Doug Parker’s Plan For American Airlines to Make Money is to Copy Competitors

American Airlines CEO Doug Parker spoke this morning at the Baird 2019 Global Industrial Conference, making the case for why the airline’s financial performance will improve. His message seemed to boil down to: we’re going to do what other airlines are doing, so our performance should revert towards the mean. In other words, by copying other airlines, if they make money American should too.

The reasons Parker is optimistic about his airline’s performance improving:

  • Boeing 737 MAX returns to the skies. But American’s marginal flights, grounded by the MAX, are money losers.
  • Contract with mechanics will improve operational performance. It will also increase costs, and the airline is starting to negotiate with both their flight attendants and their pilots.
  • Stuffing more seats into planes. Of course that makes their product less desirable, one of the way they put more seats in is having fewer international business class seats than competitors, and American already has a premium revenue problem.
  • Post-purchase upsales. American will do what Delta and United already do, pitching customers to spend more after they buy their tickets.
  • Reduce cost of overbooking through advance auctions, like Delta and United do.
  • They’ll get more gates in Charlotte and will be able to upgauge regional jets at Washington National in a couple of years.

There is absolutely nothing here about offering a better product than competitors or even offering better operational performance than competitors. Parker’s vision is copying competitors and it’s mean reversion. He acknowledges however that the airline business is cyclical. In an economy downturn their ability to simply copy other airlines and make more money will be compromised. Ultimately there is no vision at the airline and it’s not the first time their CEO has laid out that they copy competitors.

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. Just like the other clown is still in the white house.

    Once they’re in, they can buy their time in.

  2. AA should make one play that would help heal the LATAM wounds and allow AA to strike back . AA should break away from the competition by dropping out of the fight against the ME3 , shake hands firmly with Qatar , strengthen the Qatar relationship , and stay cozy with Etihad.

    It’s pretty clear that ,at least currently , the US carriers are not going to win the battle against the ME3 . So why not create a strong alliance with Qatar ? DL left AA and UA to go at it alone at the White House . DL scoops LATAM and AA should strike back by creating a real and strong alliance with the partner that DL would least like AA to get cozy with . AA should also leverage the China Southern relationship.

  3. we seem not to be able to keep politics out, can we?

    I am surprised that the shareholders have not asked Parker to step down. He got what he wanted he needs to take his package and enjoy it rather then inflicting more pain on an iconic American brand

  4. It has been said many times before Parker has taken American from first to worst. The board of directors need to wake up and fire Parker!

  5. The America West executive that he is running the worlds largest airline is comparable to a store manager at a 7-11 now running all of Amazon. He just needs to go. Nothing against him but he is not the right man for this job.

  6. He’s a dope head! What a royal moron!

    What someone already said and boggles me, is how this dip is still in charge?

  7. Why not copy competitor’s positive changes? Such as Delta’s commitment to PTVs and reliable operations; United’s website and app; etc.

  8. As a lifetime Platinum AA flyer I like the ability to buy upgrades after I’m ticketed. DL does that and I always get options to upgrade to Comfort + or First (both for miles and money) numerous times before I leave. It is about time AA does that and more aggressively tries to sell upgrades. I realize this will cut down on upgrade options for elite flyers but, given I’m retired and using my lifetime Platinum status which makes upgrades a lot less likely, I enjoy the fact I could pay to upgrade and lock it in if I so desire after purchasing the ticket.

  9. Can you not write about anything else? This blog reads as you and AA had a messy divorce, and it’s time for you to get revenge!

  10. I wonder if Gary’s argument about the marginal flights being money losers is truly correct. I suspect that they’re money losers on a fully costed basis (being apportioned their share of corporate overhead etc) but on a marginal cost basis (do they more than cover their direct operating costs) are profitable.

  11. Andrew (Troll 1) and Sad State of Our Country (Troll 2) are trolling Trump voters again (sigh). Hey does anyone else want to be Troll 3.

  12. Way Way Way overdue for a CEO change.. it’s pretty obvious that the board have their heads up their asses..

  13. And we just have Parker making excuses for poor stock performance…as he continues to make statements like these he only shows that AA has no strategy. And no strategy (other than copying competitors) leads straight to the crapper…

  14. I thought he s.d should have jettisoned a long time ago pop to copy other rd s whose value is astronomical to AA is a joke,find your niche that’s why u are the biggest and cozy up to Quatar

  15. I think the stock holders should wake up if they care for their money ,they don’t see the titanic sinking ???

  16. Gary is right: Parker has no more ideas of his own on how to move AA forward. He knew how to run a low-cost airline and he did already try that by densifying seats, cutting staff, and limiting service. He also knows how to dress up for Halloween. Surprisingly, all that did not make AA more competitive. At the end, he appears to be one trick pony. Time to go.

  17. The big money has trumped all to look the other way. From the FAA all the way to the board members

  18. I work for AA and have done so for 36 years. It now pains me to say that under the leadership of one Mr. Doug Parker. There I said it, as I walk away from my computer head down and ashamed at what AA has become.

  19. OJS – does it ever get hard supporting a racist crook, serving up advantages to him and his grifters as the expense of the country? Your back must hurt from the weight of supporting him..

  20. Andrew and Sad State of Our Country (Troll 2) are Troll 1 and Troll 2. We found one more, UA-NYC (Aka Manhattan Waterbug) is Troll 3.

    While watching one of the videos of the 1,000 protesting the NYPD and enforcement of subway fares on November 2, 2019, I thought I saw a waterbug riding on the shirt of one of the protestors. Manhattan Waterbug, was that you?

  21. The worst airline out there. If this CEO would just concentrate on what the customer instead of profits everything else would fall In line.

  22. Too harsh.

    Fact is AA is making a profit, be that directly from flying or not, it is making profit. Its on-time perf improved recently, thats really all pax cares. You tall people hate less leg rooms, but there are plenty of short people out there. US median height is only 5’9″. Don’t let your 6″2 frame skew your thinking.

    AA has a much larger work force than Delta and United, thinner profit on flying is a very reasonable expectation. Yes AA has shareholders to answer too, but it also has 130,000 employees to take care of.

    I don’t really know what you people truly expect from AA, you want them to reduce number of seats, and then you complain they don’t make money flying?

    Just give it a rest and understand this is an industry where all companies will be more similar than dissimilar one way or another.

  23. @chris – american’s margins lag those of competitors, return on capital is low. and “AA has a much larger work force” isn’t an EXCUSE, it’s the way the airline has been managed.

    “Just give it a rest and understand this is an industry where all companies will be more similar than dissimilar one way or another.” Delta would certainly disagree with this. United says they won’t densify as much as American, and offers more premium seats…

  24. It’s been obvious for quite some time now, Parker is in way over his head. Can’t understand why the Board hasn’t acted decisively. Before it’s too late, just do it

    Really am sad to see AA sink to this

  25. This dick head ceo of american airlines is worse man in charge of AA

    Employees of AA hate their job , so do customers

    My humble request to the board of director of american airlines…. fire this SOB he is pathetic SOB who should not be at this job.

    Useless man in charge of AAL

    Meg Whitman will be the best choice in my opinion, so sorry i own the stock of this airline whose has such useless man at the helm

  26. I’m a sports fan and every year especially in football, they try to copy what the champion did. Most times it fails miserably and costs the franchise decades of mediocrity while they flounder trying to find their way. Unfortunately, AA kept the wrong executive. They should have made Kirby CEO and let Parker walk. However with Isom blocking Kirby, AA gets stuck with the front office of the Miami Dolphins.

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