AA strategy
 

Can someone shed some light on what is AA business plan? What's the targeted market?
When I'm looking at Delta it's obvious what is the short and long-term plan with branding them as a premium product ("pay more for experience and quality)
United set pretty much on the same market with more focus on international and reaching out to audiences outside of the US.
What's AA going for? With the Oasis project they gave the impression of moving toward a LCC model, but then building high-end business class contradicts it. Utilizing the WB for domestic over international was a great way to make more profit and also gave an impression that the airline preferred to focus more and more on domestic but then set an order for more 787 (and even showed interest in the boom sonic project which is international operation only).
It's not a question of what's going on (the airline is doing very well, unlike a lot of the unjustified comments here...) but whats the actual business model is.

the business model is to chase easy money. Courting business travelers outside any of our fortress hubs is off the table. International is heavily dependent on One World partners. We are competing with ULCCs domestically and doing pretty good, just with worse margins.

I think it's a fair question. Some negative people on here will surely tell you there isn't a strategy, but that's not entirely true. The truth is the plan just isn't as flashy DL's or UA's plan.

AA has decided to focus largely on its fortress hubs. While Delta and United are pumping significant investments into competing in highly competitive markets like NYC and LA, AA has decided to focus on absolutely dominating its largest hubs. DFW, CLT and MIA are huge money makers with no competition except minimal presence from LCC's and AA has decided to focus on where the money is.

These hubs are much bigger markets for domestic flying than international flying, which is part of why AA has backed off on it. The other part of this equation is AA retired 757/767 and A330's all during covid. This reduced international capacity greatly, but it should be restored to some extent as these 787's continue to come in over the next few years.

AA's number one overarching strategy is paying down large portions of its debt. There will be no large-scale growth until the debt is taken care of. The company has been successful and is ahead of schedule. Once AA's debt reduction goals are met, I think there will be room for expansion.

AA is doing the right things and is taking important steps to secure a bright future. While the other legacies are taking on debt ordering hundreds of new airplanes (largely as replacements) and putting tv screens in 25 year old airplanes, AA is paying theirs down while maintaining a young fleet. AA has some ground to make up, but it has a chance to be an industry leader in profitability in 5-10 years if management plays its cards right.

Short answer: Run a reliable operation, make money, pay down debt. That’s it’s.

The oasis configuration aligned us with industry peers, not LCCs. In fact our non-neo a321s still seat less than Delta’s. PTVs, no comment. I’ll leave that for internet Av geek bloggers to discuss.

Long Hual intl network will be rebuilt when the next 30 787s and the 50 XLRs show up. But making money is priory #1. There’s no secret sauce.

Highest fixed costs and most debt in the industry. They’ve found a great sweet spot in Dfw and Clt. They’ll expand and double down there while costs at those 2 hubs are low. It’s not a sexy product, but it is efficient right now, and geographically those are 2 good spots for the population shift in the country.

why don't you take a look at AA investors site and read up on it

Thank you. Make sense and overall smart plan for the long term.

With the NEA now being canceled, are there any hints in the company on what will happen to LGA and BOS?
Looking the AA history, they don't make the effort to compete in airports that they are not number 1.
They will have to rebuild NY as it's a huge market, but what will happen to Boston? Provided that BOS only got 200 pilots, it looks very similar to what happened to St.Louis base

Increase their NB market, churn and burn, use their pilots to the max allowed, totally take advantage of the pilot's union by negotiating a contract that is heavy in managements favor, basically become more like a Regional or SWA then UL or DL.

That’s a good question that I don’t think we know the answer to yet. However, the Boston base was not a result of the NEA, so I think it should be relatively unaffected.

Short term, it could go either way for NYC. I could see some reduction for international flying because there won’t be the domestic network to support it. Long term, I think the NYC base will grow on the domestic side to reabsorb some of what AA gave up to B6 and then the international WB would be relatively similar to what it is now.

These are just guesses, but NYC is too important to give up on, so I think there will eventually be a renewed effort in that market.

The truth is nobody knows how this will play out.

STL had 400 flights a day at its peak. It was a nice hub airport, central located. But too close to DFW and ORD to keep around with the combined carrier. Think of it like a PIT. Probably similar economically speaking as well (stagnant populations, slowly dying economies).

About JFK
On our widebody flights, on average, 40% of our total load is from connections with the overwhelming majority being those who fly on AA exclusively (33%). JetBlue contributes about another 6%, which amounts to about 250 people per day that the NEA contributes to.

Only two wide body transatlantic flights average over 80% load factor - Doha and Tel Aviv. Everything else is under 80% (LHR 60%!) which means we need more feed (or more local business). 80% load factor on wide bodies? Doesn't sound like we are making money there. I don't have that info though.

I'm optimistic for the future of AA in general, but personally do not think NYC nor BOS will be anything more than outstations with limited transatlantic point to point flights. Like you said, we just don't have that much room to grow in either market and it costs too much to use JFK as a hub as far as connection fees go. BOS isn't a great hub geographically speaking.

I don't know Delta's BOS statistics but it wasn't even until 2017 or 2018 where Delta was break even in NYC. It's just not a place where carriers can make money - the operational costs are too high. The port authority makes far more money than the airlines do there.

It's possible they will down gauge and run narrowbodies on transatlantic routes if they can be done at a profit (Vasu is on record stating it's very tough to make money doing so).

The 2023 AA is nothing like the 2019 AA. We are better in so many ways. Streamlined fleet, operationally sound with true effort being made to be reliable. Our top management aren't bean counters, they have an operational background. Effort beyond lip service to align the carrier financially with peers. Our mega hubs are being expanded with focus on efficiently down to the ATC level. This is something the AA and US of the past never did.

Overall PAX loads, across all airlines, starting in the US has recovered and on some days exceeded the 2019 preCovid levels.

Everyone's an investing expert in a bull market!

Why what did he say that was factually incorrect?

Nothing, I didn't contradict any of his assertions.

Just pointing out that if your an airline "manager" and couldn't make a profit in the last 24months than your really not trying.

Mgmts strategies will be tested when things turn more "normal" in terms of revenue growth, and passenger demand.

Strategies are tested when load factors are consistently less than 80. Then decisions have to be made as to what to promote, what to discontinue. Efficiency counts much more. Pennies start to get counted and real "management" dilemmas come to fruition.

That is all. No malice or accusations made.

My statement is based on factual data from PAX counts through TSA. Numbers of PAX are numbers of PAX. Period. Everything else you are talking about has absolutely nothing to do with my factual statement.

See for yourself. https://www.tsa.gov/travel/passenger-volumes

Where did you get those load factors? They don’t sound anywhere close to accurate, mostly LHR.

Was thinking the same. Every LHR i do has less than10 open seats if any.

Fun fact, LHR is the AA station with the most number of widebody departures monthly: 600+

MCO + TPA sees 1,900+ Bus departures monthly. Too bad they don't put a Bus domicile down there.....

If talking about my post the data lags and is several months old. Summer, especially July, will be peak load of course.

However, go to jetnet and type in JFK-LHR for today. 59% LF on the three remaining flights. I wrote 60%. Seems pretty close.

24 months ago was depths of Covid restrictions, the mask mandate only ended 16 months ago. We were selling transcons for $25 back then.

Too bad they don’t make LHR a 777 base…

🔥🔥🔥🔥🔥🔥🔥🔥🔥🔥

Right, and uncle sugar covered major portions of the airlines salaries for the two years of covid.

Since the end of covid, the airline environment has been on a profit fever. For y'all equating some magical mgmt ability, it's been a great market for the airlines for the last year that has only been hampered by the lack of available planes and labor.

My whole response was to the opinion of some on this thread on how great a mgmt strategy had been on the recovery.

In hindsight, the fact that the US Govt gave the airlines money (that was free as long as they didn't furlough) which inevitably encouraged them to VEOP and early retire as many things/people as possible, ended up costing the industry $$$$$ because if there had been furloughs, at least the recovery would've snapped back at even a faster pace.

Of course everything about COVID could have been improved if govt/airlines had a 20/20 hindsight mirror.

I disagree with a lot of this.

End of covid was not 24 months ago. Masks ended 16 months ago. Summer of 2022 is when things really started heating up and bookings took off, that was just 12 months ago. As an example, on June 1st 2021, we were still down 30% systemwide as far as pax go. July 1st 2023 was the first time 2019 numbers were exceeded.

The majority of the money given to the airlines was in the form of a loan. AA did pay this back in its entirety IIRC.

Reducing the pilots on property nationwide (DL had similar issues where they put a bunch on the A220 FO bid status to save $) actually increased profits, because it restrained the amount of total flying systemwide which increased ticket prices. This had nothing to do with passenger recovery though (the two were not correlated).

I don't think anyone has claimed AA management are savants.

Completely different situation at Delta then. Company has only been constrained by lack of planes and personnel for the last 18 months. If they had those our pax numbers would’ve exceeded 2019 #s much sooner.

Delta and others didn’t have to pay back the feds anything because they never furloughed. That was the string that Congress put on the money. VEOP quickly reduced headcount right before surging demand but they had parked the 777s and 88/90 fleet so constrained by physical plane availability as well as personnel.

This debate all started cause I said all the mgmt look smart when the conditions are ripe for a profit. Right now all the companies should be making a great margin. Mgmt gets touch when conditions sour, that will be the true test of mgmt strategies.

Personally hope to see AA prosper as it helps everyone if all the companies are decently managed.

um, all the legacies are paying down debt in this environment.

shading competitors for putting in "TV screens" seems like a reach. to hell what the customers want, amirite?

Delta absolutely took the government money:

U.S. Treasury starts distributing $15 billion in payroll aid to airlines | Reuters.



You are mixing things up. Payback of loans wasn't a contingency of not furloughing, it was an contingency of getting the first couple rounds of government free money. Remember, there were a total of 3 (?) rounds of government funding.

AA furloughed after all the government money stopped, and APA refused to reduce obligation hours/pay like UAL and DAL did.

I think the free wifi Delta has offered is awesome and is a great feature that everyone should offer. TV screens don't move the needle for me. I'd personally rather watch something on my device. I think cost/benefit analysis favors the device holders over tv screens, particularly in 20+ year old narrow bodies.

The debt part is simply not true. You can't tell me UA is reducing its debt while taking 700 new airplanes...

I'm sure Delta has run its own numbers. They seem not to have consulted you, though I can't imagine why they didn't. Fortunately, since AA isn't wasting money on TV screens, I'm sure they'll be beating Delta in all the meaningful metrics any day now.
Shoulda checked the "CFO" box on your application.

You realize you're on the AA forum, right? He asked a question about AA's strategy. I included qualifiers stating the current disadvantage AA is at, but mentioned how I think they are doing the right things to turn things around. Not sure what your problem is, other than fitting the Widget stereotype...

I was skeptical of the TV screens on Delta airplanes before working here. Since I’ve been here commuting and deadheading around I actually see a lot of people in the cabins watching the TVs. There’s movies on there that they may or may not have on their phones/tablets etc. People do seem to enjoy them, I think the only thing that’s not ideal is having to plug a headset in rather than have in-seat Bluetooth.

It certainly has a purpose and I don't have any doubts that the majority of passengers use them. My point was I don't see a huge need for it on short/medium haul flights when you can just have a holder for your device and have the same amount of shows and movies available on your device. That's just my opinion. But now that I have been given the title of CFO by your friend, maybe it'll mean more now ;)

Bro,

Delta closed Memphis and Cincinnati, and moved it all to Atlanta and Detroit.

United closed Cleveland and moved it to Chicago

American closed nothing. Try to imagine the cost and efficiency gains they would have if they could close a hub or two and retain the same amount revenue.

Laugh all you want, but not because they don’t have TVs or mgmt is floundering around.

Laugh because Philly is too close to NYC for them both to operate at full potential and because they merged last and there were no other options.

Mostly non competitive pre existing infrastructure is at play.

Surely you read about Delta lobbying congress for “long haul” slots at DCA? Why do they need to do that? Their ingenious TV idea makes them all their money.

NYC doesn’t work for AA because of too few slots, not proximity to PHL

CLE is still a base for UA

That doesn’t matter, it’s not a hub, they also opened two bases that are also not hubs, and BOS isn’t a hub for AA which is a base. CVG was a pilot base for Delta well after it wasn’t a hub. Hub and pilot base are not necessarily synonymous.

Well it’s the same thing, for AA to compete in the North East they have to split operations between PHL and NYC, and United and Delta do not have to. That is an efficiency loss for AA. USAir competed internationally with the legacy’s out of PHL when they had no access to NYC, and it does not reflect on “poor strategy” for AA mgmt.

The OP questions related to controllable strategy from mgmt as a perceived defining difference in profitability which is mostly not true and mostly reflective of infrastructure efficiency.

AA and Delta can each make 50B in revenue and AA profit way less because their infrastructure is way less efficient, and they don’t have a way to consolidate infrastructure without sacrificing revenue. Some employees somehow just think they are contempt with lower profit margins when they do not consider infrastructure efficiency. AA would profit way more if they could make 50B and close two hubs at the same time. The Delta NW merger was simply much more efficient.

again, no. AA doesn’t have enough slots in NY. Can’t get anymore. No control. PHL still does fine as a euro connection hub and with dramatically less overhead and minimal competition for O&D

No, the non-originating NYC legacy AA traffic is heavily poached by PHL via the legacy USAir network.

They are not able to backfill rerouting their own traffic cheaper through PHL, so the void shows up in NYC.

They don’t have the same presence in NYC as Delta and United, but if the presence they do have were full all the time they would make plenty. If they were to make plenty with full planes, it would still be less efficient than the PHL and JFK demand being combined at the same airport like D and U.

They merged and rerouted the pax as cheap as possible and the void shows up where it is most expensive to route.

They need more slots to scale and backfill the void they created by rerouting their own traffic due to an inefficient merger.

how do they get more slots in NYC? JFK T8 has never been this busy since it was built. I don’t think any airline has good profit margins in NY, as the expenses are crazy.