Management Logic
 

In case you wondered why we don't get paid the big $$$, here's the reason. It is so brilliant that you wouldn't understand.

Just make sure you sit down reading this.

(oh and close the door at D-10 please to ensure those bonuses keep coming in)

link

American Airlines Just Gave A Perfect, Painfully Detailed Explanation For Why Passengers Prefer Delta'

When you follow American Airlines' logic, you reach a chilling conclusion.
By Chris MatyszczykOwner, Howard Raucous LLC

Defying logic?


Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek.

I want to like American Airlines slightly more than I do.

It has a large network. It used to fly large planes from the west coast to New York.

I used to fly them all the time.

Currently, I get the feeling that American is a slightly chilly place, where the employees aren't happy and the management spins itself in circles that might end with it slipping down a drain.

Some, indeed, are pressuring the board for changes at the top.

What, then, do American's executives really think?

Thankfully, at the recent Skift Global Conference, the airline's CFO Derek Kerr offered an insight into how American views its business and its passengers.

I tried hard to follow his logic.

American has become something of a symbol for trying to shove as many seats as possible onto planes, with passenger comfort -- even in First Class -- being tossed to the wind. (At least on domestic flights.)

American has, though, been calling its most important customers to apologize for the airline's less than smooth running this year.

Kerr puts it down to the grounding of the Boeing 737 MAX and American's continuing dispute with its mechanics.

Isn't there something else that might be affecting the airline's operations?

If you're not delivering excellent customer service and your planes have become less comfortable, perhaps the other, less controllable elements are mere additions to a more general disgruntlement.

Kerr was asked specifically about the issue of cramming passengers in. This so-called -- by someone with a very dark sense of humor -- Project Oasis meant that most of American's planes would now have up to 22 more seats than they used to.

First, American had already added 10 seats to its Boeing 737-800 planes. Then it added 12 more. Isn't this simply annoying your passengers?

Kerr's response was picturesque:

I look at it as a different thing. It is a fleet harmonization is what we're doing.

I can feel the emissions of breath from American's customers.

There they were thinking this was being done to make them more uncomfortable. Instead, it was an attempt to create harmony.

Kerr explained that this was all because of the merging of two airlines -- American and US Airways.

He said there were common aircraft types between the two airlines. Yet the interiors and even the seat numbering was different.

Ergo, said Kerr, all the planes had to be exactly the same so that operations can run better.

This is also for your benefit dear customer, he said:

From a customer perspective, it's better so that if I get on that plane and I swap to another plane I get my seat.

Oh.

It doesn't seem too great a benefit if you're basing it on the potential need to change planes.

Does American expect that to happen often?

Ah, but the airline has also put larger bins and WiFi on the aircraft. (We'll come back to the WiFi in a minute.)

Kerr was asked about the fact that the airline could, despite all this harmonization, also now sell 22 more seats per flight.

His riposte? That the planes with 160 seats had 10 seats put down as inoperative. Why?

Listen to this:

Because if I add those 10 extra seats, I have to add a Flight Attendant, because every 50 seats you have to add a Flight Attendant.

Gosh, no. The mere idea that there'd be more staff on a plane to serve customers must be anathema to American's ethos.

But now there are 172 seats in its 737-800's. What about that?

Kerr explained:

Going from 160 to 172 was the MAX's are coming with 172. So there's a new configuration with the MAX aircraft.

Which meant, according to Kerr, that the old planes would now have to have the same configuration, the same reduced legroom and the same bathrooms described by an American Airlines pilot as "the most miserable experience in the world."

Please let's pause to examine this fascinating logic.

All the planes had to be made less comfortable because the newest plane was less comfortable.

But why was the newest plane less comfortable? Because American's management decided to shove 172 seats in it.

Can you feel the customer-focused harmony in that?

Kerr's session contrasted rather with that of Delta Air Lines CEO Ed Bastian at the same conference.

He explained that not only is the airline working hard to provide free WiFi for all, but that it's continuing to invest in seatback screens.

This gives customers options. It also ensures that when a family of five is on a flight, they don't need to bring five devices with them.

You'll be stunned into a gnarly torpor when I tell you American sees things a little differently.

It's removing seatback screens. Kerr again:

We looked five years down the road and said would we invest in screens on the back of the TV [sic] or would we invest in the best WiFi of anybody?

Kerr is convinced everyone comes on board with at least one device and that customers simply want to have "an in-home experience."

There's a slight drawback to this. The WiFi isn't good enough. Oh, and you also currently have to pay for it.

Which means the customer experience is rather degraded. (Kerr also happened to mention that the airline doesn't make money on free WiFi, which added a blissful myopia.)

On Delta, on the other hand, the airline is working hard on free WiFi. In the meantime, it doesn't want you to sit there entirely without entertainment because you have no seatback screen.

Delta has a reputation -- at least currently -- for thinking through human issues a little better than American. (Oddly, it's doing better financially too.)

Who would be surprised if an element of American's decision to rip out screens involved making planes lighter, thereby saving on fuel? Oh, and there's the saving on screen maintenance too.

Airlines have to make big decisions a long way out.

Behind those decisions, however, is often a very particular view of how the airline sees its brand and its customers.

Currently, Delta sees itself not so much as an airline, but as a brand that seeks to engender higher, more pleasant feelings in its customers. Said Bastian:

Eventually we want to be seen as a brand that consumers love because it has such impact on their life, like other great brands that they love and pay a premium for.

Currently, American Airlines has no brand purpose.

Embarrassing.

Makes NK look good...

All the reasons why I specify Delta for business travel vice AA.

Why do people keep posting "articles" from this "journalist"? This guy is clearly paid to write stories that bash AA and worship Delta. At least use a legit source for your self-deprication.

Can someone teach that guy what a paragraph is?

Which begs the question why doesn’t AA have similar paid bloggers? They could have carved a couple hundred grand out of the $13 Billion to discretely promote the airline.

Whole article is moot, based on AA load factor, and revenue per seat mile.

Is he saying 80% load would go to 85% if AA removed seats?
Demand for air travel has been strong and AA created seats to sell. He's writing as if it's a soft market and AA can't compete for revenue with D, which has not happened.

Nobody cares if a 737 has 175 seas if it's half full, and the airline doesn't care about space complaints if it is full because that means they sold 175 seats and are busy counting their money.

D takes same amount of revenue and turns a higher profit, that's a higher efficiency operation, which AA can and should fix no matter how many seats their planes have.

AA had 12 billion dollars of revenue for the second quarter this year versus DL's 12.5.

AA's load factor was 86.6% vs. DL's 88%

AA's net income was $662 million vs. DL's $1.443 Billion.

It seems that revenue vs. profit are quite different between the two airlines.

So, I can't say I disagree with Happyflyer.

People pay more for a Delta ticket. No one really knows if premium or coach sales are better at Delta or AA.

By that I mean, maybe Delta sells their coach fares for about what we do (meaning lower density won't have an effect) but get more for their first/business class and main cabin extra (MCE) product. Or maybe it's the opposite, or some of both?

So why can delta sell their tickets for more? Is it because they have lower density coach seats, or maybe a better more business travel focused premium selection? Or maybe better schedules in more business traveler markets (ie heavy focus with more directs in Raleigh, Austin, NYC, Boston, San Jose, etc)? Maybe it's because they are actually somewhat reliable?

AA uses the hub/spoke system but over the past few years Delta has expanded their point to points in major business markets. Nobody likes connections, and when you're spending other people's money to buy tickets you don't care, you'll take a direct 90% of the time.

This isn't just about headcount as accurately described above, it's a revenue issue and that is something AA has the grapple with.

More interesting would be to have these numbers for domestic mainline flying.

Sorry, but most of the hurt in the article comes from direct quotes of the CFO

so you think AA management is on the right track, and is doing a better job than Delta management?

sometimes the truth hurts.

I didn't say that at all. Obviously there is plenty of work to do.

But, every time this hack writes an article it gets plastered all over APC, BTL, AArena like it's gospel without consideration of the source. We must be this guy's biggest audience.

Truth hurts doesn’t it. I know let’s blame the messenger.

Is he wrong?

No, but AA doesn't need a new CEO with "vision". Everyone is so over Doug because of seat pitch and TV screens, which is not the source of AA's problems.
Guy I know owns a jet and is Delta platinum, couldn't get him to ride AA to save his life. He thinks AA FAs are awful, and Delta is on time. He can leave his house and be anywhere he needs to go by noon.
He likes short productive layovers and hates running, which means, be on time. He pays extra for tickets because Delta produces for him, and why Delta has higher margins.

Ontime is everything!

Unfortunately your friend isn’t who we seem to be competing for. We want the volume of passengers from low cost websites. They’ll be back no matter how much they complain. Can’t be a high quality store if your business model deals in Walmart volume tactics.

I agree with happy- we have a lot of truly great flight attendants. But not only do we have pterodactyls swooping through the aisles, we also have some new, young flight attendants with serious attitude issues. Business people get tired of it quick!

Revenue != income != profit

AA has enough middle management bloat to weigh down TWO of the nation's largest airlines (circa 2013) and appears to refuse to trim any fat ... Strangely, most of the operational reliability issues seem to stem from those very departments.

How many more employees does AA have vs DL? Inquiring minds want to know

If wikipedia is correct ... AA ~126,000 to DL's ~89,000

https://en.wikipedia.org/wiki/American_Airlines

https://en.wikipedia.org/wiki/Delta_Air_Lines

I know nothing of AA’s corporate climate and the like, but as a Delta guy this does read as a very slanted piece. And I think he is wrong about one thing: he says it’s a huge mistake to remove the seatback screens because the internet isn’t free, but the Wi-Fi entertainment is free, so the decision to remove the screens isn’t as wrong-headed as he makes it out to be.


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Last time I was in DCA the ground crews couldn't work each other's flights. Airways ground crew can't touch AA flights and vise versa. Separate employees, supervisors and managers, I think they only share a break room.

The executives had laser focus on pilots after failed USAir/AW merger that they let everything else through the cracks.

Which part was not true?

American is a great airline. Doug Parker is a joke.

It's not untrue, he's just stating why passengers prefer Delta.
The confusion is that he's suggesting this is AA's lack of profitability.
Customer experience = revenue
Revenue- expenses = profit
AA revenue = DeltaS
AA profit = .5 DeltaS

Airlines price per earnings are lower than big oil. American is extremely profitable, just extremely less profitable than than their peers. The gap is making traders fearful of AA and the price drop. Doug is the largest individual share holder I think and the company makes lots of money.

Delta merged and went straight into BK and trimmed fat, because change comes through necessity, AA has to trim fat during the most profitable period of it existence, which is a hard sell.

I can write an article why the consumer likes Ford over Chevy, doesn't mean I'am explaining why one makes more money if they both have same sales revenue.

According to the most recent Airline Quality Rating Report, available here https://airlinequalityrating.com/ , Spirit is better than American.

Doug wanted to "do the right thing" and gave the fleet service and mechs the same raises that we got when we signed the JCBA or whatever it was that transitioned us to the merger/integration. Same as the FAs.

The mistake he admitted to making was giving them their raises before they agreed on how to merge. That took all the incentive away from the equation and we are where we are now.

Had a FSM ask me to call catering for more cookies and coffee...after being asked by the FA to call for it.

I was like...ummm...isn't that your ONLY job here? And you won't even do that? Isn't that the point of the radio you carry around?

This place cracks me up

Doug and crew had half a decade to sort this out. All they have succeeded in is spending money on the runt version of sparky, launching summer charter flights to Europe and alienating LAA's premium business customers.

It's a circus at the top. Luckily we now have the prettiest circus tent in Dallas. It only cost half a billion and produces nothing. :rolleyes:

Not even a survey this year! I had the perfect three word description for AA:

Never
Ever
Delta

They must have known...

One correction..... Delta and NWA went BK in 2005 and they trimmed their fleets, pensions, and workforces. They didn't merge until 2008.

Is he lying?

AA is a rudderless ship. They try to compete with Delta on the high end and Spirit on the low end, and do a poor job of both.

CEO is insistent that “we will compete on product.” He has yet to define what that looks like. Is more seats a better product? Is better customer service a product? Is free WiFi better product? Uncomfortable seats, unengaged employees? We’re always competing with somebody but it may be the wrong competitor.

Sorry, I got that wrong. If I'am not mistaken they did have a coordinated effort to prepare in BK for a merger.

Spirt does have a pilot base in DFW and not ATL.
Walmart has the same problem, dollar stores beat them on the bottom, and organic grocers beat them on the high end.

Walmart has a high end?

From everything i heard AA stymied spirits growth in dfw for the most part.

I've heard the same. They're now concentrating on growing their east coast operations.

Doug was able to stop SWA in PHL and Spirit in DFW from expanding. Actually SWA has reduced their frequencies in Philly even. Spirit is still aggressively expanding especially out of MCO where there are growing what looks like another mini hub. They are tough to compete with even only by mostly doing directs because of their extreme low costs, roughly 1/2 of ours on a CASM-ex basis. They can pick off the low hanging (but more profitable) O&D traffic. Basically how SWA started and grew.

Frontier so far has tried a lot of different routes but most do not stick. They seem to be a little bit less well managed. The new CEO for Spirit took over either last year or earlier this year, he was the CFO prior IIRC. So it remains to be seen if he knows what he's doing.

I was convinced jetBlue was going to buy Spirit in 2017-2018 when their market cap got crushed. But it didn't end up happening.