American Airlines: Penny Wise, Pound Foolish, And Saddled With $40 Billion In Debt

American Airlines, and in particular current Tempe management, is known in the industry for being ‘penny wise and pound foolish.’ The CEO even has a nickname that stems from this first part.

They spend lavishly on aircraft, investing in foreign airlines, and a new corporate headquarters (now supported with $10 billion in taxpayer cash over the last 18 months) while taking short cuts on employee pay and customer experience. And it winds up costing them more money in the long run.

American found ways to keep government money for ‘payroll’ while not paying employees and laying off management staff. They didn’t use government payroll funds to ‘keep employees ready to fly when customers returned’ they simply sent checks and grounded pilots, who weren’t ready to fly when the carrier brought back its schedule this summer, leading to mass cancellations.

One pilot writes me to share that the pilot crisis isn’t over, that most pilots on reserve are covering trips each day because the airline doesn’t have enough crew assigned to operate schedules. Yet when pilots volunteer on their off days to pick up trips because reserve pilots aren’t able to cover the demand, the airline breaks up existing trips into pieces to use reserves (rather than pay pilots a premium to work) and kick the can of the back end of those trips down the road hoping to have enough reserves to cover them later.

It would be one thing if this actually saved money, but they wind up paying out those premium trips anyway. And that seems to be the pattern that repeats across the airline.

They cut first class meal service to align with US Airways standards, and had to bring back meals. They thought they could get away with not putting power into old US Airways planes, before realizing they had no choice. At US Airways they even stalled on adding internet until they literally saw it was costing them ticket sales.

But is there any better example than what they’ve done to their Boeing 737s, the backbone of the American Airlines domestic fleet?

  • When Tempe management took over these planes flew up to 150 passengers. They quickly reconfigured to 160 (which meant paying for an extra flight attendant). They went out and found thinner seats and smaller lavatories and squeezed them closer together and managed 172 seats.

  • So they took out seatback video. The coach experience isn’t so good. But there’s also fewer extra legroom coach seats to sell, so you’re picking up more marginal passengers at the lowest fares and offering fewer opportunities to upsell them.

  • And the first class cabin turned out to be the biggest downgrade, not just less space and less padded seats, but the bulkhead seats were terrible and the seats didn’t even have a tray to hold drinks any longer or a holder for tablets (needed after getting rid of screens). Most importantly, half the seats no longer had under seat storage for carry on bags because of how the seats were bolted to the floor.

  • How did this happen? Chief Operating Officer David Seymour says instead of building a cabin mockup to actually see what would become the new standard domestic product for the airline they saved money by “taping it out.” And the whole thing was a disaster.

  • American finally realized their best customers were refusing to pay for the first class product, so they had to retrofit first class again, after retrofitting each 737. The Oasis modifications required a “Kodiak” modification. And they were actually installing the Oasis first class seats on 737s that hadn’t been modified yet before ripping out those same seats and doing the second modification.

  • Meanwhile when competitors announced free inflight messaging, American announced this too. Then decided not to make the investment (but never retracted its public announcement). And in the end introduced it anyway.

The whole thing wound up losing them money (premium sales) and costing more than if they’d done it right from the start. And after pulling TVs out of all the 737s? United has now committed to TVs at every seat on its domestic fleet, matching Delta, so American may be forced to retrofit again.

Instead of offering a positive vision for a product customers want to fly – an airline with higher costs than many competitors needs to earn a revenue premium – they’ve watched what other airlines have done, and reacted. That costs more and generates less value for the company in the process.

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. Parker is aligned with the people that matter, his board and the woke crowd. Screw the business operations of the airline. I feel sorry for AA employees. As consumers it’s easy for us to choose another carrier. As an employee, you’re somewhat stuck. Management does not have your back. You’re on your own to deal with the mess they have made.

  2. You need a hobby.
    “Kim, there’s people that are dying.”
    Just stop, your bias is showing.

  3. 3 MM dying since 1983. AA has sunk to al time low in customer service. You can tell the Difference from the AA employees and US Air.
    Phoenix and Philly airport are terrible. Aircraft are loaded like cattle cars, staff hates customers, rude and take power to limit… extension of the pilots authority.
    I am still flying but now choosing Delta and Alaska. Still pissed at United never flying them again under any condition. I think the whole us air merger was a disaster, the top management needs to be fired.

  4. AA cancelled on me so much I spent an extra 3 days in hotels waiting to get home. Could have driven faster. Paid for First, got shuffled to economy and reimbursed $180. Never again.

  5. Article is correct. As an EXP, I am finding myself more on Delta lately even though likely not upgraded. Better service. Friendlier employees. Better operation. And the sky clubs as a whole are far superior

  6. Good article. I have been wrestling with AAL customer services for 2 months over dreadful treatment during Bozeman, MT to Albany, NY. Not a customer-friendly airline. Apparently rude staff & poor decisions are due to “weather” . Seriously?

  7. Why am I not surprised, Useless air was a pos back then and in death. Those two airlines shouldn’t of merge. The government should of stopped it. They don’t give a crap about customers or employees. This is not the first time USair did this.

  8. US Air was one of the worst airlines I ever vowed to never fly again. For example, their obnoxious and endless insistence that I sign up for their credit card during one interminable flight left a foul stench in my mouth that 30 barrels of Scope couldn’t begin to wash away. I’m sad that AA decided to adopt US Air’s sad little anti-customer approach, as AA was once my go-to choice for long distance travel. Bad management rots through and through, it seems.

  9. AA is a wreck and I’m glad that I’m not hub captive with them. No wonder so many in Texas are switching to WN or others. It’s a good time for the other mainlines to keep easy-grabbing customers from AA (can’t say poach since they’re speaking nothing from AA, AA is giving customers away)

  10. When C-suite management cannot comprehend that when you treat your employees like they don’t matter ( constantly making them try to make fractured systems and portly designed products work) the customer will feel like they don’t matter. Take a page from the Delta and Southwest playbook and invest in your people. Profits over people are small ( and unsustainable) profits indeed. So very thankful to have retired from 43 years as a flight attendant for AA last year.

  11. AA had so much potential, always. Just in its name itself, it can be the face of our nation in a way. Above the other legacies. But instead this terrible management on mainline and regional wholly owned side has completely destroyed this airline from the greatness it could be. Our customers hate us, our competitors mock us, we have no support in management for anything, our unions do nothing to help us, so many have gotten fired during the pandemic for commuting and the union did nothing on the regional side. Reserve assignments are horrible. Either you sit and don’t work or you are worked to your last breath.

    Something has to change.

  12. How does the “Tempe Management” continue to bring down a once great airline? I agree with most of your readers Parker should have been fired years ago.

  13. @ Never Again that foul stench in your mouth comes from the cunnilingus you performed on your ratchet wife.

  14. AA struggles to become a LCC without having the low costs that are required for success. They are managing to chase away high yield passengers who won’t fly their narrow bodies when they can fly a superior product on competitors. So much so, that partnering Jetblue has decided to distinguish itself when the 2 are code sharing so customers know better what they are getting.

    The only AA aircraft worth flying these days are premium service wide bodies and only on competitive routes.

  15. Mr. Woolman, founder of Delta Air Lines, said it best, “Consideration is an extension of safety. It begins with the first contact with our passengers, no matter where this is—reservations, porter, ticket agent or wherever. Make the customer feel special. There’s more to flying than just buying a ticket.” Do we sometimes fail, of course. But we try to learn from our mistakes and correct them. Delta’s management stresses that our success is based on Mr. Woolman’s philosophy of hiring the best people to do the job, paying them a good wage, appreciating their work and treating us with respect. In my years with Delta, I’ve had some issues…every family has issues. But, in the end, the fair treatment of our passengers is a direct result of management’s philosophy of… “stay within the box” but if you must go outside of the box, do what is right and we’ll back you up. The key is “back you up” SouthWest and Alaska both run great airlines because they empower their people to do well. They don’t belittle their employees. Ask any AA employee if they remember when “Dougie” got a DUI or when he told them that they have nothing to do with the company’s profitability. Jerry Grinstein said it best when he told Delta employees that we have everything to do with profitability.

  16. I think you just don’t understand. . AA management is “Woke” and has even given millions of dollars to Marxist hate groups.

    And that’s what the the customer really cares about! Right?

  17. What about those crazy fees for seats! We paid about 360 dollars for 8 family. passengers to sit and then they changed schedules and said we would be refunded but we only got a partial refund and had to again spend more money to rebook seats in the back because they blocked the front seats, co sharing ? We have to call the other airline to get seats from 60 to 85 dollars each?
    Very out of control on every level, wow never thought I would live to see this mess!
    Passenger of AA since 2008.

  18. I agree with this article. I often fly AA it feels like something is missing comparing to flying on UA or DL.

    The employees are amazing. I just don’t feel they’re being ran by someone who really cares about them or the product they offer to the flyers.

    If AA don’t get their act up with the other type major legacy carriers like DL and UA, it’s definitely going to be in the Spirit and Frontier bracket for sure.

    Get it together AA. Nice paint job with a 1980s interior on my last MCO flight. Wake up and smell 2021!!!

  19. I am not in the mix on this story. I fly premium cabins and always choose the best equipment as my schedule is flexible and have only “great” things to say about American Airlines. My path is routine MIA -JFK – MIA and it could not be easier. I’ve flown on Delta and United and do not see a difference. For last few years, I bring my own iPad always with downloaded Netflix. No Brainer really.

  20. I have travelled the seven continents, and all American airlines are the lowest quality in the world.!

  21. Jackson Waterson!
    Your comments are DEPLORABLE!
    MUST BE A REPUBLICAN!
    VIEW FROM A WING, STOP BASHING AMERICAN!
    DELTA’S OLD,ANCIENT AIRCRAFT IS NEVER DISCUSSED!
    WHY?
    TAPED SEATS, DIRTY INTERIORS!
    OLD 767,757,717’S
    AMERUCAN HAS THE YOUNGEST FLEET AND efficient HUB SYSTEM.
    I SEE VIEW FROM A WING WITH DELTA TIES!
    CAN WE SAY “INFLUENCER’S”

  22. Not even a real First Class seat on a 777-300ER JFK-MIA gave a better experience than basic economy on a Delta A321 on the return.
    The AA “Flagship” was dark, filthy, no offer of a 3 prong headset and a choice of ick and ick for the meal.

  23. Spot on article…. as a travel nurse I used AA exclusively as I would fly home about once a month. At first they were phenomenal….here as of late it’s canceled flights or delays resulting in missed connections and a full day of travel when it should be 4-5 hr max. For this reason I have redone my schedule and just drive home now. I get to spend more time with my family as I’m not being shuffled around. Never reimbursed for 1st class seats when they reschedule or cancel either….given a “credit” of basic airfare. Total BS.

  24. As a former tenured employee I’m saddened by seeing how a once great airline, a pioneer in so many ventures (AAdvantage, Sabre Reservations System, Revenue Management practices, etc.) is a laggard and has been since the merger with US Airways. American wasn’t perfect but it surely had everything to be the best US Airline. Mediocre leadership is the answer and I’m not alone in pointing at the problem. When you brought solutions to the obvious and many problems, upper managers were afraid of presenting the initiatives if they came from the AA side. Red tape, incompetence, and a broken corporate culture shows in every failure that we as customers face today. I hope that a shake up gets the Tempe management out for the sake of the once great American Airlines.

  25. @john luffred…nope! Actually this article is SPOT ON about AA.
    Did DUI***G PAY you ($50 + a vacation day) for you to write that????
    He’s going to drag this company thru the mud and we are waiting…………….

  26. Well its like we say at the airline…you have a motel 6 airline (usair) trying to manage the Westin (American) or the dollar store trying to run Nordstroms just wont work and it ain’t working they usair are taking Americans name and running it into the gutter! Merger was huge mistake! They have totally destroyed AA! Crap ass management! Use to run with united and delta now we run with frontier and spirit!

  27. American ROYALLY screwed me on a RT flight Chicago – Dubai involving British Airways. Allowed me a grand total of 1,500 AAdvantage miles – and DEFENDED it! I have never flown American since. And since then I have flown in excess of 1.5 million miles on Delta. I hope throwing me away as a frequent flyer, with both hands, was worth it, American. You deserve all the hate you’re receiving.

  28. In treatment of customers who give them margin $ and earn status, Delta is the best. The best service in first class and best club bar none.

  29. I have been a Chairman’s Preferred and now EXP for over 15 years. I have been watching AA steadily drive itself into the ground. Many of the FAs try, too many do not. Same with the GAs. Poor leadership translates to a poor product. My question…..where is the Board that is supposed to protect the shareholders. SELL your stock and make them sit up and take notice.

  30. THE BIGGUEST MISTAKE IS THE APPROVAL OF THE MERGER USAIRWAYS/LEGACY AA AND ALLOWING THEIR MANAGEMENT(US) TAKE CONTROL.THE AA ACTUAL CEO AND TEAM SHOULD BE FIRED…

  31. This article is exactly what is happening. It all comes down to poor management and greed. In the end who gets hurt when AA goes through another bankruptcy, which seems to be the path they are flying down, employees– those of whom should be treated as the most important part of this failing company. Instead, over the years, retirements were stripped away, onerous work rules were instituted, and long-term viability of the company was destroyed through stock buy-backs, to the tune of 12 billion dollars. It’s no coincidence that Parker is predominantly paid in stock options.

  32. @john luffred – wake up and get a clue before you start whining about biased reporting and finding fault with Delta.

    -Delta’s fleet is older yet has had the highest on-time arrival metric versus American’s newer fleet that has miserable stats in this category (along with canceled flights and overbookings)

    -Delta has been atop the list of customer satisfaction and continues to win high-end industry awards across a multitude of categories. American is consistently at the bottom of the list

    Yes, honest, fact-based reporting isn’t always pleasant however, it doesn’t constitute bias. And for the record, I’m not a Delta employee. After a million miles on AA, I finally gave up and switched over to Delta and have since clocked in nearly $700k with them. Best decision my company made and we’re not looking back.

    Wake up, John.

  33. sad to say but american airlines has not been run well since the early 80’s when crandall was in charge..they have had many ups and downs and “merger” or takeover situations on thier own,before the takeoverer of aa by us airways..the reputation they once had of “doing what we do best”, or “something special in the air”, has long since gone into the history books!

  34. It’s a shame. American used to be such a leader and innovator, now they are just a complete mess! Not the same AA from 20 years ago.

  35. I grew up in a town served by Allegheny Airlines. Fast forward half a century, and I’m still trapped (different state) flying Allegheny (AA). The problem seems to be Parker. Every merger, he increases profit by sacrificing quality and passenger experience. The Suits like the squeeze put on passengers as it increases margins. Icahn ruined TWA, Parker has ruined USAir, America West, and now AA. Fortunately, AA is partnered with JAL. So many AA customers chose JAL instead of AA to fly to the Far East that AA no longer flies to Narita from Chicago. I keep hoping that some airline will compete based on service instead of ticket price. Sure thing: it won’t be anything run by Parker.

  36. Haven’t flown Anerican since they stranded me for three days in San Fran due to weather. Never even offered a bottle of water over the 3 days. Had a check in person tell me that perhaps my cancelation was “for the best as you never know, the plane could crash”!!!!! She then proceeded to book me San Fran to New York via Italy! Until I reminded her I wasn’t carrying my passport.

  37. @Robert wallas. If you are referring to European business class seats within Europe it’s true that they only block a middle seat. But in terms of food all the major European airlines KLM/AF, Iberia, British Airways have been investing in inter European business class catering. So I can’t agree that AA food is better within the US than Europe. Even Lufthansa the total laggard has been trying to up their game a bit.

  38. Spot on. Now where’s the Vitamin D bottle? No amount of sunshine from AAL mis-management will give me confidence. I just hope they climb out of this hole which seems like a metaphor for the entire country today.

  39. Retired 5 years ago with 37 years at Piedmont>USAir>US Airways>American. After the dream job of working at Piedmont for neary 10 years, the roller coaster started on the downhill with the disastrous USAir merger. I kept waiting for the roller coaster to head back uphill, but the ride continued downhill at each merger event. Who would have thought that inheriting DUI Doug as CEO from the garbage Phoenix carrier, America’s Worst, would result in the veritable destruction of legendary American Airlines a few decades later? (I did think that, actually, as did my peers at the time.) The “east” pilots of US Airways warned the APA pilots of American Airllines not to go along with the merger deal making Parker the new CEO of American. Even though it appeared to be a great short-term deal for us pilots, we knew Parker would simply do his “one trick” show and turn AA into America West (as he had done previously to US Airways.) And here you are! No longer the proud American Airlines but a global joke of America West.

  40. A lot of comments here are related to frequent flyers and there experience with the airline and yes they have reason to be upset – but the problems are not because of frequent flyers it the upper management made decisions. The airline industry is NOT what people learn in university doing a business management degree – in other words “boxes around a factory” – unfortunately it’s the type of management the airline has from the board to the department heads – NO – one in charge has any airline experience – no understanding of what an airline is – it’s not a bus company – they are sales people and cannot sell. When AA joined the club or should I say created the club called – ONE WORLD – that’s when things started to go bad as the inter airline meetings then were focused on “no matter” who you flew with the experienced was to be the same and you sure got it with – ONE WORLD – terrible everthing – I once worked for a one world airline who had of all thing 800+ department managers and none of them could get it right they were alway trying to reinvent what didn’t work before. I believe they still cannot – All the comments here are what was experienced by that airlines customers – AA – Shame to see a great airline turn into a terrible airline by the people who make the decisions “the board”.

  41. I was fiercely loyal to American Airlines, having flown AA whenever possible the past 30 years. I was almost a Million Miler, until American started charging first-class pax for Admiral Club access. Since then, I have only flown AA once in the past 5 years, and that was 2 years ago. On the employee side, life has been even more miserable than when Richard Crandall was CEO – and he was hated by the flight attendants!

    Way to go Doug!

  42. Unfortunately, Tempe either won’t read these seemingly universal comments or will ignore it.

    Personally, i have 9.78MM miles (yes) in the program (from day 1) and if i get to 10MM, i get 4 basically unusuable SWU’s..Whoopie….

    After a 7H flight from ORD-ANC with no pillows or blankets I am done with them domestically unless I can fly a widebody or a Republic E175,,,

    I got a decent status match from Delta and it’s incredible how much superior they are to the AA domestic product…especially their new A220…

    Fortunately i can keep my EXP status since my miles are usually to Asia and i can use either CX or QR….

    United had the same problem but they woke up and are starting to upgrade their domestic product – unfortunately, this won’t happen on AA until it’s too late

  43. You hit the nail on the head. The company does not care about its employees, nor its passengers….only the almighty dollar. Parker and his crew are what’s wrong with American, and every decision they make results in a worse experience for passengers and all of us employees.

    Parker would do well to learn from Richard Branson. His philosophy is “Take care of your employees and they will take care of your business.”

  44. john luffred evidently is a fan of the bowl of puke in washington. This has nothing to do with politics. It is all related to a lousy airline and dumb woke management. Period.

  45. I’m an AmeriKANT pilot. One year left before retirement. I’m not original AmeriKANT and never will be. They are COMPLETELY focused on WOKE, Implicit Bias and DIE (Diversity, Inclusion, EQUITY). They are NOT interested in the fundamentals of running an airline.

  46. This is their DNA. Not much has changed from Bob Crandall’s days as he tells the revolting story of cost-cutting he did as OKC station manager which ends as making sure the guard dog (that replaced security officers) stayed hungry . And he was obviously proud of that.

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