American Airlines has a new internal video for employees explaining that cramming more seats onto planes is good for business and good for customers too. It begins arguing they’re upgrading the quality of the airline’s interiors and asks, “if the goal is to make the aircraft better why are we also adding more seats?”
Vasu Raja, the airline’s Senior Vice President of Network Strategy, says that densifying “both for our customers, for our team, and for the future of American Airlines that’s an amazing thing.” The funny thing though is that while there’s an attempt to suggest adding seats isn’t all bad for customers, and complains that customers don’t pay more for a better product, American never actually offers a reason why squeezing more seats onto planes is ‘an amazing thing’ for customers.
Here’s the video:
There are four basic arguments American makes. I don’t think they hold up well to scrutiny.
Stack ‘Em, Pack ‘Em and Rack ‘Em Makes Money For American Airlines
Raja says densification is how they make money, that “the average fare has never been lower yet at the same time we make money, how can that be?” He suggests is two things:
- their bigger route network, that helps them collect more revenue, and
- “bigger than that, the number of seats we have on the airplane.”
Now unless he’s thinking that more passengers on planes means more people to pitch credit cards to, he’s completely off base.
American’s cost per available seat miles consistently outpaces the revenue they earn per seat mile. In some quarters their costs are higher than passenger revenue and cargo meaning they’re losing money flying airplanes. They go back and forth between earning all of their profit and merely most of their profit from selling AAdvantage miles to banks. The idea that densification drives their profit simply isn’t borne out by the financials.
Vasu says low fares mean they need to cram in more seats, but that means chasing the marginal $49 passenger rather than going after a revenue premium. Remember they are reducing the number of Main Cabin Extra seats and reducing the space both Main Cabin Extra and first class get.
Airline President Robert Isom complains about the carrier’s inability to attract a revenue premium yet has a strategy of competing largely with Spirit and Frontier,
[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.
They are adding marginal seats to chase $29 fares and giving up premium business, which is uniquely odd now that they’re actually selling more domestic first class seats than ever before.
But Delta Does It, Too!
The video doesn’t mention the stats on their Boeing 737s, going from 150 seats before the merger to 160 right after and now to 172 as they remove seat back entertainment even from planes. Instead they mention the plan to add 9 seats to legacy American Airlines Airbus A321s and 3 to legacy US Airways A321s. And they make the case that ‘Delta does it too.’
Delta, of course adds seat back entertainment and has generally happier crew taking care of customers. They’re also a more reliable airline, so the overall Delta experience is better even where there’s a similar number of seats on planes. In any case this management has offered the excuse that Delta makes money because of their fortress Atlanta hub and lack of competition. That would suggest a need for a better product than Delta.
More Room Throughout Coach Didn’t Work 15 Years Ago
Jill Surdek, Senior Vice President of Flight Service, appears in the video talking about American’s “More Room Throughout Coach” which ended 15 years ago. She says customers “make their decision on the overall ticket value” (price) so offering a better product doesn’t win business.
This says nothing to support American’s strategy of less room in first class. It also fails to describe the current marketplace. IATA’s new rich content distribution will finally show customers more than just schedule and price, so customers will for the first time be buying on more than schedule and price. American is preparing to fight with a strategy that’s quickly becoming outdated.
Moreover American’s inability to earn a revenue premium by giving more room to all seats is a straw man when it comes to justifying giving less room to all seats. It says nothing about the advisability of going from 150 seats on Boeing 737-800s (pre-merger, but long after the More Room Throughout Coach experiment ended) to 160 seats when the Tempe team took charge to 172 seats in their latest iteration.
Customers Don’t Notice The Difference
Vasu Raja says that adding more seats doesn’t mean less room for passengers, because the room is actually taken away from the physical seats themselves. He says “the seats are contoured, they’re slimline, so people have more actual legroom, they have more comfort in the seat.”
In other words, customers keep their legroom by using a harder seat with less padding. To him, a harder seat that gets really tough to sit in after a few hours is “more comfort in the seat.”