American Airlines President Robert Isom spoke this morning at the Cowen and Company 12th Annual Global Transportation Conference. His message was:
- We’re making no excuses, taking responsibility for our challenges
- But it’s not our fault, our plan is great, it’s all because of the mechanics and grounding of the MAX.
American Doubles Down on Their Current Strategy
Isom essentially doubled down on everything that he and American leadership have said before. If only mechanics hadn’t engaged in an ‘illegal work slowdown’ and the MAX hadn’t been grounded the airline would have the financial performance they’re looking for. In fact their regional operation has improved, which he suggests proves they’re on the right path when mechanics aren’t getting in the way.
When the 737 MAX is re-approved to fly Isom says it’ll take “30 to 40 days” to take planes out of storage and to do required training.
American Thinks Their Big Problem is They Haven’t Been Able to Make Domestic Flying Worse
How has grounding of the MAX “slowed down margin-improving initiatives” you might wonder? Isom explains that ‘cabin standardization’ (Project Oasis) “has been delayed, we’re only about one-third of the way through. We thought that we would be much farther along with our modification program as a result of operations difficulties we had to put that on hiatus.”
In other words American’s major problem earning more revenue is that they haven’t been able to cram more seats into aircraft as quickly as they want, and they hope to return to switching more planes over to offering less comfortable seating on domestic planes in all classes of service.
Where Things Are Going Well
Isom pointed out new gates at Dallas Fort-Worth that has allowed them to grow to a peak of 900 flights during the summer, new gates that will come on in Charlotte allowing them to grow to 700 flights there and the replacement of Gate 35X at Washington National airport that will permit using larger regional jets.
He says they’re making progress “closing load factor gap with other airlines during off peak periods” and doing well with “instant upsell where we are able to offer customers post-booking ability to buy up to a higher cabin, we are now offering that both on mobile and web throughout domestic U.S. and expect further expansion.”
Adding that they’re beginning to see traction with prepaid baggage, Isom sees a “quickening of the pace produce of tech advancement.”
Finally American is “ending the era of extraordinary capital expenses” that have led to $30 billion in investment over 6 years, with an $800 – $900 million decline in 2020 before continuing to fall further. OF course they’ve also recently placed bog orders for more Boeing 787s and Airbus A321XLRs (only 60% of which were order conversions) in addition to new regional jets.
Should American Close Hubs, and How’s Their Culture?
Challenged with whether American should close one or two hubs that are underperforming, Isom suggested that without the MAX grounding and mechanics job action they wouldn’t be having that conversation with analysts because the network would be performing better. He defended their limited role at New York JFK, which to some extent already isn’t a hub just a point-to-point spoke for London and Los Angeles operations.
Defending their stance that the airline is making culture a competitive advantage, despite friction with multiple employee groups, Isom suggested that this “summer showed the importance of culture, having everyone on same page” but deflected that it also suggests they are failing at just that.