
Meanwhile last year Delta Air Lines paid $10.5 million for “allegedly falsif[ying] barcode scans of mail containers delivered to Postal Service facilities or federal facilities to make it appear it was meeting requirements for on-time delivery, and ensure full payment.” American Airlines settled similar charges for $22 million.
The good new is that – for now at least – American Airlines does appear to be running better than it has been in four years. But I’ve heard flight attendants talking about ‘work to rule’ and they and pilots are facing protracted contract negotiations. Hopefully this lasts.