Airline Observer is well worth subscribing to for recaps of airline earnings calls and investor presentations. Here’s a free post on airline catering and naturally Brian Sumers picks on American Airlines here. Their CEO’s philosophy is that employees should never spend a dollar they don’t have to and it shows.

American cheaps out on premium cabin wine and repurposes premium economy amenity kit contents for Flagship first class, too.

American is spending a fortune on new business class suites for long-haul and premium domestic transcontinental routes. That’s all great. Clearly, it wants you to see it as a premium airline. But American still doesn’t sell real food in economy class on flights shorter than 1,300 miles. That decision probably saves American money and makes logistics easier. But is it good for the brand?

…Can I pick on American again? It serves white-labeled pretzels. It looks cheap, no?

AA’s pretzel bags showcase their different hubs. This isn’t all, there are others for the missing hubs.
byu/YHDiamond inamericanairlines

American Airline used to offer baked on board cookies in premium cabins. These were cheap to offer, but US Airways management dropped them. They initially offered a more expensive prebaked cookie, that completely missed the point. The smell of freshly baked cookies wafting through the cabin was amazing.

US Airways aircraft only had one over in first class, and they thought the service couldn’t be provided without two, and they didn’t want to spend the money to retrofit galleys on some aircraft with an additional oven (in fact, American wasn’t offering meals on flights short enough where a crewmember couldn’t finish heating meals and then use the same oven to bake cookies).

The biggest problem with American Airlines management, I think, is that they focus on costs instead of revenue. They think on-time performance is all they need to accomplish in order to succeed, and that might be true with commodity products but we’re less and less in a commodity product airline world. Products are differentiated, customers now choose on more than schedule, price and reliability, and American Airlines as a high cost airline needs to earn a revenue premium in order to be profitable.

When current CEO Robert Isom was the airline’s President, he explained his strategy of focusing on competition with Spirit and Frontier. However Spirit and Frontier, themselves facing higher costs, are even chasing increasingly premium revenue!

[T]oday there is a real drive within the industry and with the traveling public to want to have really at the end of the day low cost seats. And we’ve got to be cognizant of what’s out there in the marketplace and what people want to pay.

The fastest growing airlines in the United States Spirit and Frontier. Most profitable airlines in the United States Spirit. We have to be cognizant of the marketplace and that real estate that’s how we make our money.

We don’t want to make decisions that ultimately put us at a disadvantage, we’d never do that.

United Airlines began its turnaround under CEO Oscar Munoz in very symbolic fashion. Munoz traveled the system visiting employees and lifting morale, and to show that things were different they symbolically dropped the low quality coffee they were serving (FreshBrew was derided as Fresh Poo), replacing it with Illy, and paired it with Stroopwafels. American Airlines serves FreshBrew. Here is Sumers,

[A]s a few North American airlines — Air Canada, United, Delta, and Alaska among them — have shown [, t]hese airlines understand that while on-time performance is the biggest driver of customer satisfaction, they don’t have that much control over it. They can’t control the weather or how many front-line employees call in sick, but they can control food (along with working WiFi and happy passenger-flight attendant interactions), and that goes a long way toward helping an airline improve its satisfaction scores.

Getting it right — so people will pay more to fly you — costs a lot of money. But that’s not all. The people running the food and beverage operation need to think less like airline executives and more like restaurateurs or hoteliers.

I would put it a little differently. It isn’t just that airline managers need to think of their product differently. The management culture of the airline needs to stress the importance of paying attention to the little details. Those aren’t even always more expensive. What pairs well on the plate? Don’t just check boxes with airline meals. My personal record is three dishes with lettuce in American Airlines domestic first class, which made no sense. But it too often seems like, there, a meal is a meal rather than obsessing over the impression it creates. And managers only do that when it’s emphasized (and rewarded) from the top.

And sometimes the emphasis on short-term cost savings winds up far more costly in the long run. American Airlines never invested in mock ups for its new standard domestic product that rolled out with the Boeing 737 MAX and eventually across (most of) the fleet. As a result they didn’t realize problems with first class seats that lacked under seat storage, the bulkhead seats were too cramped and people stopped paying for them, and that the seats which lacked back support also didn’t even have the tablet holders provided in coach. They didn’t realize rear galley lavatory doors slammed into each other, and that sinks which weren’t deep enough sprayed water back onto customers. So they had to spend to retrofit planes. All of this is no surprise since their CEO at the time didn’t even bother to try the product they were selling to customers in the first six months in the was in the market.

In contrast, Singapore Airlines once built an Airbus A380 out of manila envelopes. The seats inside the model even reclined. Their tagline? “It’s the small details that make giants in the sky.” To succeed in the current airline environment, it’s critical to sweat the small details to deliver an outstanding product. Otherwise you’re sentencing your business to financial underperformance.