American’s Chief Operating Officer said that American and US Airways wouldn’t combine until late 2015.
American’s Chairman and CEO gave an interview where he said that the two frequent flyer programs would combine in the first half of 2015.
At first I thought these two statements were in conflict. Perhaps Parker was misquoted, or misspoke, or a change in course came about just in the past two weeks.
But someone at American pointed out to me that Isom was talking about the passenger service system and Parker was talking about the frequent flyer programs.
Should that even matter?
For passenger service system, think the reservation system, the website, basically combining the customer-facing systems. Reservations get combined. They operate effectively as a single airline (it would be possible to combine passenger service systems without having a single operating certificate and ‘being’ one airline, you would have “American Airlines Flight XXX Operated by US Airways“).
Generally when airlines merge they have a ‘big bang’. Call it “Customer Day One” or “the Apocalypse.”
Everything combines at one moment. They wargame it for weeks. They run tests transitioning all of the data — frequent flyer accounts, reservations, everything. One reservation system gets shut down, and the surviving system is what everyone works off of. And invariably it’s a disaster.
Well, not invariably. It was pretty bad when US Airways and America West combined. They told everyone lines would be long at the airport, so check in online. But the website didn’t work.
Much worse was United-Continental, where reservations went missing, miles went missing (and others found themselves with hundreds of thousands of extra miles). Need help because of the disaster? Hold times stretched on for hours.
Delta-Northwest wasn’t without its glitches but went much more smoothly.
I confirmed the timeline for the frequent flyer program integration with American. Here’s what I was told:
Doug’s interview is accurate… We expect to have a combined FFP sometime in the first half of 2015. That hasn’t changed. But, this is the first time Doug has said anything public about it.
Reconciling the two timelines suggests American could be charting its own path: a phased-in integration rather than a single cutover.
Combine the frequent flyer programs. Then months later combine the reservation systems.
On the one hand that seems strange, like it would entail a ton of extra work. US Airways’ systems would have to learn how to upgrade American frequent flyers.. since that’s all there would be. I wouldn’t think they’d be investing in reprogramming US Airways legacy systems unless it was absolutely necessary, the timeframe to get any sort of return on the program investment would be really short.
It might be a less risky strategy to go piece-by-piece but it may also be a more expensive strategy. It could be they view that as worth it.
And since we don’t have precise dates announced by American for the integration of frequent flyer program, they haven’t made a commitment, it’s difficult to know. But reading the statements of the CEO and the COO we would get a different picture of what could happen… a new, unexpected (relative to US Airways/America West, Delta/Northwest, United/Continental) approach of a phased-in integration. Frequent flyer program first, reservation system later.
One imagines though — given that the airline hasn’t announced its timeline and that we’re talking about as much as 10 months away — that it depends on how the work progresses. With the broad ranges we’re being given, this all could slip.
- First half of 2015 could be second half of 2015.
- Second half of 2015 could slip to the end of the first quarter of 2016.
But it’s still a fascinating clue as to how they could be thinking differently about the integration. Don’t do it all at once. Combine frequent flyer programs, which is great for flyers, we won’t have to wait to combine miles and elites will get full benefits across both airliens more quickly. Then combine reservation systems later.
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More interesting was Parker’s statement that going to a revenue-based frequent flyer program (like DL and UA have recently done) wasn’t “even on the table yet.” Obviously, they’ve already got enough on their plate.
From previous comments (and just knowing how these guys think) I’m pretty sure they WANT to go to a revenue-based program. That said, I’m also sure they will observe what happens next year when DL and UA make the leap. If I were to guess, a few high fare paying customers — particularly in highly competitive markets like NYC long haul — MIGHT defect to DL and UA to earn more mileage. (Of course, AA could counter that with special route/fare promos). On the other hand, folks who buy discounted tickets — particularly longer haul tickets — might now show a preference for AA because the mileage earning on their competitors will be terrible. This could result in increased demand for AA tickets and, perhaps, more revenue for AA.
BTW, this is the logic Southwest has long used to justify not “following the pack” and charging for bags. They claim that by being the only one with “bags fly free,” the extra customers they attract “pays for” the lost revenue (I’m personally skeptical, but that’s what they claim).
In any event, the fact that AA has too much on the table to blindly follow the pack will make for an interesting industry experiment next year. I’m sure AA will crunch the data and then decide what to do.
@iahphx wrote, “More interesting was Parker’s statement that going to a revenue-based frequent flyer program (like DL and UA have recently done) wasn’t “even on the table yet.” Obviously, they’ve already got enough on their plate.”
I didn’t make mention of this because I didn’t think it was news, at least it wasn’t news to me. It is exactly what I’ve been saying for the last 2 months. The mantra is “integrate before we innovate” that is the phrase used across the entire company with everyone at American you speak to.
US’ system can already handle upgrading AA’s elites (code is there from UA/CO) the functionality just needs to be turned on and AA’s elites given a tier code that can be queued for upgrade processing. It’s Sabre that can’t handle it without significant investment.
They need to integrate FF programs first to resolve the issues of duplicate numbers. Pre-HP/US the US FQTV numbers were alphanumeric, same as AA is. So now you have a lot of cases where a current US FQTV number has an identical match to an AA FQTV number. So they can’t just do what HP and US did in the previous merger, they need to issue new FQTV to many or all of AA/US FQTV members, depending which loyalty IT system they stick with.
I also don’t really see why they need to consider going revenue-based if they’re the last legacy carrier standing? There’s obviously a market for MRs/people that value status, why alienate them if they have no where else to go?
One thing is for certain, US has never shied away from “selling” miles out-right.
Gary —
I think the significance of Parker’s comments about a revenue frequent flyer program (other than coming from the top) is that it indicates any move is pretty far off. As recently as April, analysts like Jamie Baker (who’s pretty knowledgeable about the company) predicted that a change could be announced before year end. That now seems improbable.
http://www.star-telegram.com/2014/04/08/5720071/american-canceled-34000-flights.html
@iahphx – then you shouldn’t be reading Jamie Baker *on frequent flyer programs*… when I’ve written that a revenue-based program wouldn’t be announced this year at least 🙂
Do you have any thought that if you are a US Air Chairman’s Preferred in 2015 that you would be moved over to AA Executive Platinum?
@dan ray – if they keep to the schedule of combining programs in the first half (or even during) 2015 then a US Airways Chairmans Preferred member would certainly have the equivalent status in AAdvantage.
If the US system is the one that is ready to handle the merged FF with minimal investment (per @IT Nerd), then wouldn’t the current US FF elite status levels likely become the default? Certainly they can/will make some changes, but seems more likely that 4 elite levels would remain.
So they are taking the WN/FL approach of drag on as log as possible? I bet they wont be fun.
The Southwest-Airtran model has been a steady phased approach. Every few months, they announce that at starting the next time the open the schedule, Airtran flights out of a few cities will cease to exist, and Southwest will begin operating the exact same flights. They load new routes into their SW schedule, just like airlines do all the time, and since they do it as the schedule opens, nothing to integrate. The Airtran systems slowly become less and less utilized.