Inside The Exclusive Leaked American Airlines Employee Briefing That Reveals The Carrier’s Fight To Turn The Business Around

American Airlines seems to have a bit more of a fighting spirit these days. They’re starting to do things. I’m not sure they’ve fully figured out the plan yet, but the first step is sometimes just doing things, clearing out the bottleneck and experimenting and reducing the internal frictions that stand in the way of making improvements.

Legendary Southwest Airlines CEO Herb Keller described ‘doing things’ as his strategic plan. If you don’t have the plan yet, getting stuff done can be the start of finding your way through the thicket, and help you figure out what’s working, what isn’t, and flesh out the full analysis.

I was the first to reveal their premium pivot, back in January. And I’m not sure the strategy is fully fleshed out yet. But it’s beginning to be. I find it helpful to review their ‘State of the Airline’ events for employees, which follow each quarter’s earnings call, and which have been regularly leaked to me for years.

American Airlines Botched The Summer, Looks To The Future

American no longer takes live questions at these events. They ‘survey topics’ from employees in advance and say they’re addressing those. And they have senior executives on hand that employees who attend in person can speak to after the event. It’s clear that CEO Robert Isom strongly prefers to be well-practiced and not surprised.

Isom framed the airline’s third quarter loss as partly seasonal, “third quarter for us is typically not one of our stronger quarters.” CFO Devon May came back up later and contradicted this: “Third quarter traditionally has been a really strong quarter for the airline.”

Summer is peak travel! Delta points out that the airline business is becoming less seasonal. Over the past 15-20 years there’s been an accelerated trend toward earlier school year start, with over 70% of K-12 students beginning the year in August.

Chief Operating Officer David Seymour similarly added, “the summer for us, as you all know, is the most important period for this airline. It’s where we have the most opportunity, but it’s also the point in which we have the most challenges. as well that we have to deal with.”

The airline didn’t run a strong operation over the summer. Some of the was weather events (and there are always weather events). They didn’t run a strong financial business either. And early in the quarter they faced headwinds from tariff TACO and broader economy uncertainty. But Wall Street reacted well to their earnings not being as bad as expected, and that they had a plan for improving them. American’s stock remains higher than it was before the call.

That said, in comparing American’s performance to other airlines, it’s so weird to hear Robert Isom complain so often about United’s lower labor costs. He tries to frame the positive of ‘labor cost certainty’ at American with contracts in place, but generally (1) lower costs are better, and (2) United has labor cost certainty on the upside to a pretty strong degree – their costs won’t be much higher than American’s when new contracts there are finally in place.

New Chief Commercial Officer Nathaniel Piper describes assets American has as “The global network is in place, tools and technology, and most important, committed people that want to turn this thing around.” (emphasis mine) It’s important to see this as a turnaround project, and to embrace that.

Changes To The Customer Experience

One of the biggest frustrations for customers is having their carry-on bag confiscated from them at the gate. The airline doesn’t want this to happen at the last minute, so they start demanding bags get checked even before bins fill up. And it’s even worse for a passenger to board and discover there was plenty of room, right after their belongings were taken away because ‘bins are full’ when they aren’t even full. It feels like unnecessary pain.

American says they’re gate checking 25% fewer bags. In July they said it was 10%. That’s great for customers, but it’s also not clear why this is the case.

The airline attributes it to earlier boarding, but that alone doesn’t seem to explain it. United, Delta and now Southwest have issues gate checking bags, and United and Delta already boarded when American is now starting their process. Gate agents don’t show up at the gate earlier. I need to dig in and find out what’s really going on here.

Meanwhile, david Seymour shares that One Stop Security has now expanded to all London to Dallas flights. That means connecting passengers get their passports checked as they deplane and get to skip customs and baggage claim as well as security checkpoints, heading straight to connecting flights.

Security, our government affairs team, that is we got OSS, our one stop here in DFW. We’re now at all five flights from London Heathrow to DFW right now. Our connecting customers do not just clear passport control, Don’t reclaim your bag. Don’t go through TSA.

He continues that Miami now is using facial recognition for all of their international flights:

[W]e have just rolled out our latest hub, Miami with EPP, that’s Enhanced Passenger Processing, which means essentially for a U.S. customer coming into or a U.S. citizen coming to the United States, whether you’re a global entry or not, you do not pull out your passport. It’s all facial recognition and it’s almost you don’t break stride as you go through and the customs officer welcomes you back to the United States.

Mattress Pads Coming To All Long Haul Flights

American Airlines restored pajamas to ultra-low haul flights in business class this summer and added mattress pads to these flights. Customers love things that make them more comfortable, and the mattress pads make a real difference for the seats. (Without one I’ll use the blanket as a mattress pad, the pad is more important to me than being covered.)

Chief Customer Officer Heather Garboden says that they’re ‘looking at’ expanding mattress pads. She wouldn’t be saying this in such a public setting (American Airlines Group has over 130,000 employees) if this wasn’t close to ‘finally but not quite announced’ yet.

[W]e have extended our mattress pads to business class on all of our ultra long haul flights. And we’re also looking at doing that. for our other long-haul flights as well. So stay tuned for more there.

American Airlines Bedding In First Class

New Planes Coming, Old Ones Will Be Made Like New

American Airlines took delivery of a new Embraer, and was able to get regulatory approval for the interiors of the Airbus A321XLR, despite the government shutdown. The XLR is much cheaper to operate than a widebody aircraft. It will go on premium cross-country routes first, but will also fly transatlantic.

It won’t have as many seats as a Boeing 777 or 787, and will have higher seat costs despite the lower trip costs. They don’t need to sell as many tickets, but they do need to sell premium tickets. So the plane is configured with:

• 20 business class suites
  
• 12 premium economy seats
  
• 123 coach seats

American Airlines Airbus A321

As Senior Vice President Meghan Montana shared (by the way, that’s just a great name):

We will be the first U.S. airline to operate that airplane, and we will be the first global airline to operate the three-cabin configuration. So we’re super excited about that. The narrow-body economics and the ability to fly internationally makes it a really nimble addition to the fleet.

For 2025, American will have taken delivery of:

• 22 Boeing 737 MAXs
  
• 1 Airbus A321neo
  
• 12 Embraer E-175s

Plus, I believe half a dozen Boeing 787-9Ps. And they’re retrofitting planes with new interiors. Next year the delayed retrofit of the Boeing 777-300ERs will take off. That means new business suites on those planes (but no first class).

And they announced during the earnings call something that I had earlier reported, that they’ll retrofit Boeing 777-200ERs:

• Business class suites
  
• New premium economy (much nicer than the current product)
  
• Refreshed coach cabin (the seats are attractive-looking)
  
• ViaSat wifi (huge upgrade over the current product)

American is retrofitting large regional jets with ViaSat wifi – for years I’ve avoided flying American’s regional jets when possible because the air-to-ground Gogo was practically unusable, and that meant flight time was less productive time. But this will be ready in time for free wifi starting next year. And the interiors of these planes are getting updates, too.

While we’re at it, we’re refreshing the interiors, we’re swapping out seats, we’re adding new larger overhead bin storage. Again, all in the effort of improving the onboard experience.

Here’s the piece that I find most important in all of this: I’ve been saying we’ll know American Airlines is serious about premium investment when it moves beyond small wins in policy changes like easier standby and not taking away business class headphones an hour prior to landing and commits real dollars to the effort.

Montana laid out the financial implications for American’s capital budget. They’re spending more money. I still also need to see Robert Isom on the front line laying out the strategy and explaining to employees the vision for the airline, and what kind of service that means (and how that benefits front line staff in profit sharing). But this is a start:

I am a finance person, though, so I’m going to talk about what that means for capital expenditures. We are investing about $3.8 billion this year, which is a mix of those new deliveries and the retrofit programs. And we’re going to continue to invest next year and beyond, also in lounges and the customer experience. So from 2026 onward, we expect CapEx to be anywhere from about $4 to $4.5 billion as we go forward. So, yeah, exciting stuff.

It’s not an extra billion a year in capital spend, but it’s a start. As I’ve explained, retrofitting the Boeing 777-200s actually saves capital spending, and Montana lays this out too – but it’s still headed up and to the right.

[T]he big reason we do it from a finance perspective is it allows us to delay having to replace those planes. And so practically what that means is we will delay or push out $7 to $9 billion of replacement costs through the end of the decade, so we can reinvest in other parts of the fleet and the customer experience and lounges and other things that are going to make sure we’re positioned to win. So it also de-risks our reliance on the OEMs and is a really cost-effective way to enhance the product.

Changes To Route Network

American describes the new premium-heavy Boeing 787-9P as the “most profitable widebody in the system.” It has 51 business class suites, not just 30 as on earlier versions of the plane. It’s going on routes where they think they can sell a lot of business class. They say they’re filling those seats “at fares that are really great.”

Adding these planes frees up aircraft for other new routes and together they’re excited about adding,

DFW to Zurich, Philadelphia to Prague, Philadelphia to Budapest. We have a number of new routes coming. Some will be on the P, they’ll be mostly focused on Heathrow, but by putting those airplanes in Heathrow, we free up standard configured 789s to go to these new destinations next year.

Then moving on to the XLR, having that first airplane now outselling in JFK LA, you can go buy tickets on it in the front cabin, premium economy. And then we’ll have more of those airplanes coming in over time, and they’ll be deployed in transcon to start as well.

And I’ve said this in this venue before, but just to remind everybody, the XLRs will be first deployed on our transcon flying between JFK, LA, San Francisco, Boston, LA, and Orange County. And once we fill out all of those routes and replace the 321Ts that are in those markets with XLRs, then we’ll start pushing the XLRs transatlantic.

Next year the Airbus A321XLR replaces the A321Ts flying premium cross country routes. But they “will have one transatlantic route on the XLR.” (That’s been subsequently revealed as seasonal New York JFK – Edinburgh.) Then transatlantic will ramp up when “2027 rolls around and we have between a half dozen and ten XLRs to deploy in transatlantic flying.” And that means that a year from now they will have:

a bunch of new long-haul routes announced, transatlantic, transpacific, We’ve got 78Ps coming in. We’ve got XLRs coming in. So we just can’t wait in network planning to share all of our ideas with you when we get to about this time next year. So look forward to that.

Ameircan Airlines will add transpacific routes! American still has challenges, but they also still have revenue coming in and should make (some) money in 2025 so there’s still a window to make the investments necessary to get the airline on the right track.