Incoming American Airlines CEO To Employees: Cut Costs, Don’t “Spend A Dollar More Than We Need To”

At the ‘State Of The Airline’ employee forum last month current American Airlines President and incoming CEO Robert Isom laid out his vision for the airline. It was mostly about operating reliably as the priority that matters most. One line, though, struck me at the time. I didn’t write about it. Instead it’s been tossing around in my head ever since.

The last piece here is be efficient and accountable. This is for everybody. We can’t spend a dollar more than we need to. And we shouldn’t. We have to be on the lookout for opportunities to save while we provide a great product and while we put all of our fantastic investments to work.

At first I took Isom’s remark to be a simple platitude. Of course you shouldn’t spend money that’s unnecessary and wasteful. But what does this mantra really mean in practice, and what is the message that he’s sending to managers?

Looking for places to cut costs, and avoiding expenses, aren’t priorities that are ultimately consistent with delivering a top notch product that drives a revenue premium – and given American’s relatively high costs and high debt load, they need to be driving revenue premium by delivering a product customers willingly pay more for.

  • If an airline needs to buy seats, is it really necessary to spend a dollar more than needed buying them in order to get the latest or most comfortable product?

  • If you need to provide meals to premium customers, how much do you invest? Steak or short rib (‘mystery meat’)? How much should you put into your wine program?

  • Do we spend a little more on the catering company that delivers a great product and always stocks flights properly and on time, or accept a bit lower quality meal and occasional miscatered flights? One provides a consistent great product for customers, the other risks criticism for spending “a dollar more than we need to.”

  • When there’s life left in a product, do you replace it because it’s not the best experience? Is that dollar of spending necessary, especially when you believe it’s operational reliability that’s what actually matters?

Isom chooses his words carefully. He’s far less off the cuff than Doug Parker. Being careful with money is very intentional for him. And there’s a difference between ‘not spending a dollar more than you need to’ and ‘being a good steward of shareholder resources’. As the mindset of avoiding an extra dollar of spending whenever and wherever possible repeats itself over and over throughout daily choices managers must make, that leads to a different product than where the mantra is to produce the sort of premium product customers will pay more for – that will be needed to deliver the kind of financial performance American needs to be even with the industry (let alone ultimately avoid the courthouse).

US Airways delayed investing in internet for years, believing they’d never generate more money selling the service than it cost to install. They didn’t want so spend money unnecessarily. Eventually they admitted they were wrong when they saw they had been losing business for some time from customers who weren’t willing to book tickets on an airline without internet.

I’ve said many times that “you can take management out of Tempe but you can’t take Tempe out of management.” The idea is that America West took over US Airways and then American, with America West now doing business under the American Airlines name and with the America West mindset. But Northwest Airlines may hold equal prominence going forward.

Northwest was a terrible airline with a (mostly) terrible product. The Worldperks program was generous with its elites because they had to do something to keep customers loyal. They simply didn’t like spending money, and didn’t think customers noticed, cared, or knew the difference.

For years the World Club at Washington National airport begged and begged for authorization to paint dirty scuffed walls. The paint job never happened, the airline was acquired by Delta, and the club closed.

There are a couple of basic assumptions that I have about people in the airline industry. These are rebuttable presumptions, and I am always looking to be proven wrong. I assume,

  • if someone came up under Bill Franke (America West, Spirit, Frontier, Wizz Air, Volaris among others) that they believe in cutting costs everywhere and always and de-emphasizing customer experience.

  • if they spent much of their career at Northwest, quality product and friendly service aren’t focal for them. They may think that those things are but it doesn’t run in their blood.

Robert Isom was at Bill Franke’s America West from 1995 to 2000. He was Senior Vice President of Ground Operations and Airport Customer Service at Northwest and also Vice President of Finance there. Several American Airlines executives over time have come Isom’s Northwest days, and it’s a presence at American today alongside legacy America West.

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. Northwest, was in fact, a great airline :-). Sure they had a slightly Wicker domestic product with no IFE, But their staff always took care of customers, and they usually did it with a smile on their face. It was difficult to secure international upgrades compared airlines like United, but I always had a wonderful experience with them and miss them as an airline.

  2. Does CEO Robert Isom’s vision of the future of American Airlines mean we will not have table cloths covering our tray tables when we are served “mystery meat” for dinner during the next five years?

  3. The way these people got to be where they are today is by not going anywhere in 30 years, when more talented minds had left long ago, just like the public sector gov. Keeping a “great product” is not gonna happen.

  4. If they cared, they’d woo Gordon Bethune on to the Board or hire him as a consultant. That man knew how to lead and transform an airline… as he built respect from employee and passenger groups. Today’s AA reminds of pre-Bethune Continental. (I keep escaping the HP Tempe management only to find they take over the carrier I have moved to… it’s like a pack of gum stuck to my shoe that I’ve been trying to remove for 15 years. I’m afraid the next wave of mergers will target my current carriers.)

  5. What an unsubstantiated pot shot at Northwest Airlines Gary, a good value airline for Midwest business travelers.

    In 2009 Northwest was above your fanboy Tilton at United in quantitative JD Power satisfaction ratings as well as America West.

  6. Things will never get better at American as “Team Tempe” is running the airline. This group brought American Airlines from first to worst,

  7. @SB For the most part I agree with you and yes Northwest was not IMO that good domestic. International, I loved flying the US (flew all the gateways)-Narita route many times. Northwest 747-400 first class, and I’m was a happy camper. And yes, I miss Northwest. Oh, I’m a million miler with Delta and grew up in ATL and Delta. I go back to Delta props. So I’m glad if Northwest had to be a fallen flag, it went to Delta.

  8. Getting rid of upper management would save the airline millions.
    The cash cow is the little workers who provide the service, not the self serving upper management..
    They only care about there golden parachute and not the airline as a whole..
    You can blow smoke with words, but your actions have spoken volumes to the true intentions behind carefully carved words in a speech..
    Start at the top!!

  9. @Joe T, I could not agree more at your comment! Team Tempe needs to go, only then can we become American Airlines again.

  10. PDT you hit the ball right out the park. I left Continental and went to work for American not long after Gordon Bethune came to the airline. He never made a promise he couldn’t keep, and he loved coming on the planes and seeing for himself what was going on. It is a complete disgrace what these guys are doing to our customers.

  11. I flew AA coast to coast RT recently, LAX-PHL. Nice plane, but VERY substandard service by a non-interested crew. I’ll not be flying AA again if I have a choice, and I certainly do! My current 3 go- to airlines are Alaska, Southwest, amd United.

  12. Meet the new CEO same or worse than the former CEO
    To quote a philosopher from these posts
    American Airlines a depressing airline where I feel somewhat
    like a welfare recipient even in First Class
    Was once a fairly good airline but lost its way with poison Parker

  13. Such a joke this airline going to go further down hill if not bankruptcy I mean make up your mind low cost carrier or premium product???? I agree with someone above fire all of these usair people save tons of unused money! I mean worthless!

  14. What a completely ridiculous article. American does not invest in the customer experience? They just rolled out new cabins on most of their planes that have power in every seat, device holders, super fast Wi-Fi, clean and modern. The new delivery widebodies have brand new, huge IFE screens They have world class lounges. We get it, you’re mad they matched the cabins to the same density as Delta. You’re mad they got rid of the ancient, outdated screens on the narrow bodies. You can debate I suppose what they have done but to say they are not investing in the customer experience, and it’s being run like America West makes you just not seem serious. This was 30 years ago. Get over it pal.

  15. I fly American almost exclusively because it’s my corporate carrier and I’m not too far from being a million miler, so I feel qualified to make this comment.

    American’s problem is the employees don’t give a crap. They work for greedy idiots in upper management and their view of customer service has been degraded. They don’t care about their customers because upper management doesn’t care. AA employees are demoralized.

    American Airlines should be renamed American-CAN’T. .

  16. I think their strategy is to leverage their monopoly power on some hubs to get the customer who HAS to fly with them no matter how BAD their product is.

  17. No one I know is much enthused about Isom as CEO, but you can’t simply blame Team Tempe. Scott Kirby was part of that team for ages, and yet everyone I know who has ever worked with him or for him has praised Scott as the smartest guy in the business and the CEO to beat this generation. United is going in a very different direction than American, and that is very much Scott’s playback in execution.

  18. To ALL AA employees out there, please please make sure to start saving your money from each pay check, $25, $50, $100, $500, whatever because this company is on the straight path to a bankruptcy soon which may mean wage cuts, cut hours. This Ukraine situation makes things worse as any spill over into other European countries and AA could cut European flying.

    Just be ready for possible bankruptcy, wage cuts and lay offs!

  19. @Jim “They just rolled out new cabins on most of their planes that have power in every seat, device holders, super fast Wi-Fi, clean and modern.”

    Less legroom, less padding, smaller lavs… less comfortable seats and less room in first class… fewer Main Cabin Extra seats… no seat back entertainment.

    The new Oasis cabin, American’s standard domestic product, was a downgrade not an ‘investment in customer experience’

  20. Leff’s comment that Northwest Airlines “was a terrible airline” is a statement that I find offensive. I was a Northwest employee for almost twenty years, and I can state with pride that each one of my NWA compatriots with whom I had the pleasure of working showed pride and love for the company. To call NWA “terrible” is unfair and horribly inaccurate.

  21. The employees at my company virtually beg our travel department to NOT BOOK them flights on American Airlines!
    Everyone dislikes their service.

  22. Basically, like so many other CEOs, Isom is saying. We need to keep costs down, so we can keep executive pay high. Union negotiations are progressing, and Isom is basically telling its demoralized employees to not think they might get the raises they deserve to bring parity with other airlines.

  23. Agreed
    American is the pits
    Ok
    New aircraft- stuffed like anchovies .
    Through me a biscotti and water..
    No room to move – stand – stretch…Airbus configuration is just plain wrong.
    Staff from tickets to onboard.. substandard.. careless
    Airline of choice from Philly but worth a ride to Newark or jfk for better options…
    T

  24. How many Northwest flights did Gary take?

    I flew 1.5 million miles on NWA and I loved their a) reliability b) technology that even back in 2009 when Delta shut out the lights, was better than what Delta has now c) WorldPerks which provided fantastic value, and service, to this Platinum flier.

    It’s true Northwest wasn’t the flashiest airline. But within a year of the sunset of NWA as an airline and nwa.com, I badly missed them, and still do, when it takes Delta 25 minutes to reissue a ticket that took Fn+9 key on NWA’s system.

    It’s funny that so much of Delta’s performance metrics are because they used Northwest’s TechOps systems and practices.

    And apparently Gary doesn’t fly Delta out of JFK which has a in-flight base that makes some of the old, occasional surly NWA AFA MSP based crews look warm and fuzzy.

  25. AA is dead to me, a 2MM who was Executive Platinum for 12 years straight. Even as permanent Platinum, there are no bennies to flying AA and significant failures in schedule and the most basic of services.

  26. Take care of your employees and they will take care of your customers. These highly paid executives want to cut corners and treat their employees poorly. American and Southwest need to heed Herb Kelleher’s advice.

  27. How much is the America West exec team getting paid?

    I reckon that number is aboub20 million more than they have to. No matter what that number.

    Cheap, selfish, greedy ceo in a long line of people who drove employee morale, customer experience and shareholder value into the toilet.

    Stop flying America West. Join another carrier. Dump their stock.

    This exec team is like a parasite jumping from host to host, bleeding it dry, then repeating.

  28. Flyoften – agree! It is starting to look like a recast of Pan Am! How many CEOs did they have with golden parachutes? How many times did they file bankruptcy before the airline was trashed and shut down? This is similar to what Icahn did…. Just the same as the execs who destroyed Sears…..

  29. I rather pay for Emirates or Qatar Airlines than fly American Airlines. I pay for services and qualities . This man is cheap. Please fire him. Mystery meat. Cheap wine. Oh hell no.

  30. In my opinion , those who do not want Isom should turn their ire toward the Board at AA. The Board anointed Isom as the heir apparent to Parker . The Board ousted Kirby .
    I am of the opinion that any Board should conduct a search for CEO.
    If Isom is truly the best option , then he would have emerged at the top of a competitive search . How can you know that you have the best person for the job without a search. UA went outside the company and brought in Kirby and Nocella and UA seems to be on an upward trajectory.

  31. David Holmes,
    there is no doubt that the Delta of today is more the product of BOTH Delta and Northwest than any other airline merger was the sum of its two parts. If you can’t or won’t accept that Delta brought just as much to the merger as Northwest, or any other person fails to see the other side, then you and they have missed the plot line and don’t understand or can’t accept why Delta is at the head of the global airline industry.

    and the reason why the AA merger has never delivered the competition to Delta and United is because American today is still ideologically America West. While I think Isom is capable of separating himself from some of Parker’s blunders, he was schooled in the America West mindset which ran USAirways and American for so long that it is doubtful he can really move the airline forward.

    The bottom line is that frontline workers in a service industry should not be told that cost control is their job. Their job is to deliver service within guidelines that the company has provided, including being able to interpret rules and guidelines where necessary to provide good service. American hasn’t understand that concept for 10 years; even their most senior employees have lived in that environment for so long that they don’t know why airlines like Delta consistently outrank American in customer satisfaction AND profitability

  32. Appears that many comments are directed towards the CEO. What are the executive compensations at other carriers? Probably not much difference because executive compensation is based on what the market dictates. Isom can take a $1 compensation and outcome will still be the same.

    The primary problem at American is the workforce. Pre-mergers America West was the little engine that could – young, energetic, and great attitudes (Almost sounds like Southwest. Hint, hint). Merger with a larger east coast-based US Airways changed those dynamics. It took several years for the synergy to take hold, but the workforce mentality had started to change for the worst albeit a better product. Another merger with another dumpster fire of an airline created what you have today. Some mergers work out better than others and the synergy happen faster as long as the company share similar values.

    If you want to fix the problem, get to the root of the problem. Observe the attitudes of your employees. How are your customers treated from the time they arrive at the airport to the time they walk out of the airport at their destination? Every one of your employees play a role in that customer’s experience. I can tell you from experience that giving employees higher pay does not equate to better service. It’s about company hiring practices and creating a work culture that foster good customer relations. I just don’t see that happening anytime soon at AA.

  33. So here we are. Another airline exec showing his ‘cards’. The aviation maintenance industry has declined and continues to do so. From toxicity, retaliation, strong-arm tactics to “save a buck and give ME more”. If these clowns were to cut THEIR SALARY first and actually lead … that would be a start. At least this guys’ being honest upfront on how’s he’s going to screw over the employees who are the ones that MAKE the $$. (Management only cuts costs further giving the impression that THEY are the ones making profit) These people live in their own world where their distorted sense of reality tells them THEY are the essential ones.. no no. Again, Profit over safety. Money over the well being of employees. We’re sitting on a ticking time bomb, their will be another major aircraft disaster thanks to these circle jerking execs and management. Pushing out good elder mechanics (or other employees) and hiring young impressionable kids that will do anything to keep a job even if that means doing the wrong thing, for the wrong reason. It’s crazy because the flying public has ZERO clue the reality of the aviation maintenance industry. This doesn’t just go for screwing over mechanics but is also going to affect crews as well. Your living a pipe dream if you believe aviation as a whole is “safer” based on, “planes not falling out of the sky” alone… the toxic culture and turned-nose for safety still exits I.E, the human element of an unsafe culture still exists and is getting worse. The difference now is these airlines and aviation companies have learned to cover these things up, knock down employees who speak up- they have PR department’s dedicated to putting a positive spin on anything negative and contorting reality in a way that the public believes, “everything’s fine with flying- nothing to worry about” . We as a people, the masses need to rise up and speak out. Write your senator, congressman, the DOT, the FAA even these back-yard bandit upper level execs; TELL them your onto them… Save a buck at the cost of safety. That’s the name of the game and it’s disgusting. https://aviationmxtruth.com/

  34. Gary, you are looking at 1 sentence as if it was the Bill of Rights. As you mulled on it, did the thought ever cross your mind he was directing that sentence to station managers and corporate offices? I did 35 years with the various airlines that have become AA. In my Piedmont days, we were issued a parka in cold cities, but when we transferred out the parka had to be returned. In my last years working, in balmy south Florida, when the new uniforms came out, we were ALL given parka’s, and coats! It may seem like a small expense, but when you issue 2500 winter parka’s to MIA,FLL,PBI it ends up being a silly expenditure. In my airline life, I have seen clerical staff order all new office supplies each time there is a new clerk taking over a desk. Managers who came thru and threw out functional ,solid wood office desks and replaced them with Staples press board systems because the wooden desks were “old”. I really believe what Isom was suggesting was aimed more at the working front line to justify what they were spending money on at the local level.

  35. This is why deregulation never works. The airlines undercut each other and the customer suffers. I will never fly Frontier again, because of their uncomfortable seats on the A320. It was only a three hour flight to Denver and I felt like I was sitting on a bleacher. Then my favorite. Every economic downturn the airlines look to the taxpayers for a bailout then buy another airline with our money. The cycle begins again. United buying Continental is a perfect example.

  36. Ipsom’s remarks and JD’s experiences while working for now defunct airlines are certainly not reflective of American when it was, in fact, one of the premier airlines in the world. If that is the culture that exists now it is no wonder that it is such a mess. The is reflective of a clueless group of executive USAir carryover management and culture foisted on legacy AA by the loser USAir bunch, of which Ipsom is a part. Typical “head in the sand” lack of what is top to bottom drastically wrong. If you don’t understand the root cause of the major problems and issues, how do you expect to even begin to solve them?

  37. From first to worse is exactly right! Thanks to America West or US Airways or which ever one is running or “ruining” American Airlines.

  38. I fly American for what I have decided was the LAST time in my life in January 2022. Flew business class. They served a turkey sandwich that was dry an worse than something o e would buy is a gas station. Inedible. Flight attendants said they only stock 2 cans of each beer selection and keep telling management it’s not adequate to meet customers needs, but they don’t listen. My bags did not make it to my destination. They knew exactly where they were, and despite telling they would arr6the next day. They did not. They did not know why. They didn’t know what to do, or accept any responsibility. It took 4 days of me wasting time and money on international calls and multiple visits in person to the airport to tell me “I don’t know what to tell you”, no sympathy,compassion or care. Just shrug shoulders and send me away. I finally wanted on hold for 2hours. Customer service rep tells me “they’re working on it ” and was eager to end the call. I BEGGED him to call the airport where my luggage was to make sure it was put on the next plane to my location and it finally showed up. Half of my vacation ruined. I submitted receipts for approximately $1500 for clothes, toiletries, medications needed while we had no stuff. They lost revenue on that trip due to what they had to compensate me, and list a customer for life. I hope they go out of business. The sooner the better.

  39. Besides all that’s been mentioned being absolutely true, how come nobody is mentioning that AA and Delta have issued uniforms full of toxicity. There is a Facebook group with over 7000 FA’s Agents with horrible health problems, from loosing all their hair, their reproductive system, brain cancer and most prevalent skin issues. The airlines don’t care, there are hundreds of applicants for these jobs. It’s beyond me that this is not common knowledge and nobody seems to care. I only mention this since my husband passed away recently from exactly those exposures to the toxins.

  40. American Airlines needs to pay attention to Dallas based Neiman Marcus. Known for the best customer service in the retail industry. Not now. The corporate ladder got really top heavy and greedy. Now they’re all retired and living fat and happy compliments of the dedicated and loyal salespeople that paid there fat salaries. Sounds real familiar. Americans upper management wants everything for nothing. Their employees are exhausted, disillusioned and flat over it. Put your employees first and they’ll put the customers first. So many successful examples out there. Greed is an amazing thing. The higher ups cut costs and pass the savings and bad attitudes to the employees who in turn hand it out to the customers. This isn’t hard. Slow down on the bean counting and pay attention to your VALUED employees. Try it, you might be surprised.

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