After each American Airlines quarterly earnings call, the CEO and several top executives gather with employees to present a “State Of The Airline” message and take questions. The carrier’s third quarter earnings call was on Thursday, but this time they held the company meeting the next day. A recording of this meeting was reviewed by View From The Wing.
I already shared a tidbit about changes to upgrades coming next year that was leaked at the event. There are a few other items that stood out to as well, during the discussion and ensuing Q&A.
- American Airlines CEO Robert Isom still doubles down on all they need to do is operate reliably, calling it the “best way we can improve our financial results? Run a solid airline.”
Running a solid airline is absolutely the most efficient way. It’s the way to keep the most revenue. It’s the way to keep our customers the happiest. So it all works together.
The problem is that this is table stakes.
- They’ll perform poorly if they don’t run a solid airline
- Doing this may keep customers from actively avoiding American
- But it doesn’t lead customers to prefer them over Delta (which is generally even more reliable, too)
- With American’s relatively high costs, they need to earn a revenue premium – customers need to be willing to pay American more to stick with them
- And that means making the travel experience pleasant – from good seats, to a quality soft product, to friendly employees.
American keeps repeating that they have been operating reliably and yet they haven’t been making money.
If all an airline wants to do is operate reliably, they’d better offer the lowest prices. For that they need the lowest costs. American Airlines is too large and complex an operation, and generally pays unionized work groups at the top of the industry. So it’s an insight American paid $31.4 million for but it’s wrong.
- They’ll perform poorly if they don’t run a solid airline
- Boeing delivery problems aren’t really hurting American. Remember that American actually deferred delivery of some 787-9 aircraft. They don’t want more widebodies, or to do very much long haul flying – they fly to joint venture partner hubs and their partners fly beyond to other destinations – plus they fly seasonally to Europe but they need to fly those planes somewhere in the winter and only so many widebodies can head down to Cancun.
Isom offered,
Our fleet right now is about 50% Boeing, 50% Airbus… a little bit more Boeing? A little bit more Airbus? I should know this stuff. But I’m also taking into account Embraer… Embraer does a wonderful job delivering aircraft on-time the way they should be spec’d out, with seats, with engines…
Despite Boeing’s problems and delays “We’re fine in the short- and medium-term. Our positions are going to be protected. We can fly everything that we think we want to. But over the long run we need Boeing to get there.”
The airline’s Director of Fleet Planning added, “It’s not like we are worried about having to pull back on markets…we are not that concentrated on Boeing deliveries for the next year or so…we’re in a much better spot than some of our peers.”
- A single gate in New York costs $400 million to build. That’s surely part of what’s wrong with America.
An LAX Airbus A320 first officer asked about saving the ’employee cafeteria’ restaurant space, allowing crewmembers to purchase “quality food, good prices, half the price of what’s upstairs in the concourse” but that has to vacate. He wanted to know if Isom would support providing space in American’s facility, and Isom said he couldn’t subsidize the rent.
Airport real estate is the most expensive real estate in the world. When we talk about what’s going on at JFK right now. Not just our terminal but construction at JFK Terminal One. One gate at JFK Terminal One will cost $400 million. $400 million. People are going to say ‘it’s just one gate’ no, it’s the gate and everything that goes behind it.
- LAX is miserable. Talking about modernization of American’s facility at LAX (related to the loss of the employee cafeteria there),
If anybody’s been out there over the years, LAX has not been one of the airports and facilities we’ve been the most proud of. It’s a difficult operation. Difficult for passengers. Difficult to get aircraft in and out of. By 2028 we’re going to have new facilities throughout. We just opened up in T4 the South end of T4, which will give you an idea what things are going to look like.
American Airlines’ post-earnings employee meeting, held right after their quarterly call, underscored CEO Robert Isom’s emphasis on reliability as the sole key to success, insights on Boeing delivery issues, and the costly challenges of airport real estate, especially in high-demand locations like JFK.
In many parts of the world, airports are privately owned.
One thing on which I can agree with Isom is that LAX is a hell-hole.
Nothing compares with the sophistication and elegant Newark Airport the armpit of America
Certainly the envy of the world
American will soon be 300k in miles for a cattle car seat one way
Has AA considered whether it’s even possible to be a leader in “reliability” given the locations of its hubs?
UA and DL seem way better positioned to succeed in this metric at airports like SLC, MSP, IAD, ATL, and even IAH than AA is at DFW, CLT, LAX, and MIA
LAX sucks bad flying AA.
American keeps blaming everyone but themselves. I’ m a loyal EXP AA customer for many many years. I like many of the things that AA does but they need to get their head out of their buts and start competing. They are killing off ORD, LAX and now it seems like maybe an attempt to kill JFK. They are so obsessed with DFW, CLT and PHL that they don’t realize that the big money is still at LAX, ORD and JFK. If you want to earn premium dollar than you’ve got to earn it. Luckily for them, I don’t believe UA or Delta to really be that much more premium, regardless of what the Delta Mafia likes to tell everyone. AA just needs to put forth some effort, maybe by completely overhauling its current leadership. The hard products are some of the best in the world… that isn’t the problem.. it’s everything eles from, service, to food, to the elimination of AAs international routes. I want to fly to HK and Japan from Chicago.. I can’t do that anymore on AA .. they want me to fly to DFW or JFK… are you kidding me, it’s freaking O’hare airport. Figure it out AA.
I flew out of LAX and into LAX during the last week. I found nothing about it to be really terrible. Yes, vehicle traffic was a bit slow, but that was accommodated by planning. Going through TSA the last few times has been pretty quick and they have finally got smart enough to listen when I tell them my pants will fall down if I take off my belt (the scanner didn’t alert on the belt buckle). I’ve been flying in and out of LAX for almost 40 years so I know it well. Hopefully the people mover will solve a lot of the traffic problems. The construction of it has caused some of the congestion.
@Dwonder…. EWR terminal A won the Skytrax 2024 award for best new airport terminal in the world and a 5 star terminal rating.
The South End of T4 at LAX (just re-opened) is beautiful. Connecting to other terminals via the walkway is easier – American at LAX on the whole is a more efficient airport than others American is in.
A reliable airline should be the basics. It’s like a retail store touting that it opens on time. Maybe try something different like installing coach seats with some modest amount of padding.
Try adding some padding to the first class domestic seats too. I recently flew CLT-LAX-HND. The first class seats from CLT to LAX were as bad as sitting on a park bench for 5 hours. You can feel the metal bar in the seat back up against your spine the entire way. To me, that isn’t first class. Even coach seats should be more comfortable than their first class seats.
@Gary, what you didn’t mention about the SOTA was AA was highest in completion factor (a metric) than any other airline during Q3. And how the heck are you getting the SOTA? Who gave you their Jetnet password?
AA is a good airline, my flights are on time and pleasant, I get upgraded on about 90% of my flights. The Admirals clubs are comfortable and the amenities are great. Yes, they’re going for great, but have yet to achieve it. There’s no where to go but up. I recently watched a flight review that took the highest priced seat JFK to LAX and the lowest priced seat from LAX to EWR. How is AA FC not the highest priced seat transcon? Gotta price the seats higher than DL Biz class, (not well reviewed btw) You moan and groan about everything AA, yet you are a loyal AA customer. Shit or get off the pot. It’s getting very tiresome.
I also don’t find LAX to be an issue. The horseshoe layout blows, of course, but if you know the shortcuts and get your timing right, it isn’t bad. It’s one of the few airports where I can go from the terminal entrance, go past security and to my gate within 10 minutes. Terminal 4 needs a refresh – but they’re working on it.
As far as Delta goes – they really figured out how to cater to the LA & NYC crowd, which is why they are #1. Delta focused on providing excellent customer service with a smile, and Delta’s SkyClub runs circles around Admirals Club. I hope AA can redeem itself, but cutting routes from LA and NYC is not the answer.
@Peter – “Luckily for them, I don’t believe UA or Delta to really be that much more premium, regardless of what the Delta Mafia likes to tell everyone.”
I’m sure as an AA loyalist that you really, really want to believe this. I too have been EXP for donkey’s years, Plat for life, multi million miles yadda yadda. Guess what? You’re dead wrong, at least with respect to DL. Fly ten times r/t from DFW-LAX on AA in paid F and then do the same on DL — attending both the AC and the DSC each time in both directions — and try to tell me with a straight face that they are comparable offerings in terms of the customer experience. You can’t, because no sane person could possibly conclude that. It’s not a close call. In fact, its an offer you can’t refuse.
Complaining about the two hubs that ferry the richest and most profitable customers is yet another typical USAir mentality failed talking point to try to move traffic to basket of deplorables flyover airports. When will Team Tempe discount air realize they have to compete where the money and power is? Blaming everyone except yourself and trying to send people to hell holes like Charlotte and Phoenix and Philly isn’t a winning combo, dipsh**s.
Pilot,
what AA mgmt didn’t tell you of anyone else is that they had already cancelled over 5000 more mainline flights before the CrowdStrike issue which resulted in a 4.5% cancellation rate for DL in July and 2.5% more than UA.
UA had cancelled an even higher percentage of flights before the CRWD event than AA – in part due to the MAX 9 grounding – but, at its core, the MAX and CRWD are both just vendor quality issues.
DL is still at the top of mainland airlines in YTD lowest cancellation rate and on-time. Since Hawaiian will be folded into AS and they were the only airline that has beat DL in on-time performance for any consistent period of time, DL is likely to end up as the best US airline in all operational metrics while HA is too small relative to AS to move AS up higher.
Like every other piece of data, anyone can cherrypick to create an advantage but, at the end of the year, DL will still be at the top operationally- even with the wounds from CRWD.
Leff: “American Airlines CEO Robert Isom still doubles down on all they need to do is operate reliably, calling it the “best way we can improve our financial results? Run a solid airline.”
Isom: “Running a solid airline is absolutely the most efficient way. It’s the way to keep the most revenue. It’s the way to keep our customers the happiest. So it all works together.”
Why did you deliberately distort what Isom said (even though everything is clearly shown above) ???.
“…ALL they need to do…” is not the same as “…It’s the best way…”. The word ALL is your deliberately incorrect distortion – which is clearly meant to inflame and misinform.
It’s almost as if you want to see American Airlines liquidated and thousands of hard working people to lose their jobs.
Gary is right regarding fundamental business strategy. Commodity markets compete on price, participants do not have pricing power, and increased profits come from cost cutting. Differentiated markets compete on quality, participants do have pricing power, and increased profits come from the ability to charge more. To me, AA needs to focus on quality. I’ve been a CK for years and seen that quality has been dying by a thousand cuts (pun intended). As a result, I don’t see myself doing much with AA going forward other than transcon.
Regarding LAX, when the (heck) are they going to reopen Flagship First Dining?
PS – AA’s newly announced 2025 European routes highlight the disenchantment I’ve felt regarding their network planning. AA needs to use its JFK slots for these routes. It has been network planning decisions such as these coupled with the drop in service level that has pushed me away from AA.