From Shawn: This editorial is written by R.D. Sussman. He has been involved with the airline industry for over 20 years and is an active travel consultant and airline analyst. R.D. is also a huge #Avgeek and theme park enthusiast (like myself) and is one of the most passionate and knowledgeable people I know. For months I have been asking him to write an editorial about the new American Airlines and he finally got sick of my pestering. This is part 1 of 2 about the new American. I sincerely think you will enjoy. I know I did!
The Future of the New American Airlines
AA has come a long way in the past couple of year since US Airways took control of the carrier just after entering bankruptcy proceedings. A lot of the changes were a long time coming, and created a hodge-podge of both carriers under the new guidance of Doug Parker. The challenge has been immense; AA was operating a 1980s airline well into the 2000s, and had not really been able to stabilize or create a unified airline. US Airways on the other hand was well stabilized and operating a profitable airline through the challenges of the 2000s, as well as through several turbulent periods which shook down the entire airline industry.
Now that both carriers are one, I wanted to take a look at the future of AA from the standpoint of how I feel the carrier should evolve & grow. Mind you, this is armchair CEO talking, but it is something I’ve been thinking about for a while.
There are 4 ‘P’s of a successful airline: People, Product, Planes & Places. When you have all four of these working right, you get the most important P of all: PROFIT. Airlines are a business after all, and the shareholders, bondholders & cities they serve all need to be addressed with that all-important profit.
Let’s start with the first ‘P’: People
AA’s staff were among the lowest morale in the industry over the past 15 years. Reasonably speaking, they had good reason to be. Wage concessions, work-rule changes & an uncertain future for example all caused morale to plunge at AA; having two CEOs in a row who were incompetent didn’t help this. Don Carty by and far showed up as being a far cry from his predecessor; being caught in a scandal ruined the trust of his employees. Arpey tried to placate the masses, but failed to unify them into leading the company forward, and as a result, AA’s product began a swift & damaging decline.
Now Parker is in control, and he has begun the unenviable task of unifying the carriers together and to bring a single voice to the world’s largest airline. He has already taken steps to show leadership & difficult decision making, and to further bring the carrier’s staff together into a working body. There is still a lot of way to go here, including staff & management training – particularly around customer service improvement as well as empowerment of the front-line staff to make the right decisions as needed. However, the groundwork is laid to make this transition, something that was lacking under Arpey & Carty.
The second ‘P’: Product
As many people know, I find the product aspect of flying in the USA to be lacking, well behind our foreign neighbors around the world. For the most part, AA is also part of this, but let’s take a look at both the hard & soft products.
AA has been rapidly implementing IFE onto most of their existing mainline fleet of planes, especially on the new A319 & A321 fleets, as well as all current deliveries of the 737-800 series. Older aircraft are being retrofitted if they are part of the fleet plan (See the other ‘P’ for planes) and are not already scheduled for retirement. As for old US Airways planes, these will be retrofitted in time, but there is no current priority on this changeover. In addition, WiFi refit has begun on the mainline fleet, excluding again the soon-to-be retired jets. As for seating, the conversion over to ultra-slimline seats by Weber has begun.
Notable again is that old US Airways aircraft are being modified with the Main Cabin Extra. Domestic First has also been given an upgrade to their seating & connectivity, as well as to adding Domestic First to many of their existing fleet of CRJ700s. International Business is gradually being converted to a new-generation business class seat created by Zodiac, which has an unusual reverse-herringbone configuration, a first in the USA.
Similar to US’s current A330 international offering, this upgrade alone is worth noting as a major improvement off the existing business class product. A larger question that is being asked is the future of American’s Flagship service on international routes: While the new 777-300ER fleet is being delivered with Flagship First, the existing product is beginning to show its age relevant to other first class offerings around the world. This alone points to an area of indecision on the part of AA as to the future of Flagship First.
As for the soft product, this is an area where great strides could take place, but have yet to be made. Admittedly, the buy on board products are severely lacking compared to many others globally, but are on-par with what most domestic ULCCs as well as United currently offer. This isn’t saying much – at all. Certainly if Southwest & Delta can both improve their soft product and make good profits, so can AA. Here’s what I would consider a good starting point, and how it could benefit AA both short & long term:
1.) Bring back basic snacks to ALL flights – this is a no-brainer. While they may be something akin to the ubiqitous peanuts & pretzels, they are something that do give to the passenger at very little overall cost. Southwest even added in snacks such as Nabisco products, and has kept their per-passenger cost lower than just about anybody in the industry, save for the ULCCs. With Delta adding in free premium snacks to their Comfort + cabins, as well as retaining basic snacks for the main cabin, this puts AA to a disadvantage to everybody.
2.) Return basic meals to longhaul domestic flying (transcon & Hawaii/Alaska routes). While currently only Hawaiian offers meals in economy from Hawaii, this is an area of strategic strike value – especially on the longer legs flown. Delta (again) has improved their product to offering sandwiches & premium snacks in Y on transcon stages, and is currently evaluating this on their Hawaiian routes. American could do this first – and for that matter SHOULD – as part of a competitive response. Airlines (all of them) have forgotten that having a meal service no matter how basic is an excellent distraction to a long flight, as well as something that keeps people happy. A full passenger is a HAPPY passenger. And overall, the costs of catering for a transcon/Hawaii market flight per passenger would not be detrimental to the bottom line, considering the healty premiums these routes earn.
3.) Upgrade BoB (Buy on board): This too is a no-brainer. If you look at the current AA BoB offerings, they are nearly identical and show a total lack of imagination to every other domestic BoB product. It is time to differentiate and to expand the concepts of what BoB is for mid-haul routes. Adding a broader variety of sandwiches and hot options (as Air Canada, WestJet & United do) not only increases the revenue spent per head, but also (again) pleases the passenger better.
Overall, AA is keeping up with trends, but not necessarily in a good way with regards to the soft product offerings.