Critics attribute American Airlines' struggles to a lack of leadership and failure to focus on details. They argue that the airline needs to deliver a premium product that customers are willing to pay more for, given its high cost base. Instead, American Airlines has focused on cost-cutting measures and maintaining a domestic route network without investing in policies, people, and products that could enhance customer experience.
During an earnings call, the company highlighted efforts such as cost savings, attempts to recover lost business travel through sales efforts (which will increase costs), and hopes that other airlines will reduce capacity to help raise prices. However, these strategies depend on constant market conditions which are subject to change.
The discussion centered around winning back business travel lost due to previous strategies implemented by Vasu Raja and Robert Isom. These strategies involved cutting managed business travel and agencies while reducing costs and discounting fares. This approach resulted in significant revenue impacts: $750 million loss in revenue was observed in the first half of 2023 with expectations of similar losses for the second half.
The Business ExtrAA program contributed $2.5 billion in revenue in 2023 but has been replaced by AAdvantage Business program which is less valuable by about 75%. Despite this reduction, American Airlines plans improvements such as providing customer service for the program and allowing agency bookings again.
CEO Robert Isom mentioned that AAdvantage revenue increased by 8% year-over-year and expressed optimism about further growth through deeper involvement with Citi. Devon May acknowledged pride in cost performance but admitted there would be cost pressures as sales staff rebuilds.
American Airlines aims to win back alienated business travelers but still faces challenges compared to competitors due to underperformance despite good cost management. The airline lacks sufficient planes for international routes after retiring several aircraft models during the pandemic without adequate replacements from delayed Boeing 787 deliveries.
In summary, American Airlines is focusing on mean reversion—returning to pre-pandemic levels of business travel—while dealing with higher costs including a new flight attendants contract expected from September onwards. To outperform industry standards requires leadership committed towards premium services along with continuous improvement of AAdvantage rather than waiting for renegotiation of credit card contracts.
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