Armchair CEOs are everywhere, but perhaps not more so than in the frequent flyer community regarding airline leadership. But replacing American Airlines CEO, Doug Parker, wouldn’t necessarily solve their problems.
There’s a Revenue Problem
Gary Leff has pointed out several times (and I am happy to reiterate) that American Airlines isn’t making money from flying airplanes anymore, they remain profitable solely due to their credit card banking relationships. It’s worth emphasizing that again, in the best possible economic times for US airlines in the last 20 years, American Airlines is losing money as an airline and making money as a loyalty program.
Revenue has been falling compared to peers without any substantial new entrants, this is purely American’s customers voting with their feet and their dollars. But that doesn’t mean that a new CEO will reverse the course of their airline’s revenue trouble.
There’s a Strategy Problem
Years ago, American took the right customer tactic and got burned for it – More legroom through coach. They offered more space to every man, woman, and child in the back of the plane than most carriers do today. Customers responded by continuing to choose less expensive carriers rather than paying a little more for each ticket and the strategy was scrapped. Interestingly, Southwest has struck the value cord with their “Bags Fly Free” mantra that has helped them inch away from the Low-Cost Carrier model they once pioneered.
They continue to de-hub the New York market (JFK and LaGuardia for domestic non-transcontinental) due to the proximity of Philadelphia, established operations and lower cost basis. In fact, with forever fragmented Los Angeles and New York City markets (multiple airports and everyone claims each is a hub) American has more or less retreated into fortress hubs and reduced service at O’Hare, their only true split hub city.
The problem is that Philadelphia is not New York City, Washington National is not Washington Dulles. While Newark isn’t New York City either, United has the most flights into the market of any of the carriers so their dominance defends their role as the leading carrier from the market. Their strategy of avoiding competing in markets where they are not protected by the sheer volume of flights and a reduction of peers has failed.
There’s a Customer Service Problem at American
In my own experience this week on American Airlines flights (for just the third time this year since leaving them), the apathetic staff makes for distasteful customer experiences. While our checkin agent was great, I was shuffled along by a kiosk manager who was unwilling to listen to my needs which couldn’t be solved by the machine.
Gate Agent Mai in Miami, was rude and condescending before she even understood my question or status. She chose to fly the plane with six empty first class seats despite being eligible for an upgrade, having the appropriate instruments and an empty upgrade list. One passenger had an issue with her seatbelt. She rang the call button several times but was promptly ignored for ten minutes. Finally, the coach FA came on the PA and instructed that “unless it is a medical emergency, do not ring the call button.”
Mai came on board to verify something, the passenger raised the issue with her, she instructed her to ring the call button. Upon so doing, a furious FA marched through the aisle and asked if it was a medical emergency. She indicated that her seatbelt didn’t work properly and the FA condescended the elderly passenger and made her agree that she wouldn’t push it again unless she had a true medical emergency.
Not all American Airlines employees are this way – I will agree, but more than other carriers in my experience (including Spirit), American staff is demotivated and unpleasant.
But don’t take my word for it, take American’s. The carrier is looking for ways to increase the number of customers that recommend them, Delta leads the way in this metric and American is woefully behind. In fact, in the latest US airline rankings, American came in above only Frontier, appalling for a carrier that considers themselves the premier airline in the country.
Why Replacing CEO Doug Parker Won’t Solve These Problems
Without a better product and a better program, American flyers aren’t going to come back. That’s not going to help the revenue problem and with fewer flyers, fewer will take up the credit cards making their deal smaller, not larger upon renewal. Improving the product and loyalty program is the only way to win new customers and keep the ones they already have. The CEO can dictate and direct some of this but won’t have the latitude needed to truly affect change in the product over their tenure. The next CEO also wouldn’t have the budget to make substantial changes and product investment it would cost.
Regarding the strategy problem, perhaps a new CEO could have some effect on change, but I am not sure it would be enough to move the needle. For example, if the next American Airlines CEO (please not Scott Kirby, please not Scott Kirby…) decided to move dramatically back into the New York market, they wouldn’t unwind their complete dominance of hubs Philadelphia, Charlotte, Miami, and Dallas/Fort Worth. Therefore, a CEO can only grow the new strategic markets piecemeal, and that will reduce the effect they will have benefiting the airline’s future.
Lastly, on the whole, staff won’t likely care about who the CEO is because it has little effect on their life. While some FAs and pilots may have an opinion on the CEO, ultimately it is in relation to how they feel about their current contract and whether they assume the CEO had an important or unimportant role in its creation. Even if they have a negative view of Doug Parker (they do) is that going to change their lackluster approach to catering? Will they start to leave the headphones out on international flights instead of picking them up an hour prior to landing like business class passengers are going to steal them? Probably not.
No, replacing Doug Parker is not going to fix American’s woes, even though it would be a start in the right direction. I have begun to wonder, is there any coming back for American or are they too far gone?
What do you think? Would replacing American Airlines CEO Doug Parker solve their problems in part or entirety? Do you have any replacement suggestions?
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