American Airlines’ New Strategy: Brilliant Or Bizarre?

Filed Under: American

2020 has been a fascinating year for American Airlines so far. On the one hand, I’m thrilled to see that they’ve woken up and are actually starting to develop a strategy. Is there actually an underlying strategy, though?

Or at this point is American like someone who woke up, showed up at the breakfast buffet five minutes before it closed, and is disappointed by the selection?

American’s management has been asleep at the wheel

I’m not really saying anything controversial here. I think a vast majority of people would agree that American management has been asleep at the wheel for the past few years:

  • Shareholders certainly agree… just look at American’s stock
  • Customers certainly agree… just look at American’s customer experience
  • Employees certainly agree… just look at what their employee surveys say, and the labor disputes they have

I live in Miami and am largely a hub captive, and frankly am happy enough flying American when they’re operationally reliable (which they’ve been lately). I’d love to see American Airlines undergo a renaissance, because it sure would benefit me as a customer.

But for the past several years that just hasn’t happened.

American Airlines hasn’t been doing a whole lot of innovating

The Delta & LATAM deal clearly rattled American

Last September it was announced that Delta would be buying a 20% stake in LATAM, and that the two airlines would be forming a joint venture. Suffice to say that this came as a complete shock to American, which had been pursuing a joint venture with LATAM as well, and had been partnering with them for years.

Latin America is historically where American has been strongest. I think after years of not doing a whole lot of anything, this situation finally rattled American Airlines a bit, and made them realize they need to do something.

Delta shocked the industry by buying a stake in LATAM

American Airlines’ new partnerships & routes

In the past several weeks, American Airlines has made several major announcements, though I think I’m not alone in being confused about what to make of these.

The way I view it, American Airlines’ strategy could be viewed in one of three ways:

  • They’re nonsensically grasping at straws and don’t actually have an overall strategy, but rather are taking the approach of “the enemy of my enemy is my friend” (in reference to Delta)
  • They’re making the best of the situation, realizing that they’re at a disadvantage compared to Delta, and have some catching up to do
  • Doug Parker and Vasu Raja are geniuses, and we’re just not seeing the whole strategy yet; American’s stock price will soon quintuple

I’m honestly not sure what to make of all of this. I’m thrilled to see American doing something, though suffice to say that their strategy doesn’t seem particularly cohesive. Contrast that to Delta and United, which have pretty clear strategies:

  • Delta is all about investing in airlines globally and forming joint ventures, as a way of achieving global airline domination
  • United is focused on their core joint ventures, and then has been successful with launching point-to-point seasonal transatlantic flights, as well as ultra long haul flights in key business markets

United has launched all kinds of ultra long haul flights

And then you have American. Let’s take a look at what they’ve announced so far this year.

American’s partnership with Gol

In early February, American announced that they’d partner with Brazil’s Gol, including forming a codeshare agreement.

Of the recent announcements, this one is the most logical. American Airlines had a partnership with Gol until 2012, at which point Delta bought a stake in Gol, causing them to cut ties with American.

Then Delta dumped Gol when they bought a stake in LATAM, and now American is partnering with them again.

Does Gol fill the global void left by LATAM? Absolutely not, but it’s better than nothing. It’s also quite reflective of the extent to which Delta is in the driver’s seat in the airline industry, causing American to be “dumped” twice (by Gol and LATAM).

Gol will offer some connectivity for American’s flights in Latin America

American’s expanded partnership with Alaska Airlines

Alaska Airlines will be joining oneworld in 2021, and American is undoing their plans to further cut ties with Alaska Airlines.

To me this is also logical — in many ways the American and Alaska route networks complement one another, and with Alaska fighting Delta in Seattle, this is a case where Alaska and American are better off working together against a common enemy.

I just don’t know why American wanted to scale back that partnership to begin with…

This is positive and perfectly logical, in my opinion.

Alaska & American will work closely together once again

American’s Seattle to Bangalore flight

American announced that they’ll start flying daily between Seattle and Bangalore as of October 2020 using a Boeing 787-9.

I don’t think there’s a single soul on earth (without inside info) who could have guessed that American’s return to India would come in the form of a Seattle to Bangalore flight.

I’m undecided as to whether this strategy is absolutely brilliant, or the most bizarre route announcement of the decade:

  • Sure there’s definitely some demand for a nonstop Seattle to Bangalore flight, given that both cities are tech hubs
  • But would anyone expect American to be the airline to operate this flight?!

With this announcement I only have questions, and no answers:

  • Does American have a super lucrative contract signed with Microsoft that guarantees this route will make them money?
  • Is there more expansion coming out of Seattle?
  • Will American otherwise grow out of Seattle?
  • What will the aircraft utilization and staffing on this route be like, given that American doesn’t otherwise fly 787s to Seattle?

I feel like this route will either be a total flop or a big success, but I don’t know which.

American will fly from Seattle to Bangalore

American’s expanded partnership with Qatar Airways

Today American announced that they’re reinstating their codeshare agreement with Qatar Airways, which they cut back in 2017.

It’s not actually the hilarious politics of this that I want to bring up, but rather what American announced in 2017 when they ended this codeshare agreement:

“This decision has no material financial impact on American and is an extension of our stance against the illegal subsidies that these carriers receive from their governments.”

Cutting the codeshare had no material financial impact for American? If so, how will reinstating this codeshare have a positive material financial impact for American? What has changed in the past two years that suddenly makes this worthwhile or lucrative?

This likely means that Qatar Airways won’t leave oneworld, as they’ve threatened

American flying to Doha?

As part of today’s Qatar Airways announcement, American has also stated that they are exploring the possibility of flying to Doha, which makes very little sense to me.

Presumably they would launch this route not because of massive demand between the US and Doha, but rather to connect into Qatar Airways’ network from Doha. If that’s the case:

  • Why on earth would anyone, especially business class passengers, choose to fly American Airlines over Qatar Airways?
  • While there might be some military traffic, it’s my understanding that a codeshare would be sufficient for them in terms of airlines they’re allowed to book
  • Qatar Airways is known for reasonably priced premium fares, so it’s not like itineraries through Doha to India and beyond are particularly high yield
  • Qatar Airways already flies to most American hubs, so would American just be replicating a Qatar Airways route, or would this be launched out of Seattle (or somewhere else)?

Personally I think it’s highly unlikely that American adds service to Doha. Then again, a few weeks ago I would have said that Seattle to Bangalore flights are virtually impossible, so…

Could we see American fly to Doha?

My take on all of this

When I look at American’s strategy, two things in particular stand out:

  • American is indecisive — they cut their partnership with Alaska, then they reinstate it; they cut their codeshare with Qatar Airways, then they reinstate it
  • American’s strategy is reactive — rather than being proactive and deciding who they want to work with (and creating a compelling case for it working), American is essentially picking up the scraps, whether that comes in the form of hooking up with Gol after Delta dumped them, or trying to establish some sort of presence in Seattle in response to Delta

If I had to guess, I don’t think American’s management necessarily has a big picture strategy here. Rather my guess is that they realize that they need to compete with Delta, and they’re willing to try just about anything.

The fundamental strategy here seems to be partnering with airlines in the way that best competes with Delta. That’s fair enough, though I also question the long term viability of this strategy.

Regardless, my biggest takeaway is that I’m happy to see American Airlines finally trying something. I just hope it works out.

What do you make of American Airlines’ new partnerships and routes? Do they have a big picture plan we just don’t fully see yet, are they throwing darts and seeing what sticks, or…?

Comments
  1. There are very few nonstop routes between North America and Africa. Maybe AA can give it a try and try to establish themselves there first. I would say they can start with seasonal flights from west coast to destination such as Marrakech, Cairo, Nairobi, and Cape Town to see how it goes. Currently there are zero nonstops from west coast to Africa and I’m sure they will get filled up easily if they run it seasonally.

  2. Great perspective. I agree that AA is still slowing waking up and wondering what happened in the last 4-6 years.

  3. How about completing with Delta the old fashioned way: delivering a quality customer experience and offering a competitive route network and schedule, especially in markets where you compete directly with Delta (like New York)? American cut and ran from that competition.

  4. Ben – was chatting to a Purser on a flight from MAN-PHL in July 2018, and she stated that American hoped to return to India in the next two years, from an airport on the west coast of the USA that is not LAX – I guessed Seattle – she agreed – and look where we are. Maybe, due to the 737 MAX crisis – management were delayed in implementing the decision – how likely do you reckon this is?

  5. The Seattle to Bangalore route is not operational (yet?). Whatever American announces and what ends up implemented are two different things.

    Doug Parker and Vasu Raja geniuses? Maybe… maybe also late bloomers.

    I recently wrote in an earlier post (about QR investing in IAG) that AAB was a genius (this one yes) and that his earlier threat to leave Oneworld may have been in order to obtain something which he ended up getting (hence the re-investing into IAG). This may very well be it. What mostly makes a QR/AA valuable is the size of the US domestic / North American market for QR arriving passengers.

  6. I am.as bemused as you. Lunacy or Genius – Time will tell. There is clearly (hint) a big toe up with a corporate customer on the Seattle – Bangalore route. The Qatar tie up seems like a complete U turn. Fundamentally nothing has changed. Not sure I will be buying American stock any time soon.

  7. Your blog is, as always, exceptionally biased and overall, anti-American Airlines. They’re doing what they need to be doing to respond to the market’s shifting dynamics. Nothing unusual. Should it have happened earlier? Maybe. But remember they were the last of the big 3 US airlines to close a merger and the optimization of the industry’s consolidation has roughly followed the order of the mergers (DL/NW, then UA/CO, and now AA/US). Lots of factors go into these decisions, and you don’t have all the facts.

  8. You cannot responsibly use labor disputes as a gauge of how much employees like working for a company. Union labor negotiations are going to be contentious even for the most loyal/happy workforces. I won’t get into the politics of pro vs anti union, but if you create a system that forces mass negotiations there will never be “winners” or “losers” but people that find some sort of middle ground.

  9. For the record, this is the last year of the decade, so it’s very late. And the answer to all questions posed in this piece is “AA has incompetent leadership that has been behind the curve for at least 13 years.”

  10. @ Biz Guy — Sure, but you can use employee surveys and the general pulse of employees to gauge morale and perception of the company, and those sure aren’t looking good either.

  11. @ LNYC — Did you actually read the post? I said I’m excited about these changes and that they’re doing things. I acknowledge that many of these developments are perfectly logical and make sense. And for some I say that they must know more than we do.

  12. “Cutting the codeshare had no material financial impact for American? If so, how will reinstating this codeshare have a positive material financial impact for American? ”

    Material has a very specific meaning. The Qatar codeshare could have been worth $10mm to American while it was basically underexploited, and still wasn’t ‘material’. And a more integrated partnership could be worth much more. That was likely true in 2017 as well.

    “Personally I think it’s highly unlikely that American adds service to Doha.”

    There’s a few scenarios here. With Alaska joining oneworld does their partnership with Emirates end? If so, SEA-DOH could make sense — especially if it is, ironically, subsidized by the Qatari government… It might make sense commercially with the Alaska tie-in, or at least have trolling value to the Al Thani family. AA could also take over PHL/DFW-DOH (these markets surely can’t support an incremental flight), again with subsidies.

  13. I flew American on Sunday which I generally try to avoid. In first class My experience included:

    -boarding announcement beginning with “show us the respect we deserve as flight attendants and we will show you the respect you deserve as customers” what?

    -flight attendant never once crackling a smile.

    -FAs at the front congregating and talking about how the first customer that steps out of line will “get it”

    -late departure and arrival.

    -37” pitch in first and an uncomfortable seat.

  14. As to the AA DOH possibility, I wonder if the agreement might include AA assuming one or more of the QR flights to AA hub(s). I agree that a duplicative route really doesn’t make sense for AA.

  15. Let’s not forget they have also recently seized thousands of high-balance AAdvantage accounts. This will let them dump part of the billions in loyalty program liabilities on their balance sheet, and will presumably be an integral part of their strategy going forward (at least until Parker and co bail out with their golden chutes!).

    Short terms gains are the name of the game for AA now, as their long term strategies have all fizzled out. Expanded partnerships might help a bit, but being limited to partners that have been dumped by your competitors is not a solid plan. Let’s face it, most airlines would much rather partner with Delta than American; this gives Delta first pick and relegates AA to the leftovers. AA management can choose to compete in a different segment than Delta (ie be a lower cost carrier) or they can choose to innovate and take Delta on, but so far their strategy is a mess.

  16. Instead of Doha, AA should just add another route from one of their hubs into India. Some may appreciate the Oneworld direct service and while not as good of a product, the convenience may make it successful.

  17. “I live in Miami and am largely a hub captive.”

    Ben, I don’t know why you restrict yourself to MIA that way. FLL is just a few miles to the north, and is a major focus for JetBlue, one of your favorite airlines. Given the presence of another major airport just a few miles away, why do you feel so tied to American and MIA?

  18. As an employee of this once great airline, the previous management had the company on auto pilot for years and the current management has lost the will of its employees. It’s a sad situation at AAL

  19. @jetaway to whom? I filled out their survey and received no response. It feels almost deceptive to report their poor hospitality since I know what I’m getting when I book.

  20. As @Gary Leff points out with Alaska joining oneWorld a SEA-DOH makes complete sense for AA. You can compete with EK, on a route where you can provide better connectivity on both ends, with a very loyal Mileage Plan base, especially if you convince Alaska to cut the partnership with EK after they fully join oneWorld.

  21. “Why on earth would anyone, especially business class passengers, choose to fly American Airlines over Qatar Airways?” Easy- many corporations have discount contracts with American but not Qatar. Corporate booking systems will automatically push travelers to book on contract carriers and mark Qatar flight numbers as out of travel policy. Plus the vast majority of business & leisure travelers don’t read airline reviews at all.

  22. It’s all about Amazon in Seattle. I fly the Emirates flights through Dubai and it’s basically an Amazon shuttle – charging $2,000 each way in economy. Who wouldn’t want a piece of that.

  23. AA is reactionary. That is all that really needs to be understood here. They obviously aren’t in a position of power.

  24. I think AA might just operate one of the frequencies for LAX/SEA or DFW/SEA with a 787 to position the aircraft for SEA-BLR. I cant see them positioning one from ORD or PHL

  25. I think you really overestimate your analysis here. Saying that they are “indecisive” isn’t accurate at all. When they cut ties with AS, DL didnt have a massive SEA hub. They responded to a changing market. Same with QR. When they thought they could gain from a PR stunt, they cut ties. Now they realize they weren’t gonna win and went back. Reactive? Yes. Indecisive? No.

  26. @ Alex Manero — That simply isn’t true. American and Alaska have reduced their partnership twice now. The first cut was announced in July 2017 and second cut was announced in October 2019, and at both points Seattle was already a hub for Delta.

  27. Once AGAIN, I find Your anti AA bashing makes really Anything You state pretty much irrelevant. “Hub Captive”….laughable (No one is Captive, You choose to Be….Make Your Connection in ATL and I am sure No One at AA would Miss You).The constant bashing is so Tiresome….If I do Not like a Business/Enterprise, I Avoid it Plain and Simple and do Not Give it any thought. AA upset over LATAM….that is a Good One….I really do not even think they are concerned about LATAM and never were. AA was partners with LAN and Gol….once LAN & TAM decided to Merge …the existence of AA-Gol would end. STATE the FACT. I fly throughout Latin America and know the Market, whereas You Like to Write about It. I Fly All the Airlines based on where I need To Go…I am Objective. I am not a Fan of Doug Parker by Any means but Your Continual Narrative against AA is so ridiculous. IF You are a Delta FANBOY….admit IT and clearly State Your Mission. Hub Captive You are Not…..I would bet Many AA Employees Loathe the Living Sight of You and would Like to See You Disappear. (I have asked, and Yea they pretty much Told me so).

  28. @ roger — a) You have a unique way of capitalizing b) LOL that you think American isn’t and never was concerned about losing LATAM as a partner. C) I’m honored you’re so passionate about this blog that you’re apparently bring it up to American employees, and that they want to see me disappear.

    Alrighty then…

  29. I agree with you Lucky, I do not think that AA has much of a strategy.

    The have decided to grow rather than to focus on their core competencies. I think that this will hurt them. Except in hub cities, travelers do not choose AA, something management does not understand.

    AA has no international strategy, and their only strategies are to grow DFW and CLT.

  30. @ Lucky – Boy if it was Delta that made all these moves it would be all fine and dandy.

    Great solid strategy by Delta you would be preaching. But alas it is AA so they must be dumb and clueless or in your words – don’t have a strategy.

    You complain when they do nothing and now that they make bold moves beyond your wildest imagination you complain too. Sigh!

    Seems they could never to right enough in your view. Tell us exactly what they must do to make it perfectly right for you.

    Or do you prefer them to fail just so you have something to blog about?

  31. @ Andrew “FLL is just a few miles to the north”

    Try again. For the majority of business travel folks, FLL is an absolute nightmare to get to. I’m talking about people who live in Brickell, Coral Gables, Miami Beach, Pinecrest/Kendall, etc. Brickell is geographically the closest to FLL of the neighborhoods I mentioned, and trying to catch an evening flight means a minimum 75-90 minute drive to FLL up I-95.

    I’d personally love to fly out of FLL instead of MIA, but it’s never worth the headache and commute. There is a simple solution: having VirginTrains/Brightline add a station in front of FLL. But for some reason that common sense idea isn’t happening and instead stations are going in Aventura and Boca.

    I smell some heavy lobbying from AA to make sure there isn’t a 25 minute high-speed train connecting FLL and the CBD of Miami. That train would make getting to FLL faster than driving to much closer-by MIA. Would probably take customers away from AA.

  32. Hi Ben, I was searching your site to see if I missed some AA updates but I am in the early stages of planning my annual summer trip to Budapest and could not believe what I saw. I’ve flown AA for the last two years on miles for around 57,500 miles each way in business class and less than $100 in fees and taxes one way.

    I was floored to see my trip pricing in miles with $821.65 in “CARRIER-IMPOSED FEES AND TAXES.” The AA carrier-imposed fee was $650.00, regardless if it was AA or BA metal.

    When did this change? I’m really disappointed to see this.

  33. It is worth noting that AAL has been by far the hardest hit US airline in the past two horrific days of stock market losses.
    Lucky can have an opinion but he can’t move the big institutional investors that control the US airlines. They see American as having no international strategy but American does have the most debt and the least profitable international route system. American is by far the most vulnerable in a year in which international air travel could be severely hurt. They either will lose billions trying to continue to hold onto an international route system that doesn’t generate anywhere near the profits of Delta and United or they will finally come to the conclusion that they have waited far too long to come up with an execute a strategy and start paring the underperforming parts of their network.

    Deciding to do something in the 9th inning as thunderstorms move over the field just might not be enough.

  34. @ ryby — Reading comprehension clearly isn’t your strong point, so let me help you:
    — “I’m thrilled to see American doing something”
    — “My biggest takeaway is that I’m happy to see American Airlines finally trying something”

    And really, I just sing Delta’s praises? I’ve long said that Delta runs their business in a smarter way than American, but I’ve had a long of negative things to say about their arrogance when it comes to growth and partnerships.

  35. @ Adrienne — Those surcharges should only be so high for British Airways, and not American. Maybe double check the itineraries you were looking at? Would be big news if it were on AA metal, but I’m not seeing that.

  36. There probably is a big strategy here…code share with QR bring Alaska into one world then get QR to bankroll the purchase of Alaska by AA. If they could somehow figure out how to merge they would get the benefit of instantly being a strong west coast player again along with weaker union contracts that could be used in negotiations with the workgroups. Alaska will be expensive but QR basically has unlimited money and aa could sell legally up to 25% of themselves to a foreign company. The big argument would be anti trust but that could be solved by giving up all the JFK slots that they are just sitting on as all the Alaska hubs are also hubs of other airlines outside of Portland and Portland can’t really support two hub carriers.

  37. I used to fly AA frequently as a budget flyer, but last summer AA stranded me for over 24 hours both going and coming to Miami twice. Their excuse every time was no planes are available. The ticket agents were (both times) harassed or couldn’t care less. One flight out of Heathrow was cancelled less than an hour before departure, right when I sat at the gate and had to pay huge wireless fees to get a hold of an American agent who would help me and even then it wasn’t really help.

  38. @ Lucky – I beg to differ on one aspect about “DL always being on the driver seat”. Some of the statements you made seem to always have something additional story to them, which you are suppressing to support your statements.

    For example, DL buying a stake in Gol causing them to sever ties with American: This happened after LAN and TAM merged and it was becoming increasingly apparent that they are going with Oneworld. DL was desperate and bought a stake in GOL. In any case, TAM was initially partnered with DL – which they lost to UA when TAM joined Star. And then I believe G3 was partnering with both DL and AA. This was not DL in driver seat. And G3 was certainly not dumping AA – It was basically DL trying to prevent G3 from partnering with UA.

    DL tends to do these investments/partnerships because its SkyTeam partners have mostly been second-tier in nature, and also with hubs in less important markets (similar to DL’s hubs in relatively smaller cities than AA’s or UA’s hubs). For e.g. In Asia they have KE vs JL/NH, VN/GA vs TG/SQ/MH. In Mexico, they were the weakest player and AA and UA are almost as large as DL+AM in Mexico-US. AF and KL are the only saviors for DL. In Latin America, they could really do nothing with ATL – neither AR or G3 wanted to fly to ATL (Let’s set aside the joke that would be if LA flew to ATL, but let us not side-track). The whole DL/LA thing came about only because of Chile’s decision to reject AA’s JV with LA. It is not something that DL has driven from the start. The only common theme here is a desperate DL trying to get partners that at least make sense for them and their flyers.

    DL has been on the driver’s seat for one thing definitely: with all the DL rants against ME3. What we have seen today is that one passenger decided to leave their seat.

  39. Military/Govt travelers aren’t allowed to travel on foreign carriers unless there is absolutely no other option and code shares don’t count as U.S. flagged flights if the metal is foreign. So “While there might be some military traffic, it’s my understanding that a codeshare would be sufficient for them in terms of airlines they’re allowed to book” would only apply to non-U.S. military traffic which probably wasn’t what you were thinking. Joint Federal Travel Regulations, if you’re ever having a hard time getting to sleep.

  40. @Ben re: surcharges – I was checking every day since Saturday for July 2020 and one variation was all AA metal (JAX-PHL-BUD) and same for return and still $800+ (in taxes and $650 carrier-imposed fees). I travel the same time every year so I usually know the prices fairly well.

    I searched your site to see if I missed an update on that. I usually avoid BA metal because of those fees.

    I even checked AA vacations and added a hotel and business class flight and the package price was $5,500+ with the fees and taxes approx. $1,665.94. (I printed it since I was in disbelief). It was all AA metal: JAX-CLT-ORD-BUD and BUD-PHL-JAX

    I did an AA vacation package in late July 2019 with less than 14 days till travel time and that was $4,400.00 all in business class and included a very nice hotel, JAX-BUD RT all AA.

    Has AA copied BA with the carrier imposed fees, even on AA metal? I figured you would surely be the one to get to the bottom of this.

    The only other thing I noticed was if I searched for more expensive mileage flights (more than the 57,500 OW I’m used to), then the carrier-imposed fees were less. So if I picked a flight which was let’s say 200,000 miles to redeem on AA metal, the fees were maybe $200-300. What’s going on?

    Thanks for checking on this!

  41. Rearranging deck chairs on the Titanic if you ask me. The weight of their largess and lack of service is catching up to them. I’m glad they’re noticing a difference, just wondering if it’s too late. Imagine if they failed, how many different airlines would come swarming into MIA, DFW, ORD for those gates!

  42. Lucky,I couldn’t agree more with your perspective on aa. As an aa retiree,it’s been apparent that intelligent leadership has been awol since Crandall left. Their “leadership” is idiotic at best,and there is no cavalry coming over the hill to alleviate the situation…

  43. @ks,
    The airline industry isn’t a Monopoly game. In the free enterprise system, ll that matters is how much profits an airline can generate with the network it has.
    Delta carries more revenue from the top US 10 airports by O&D revenue than United or American in part because Boston and Seattle are both top 10 revenue airports and Delta has rapidly grown there. Delta is also the top airline at both LGA and JFK and number 2 at LAX. Atlanta is a larger airport based on local O&D revenue than DFW and Delta’s local revenue at Atlanta is higher than American’s at DFW. AA and DL’s route systems are similar in that they have large hubs, some of which they dominate, while also getting lots of revenue from secondary cities. United gets lots of revenue from its hubs but very little in comparison from secondary cities. Delta right now just happens to be generating more revenue than any other airline; the notion that they have inferior hubs or anyone else has superior hubs is contrary to fact. Delta and its partner airlines carry more revenue than other US airlines and their partners which is again confirmable by fact. Network dynamics might be of interest but that isn’t the issue involved in AA’s latest string of moves.
    The real issue which Lucky raised and which remains regardless of hub dynamics is that Delta’s decision to move into the Miami – Latin America market, first through their joint venture with Latam and likely before long on their own metal – challenges American’s 20 year plus US carrier monopoly from Miami to Latin America. It should have been a given that AA could not have received antitrust immunity when it and whatever airline it partnered with in Latin America dominated that market – solely because there has been no other US airline competitor. If it was inevitable that DL or UA would have entered the MIA-Latin America market, then AA should not have ben surprised when it eventually happened. Combined with Delta’s growth in Boston, Seattle, New York and Raleigh – which has come at AA, UA and WN’s expense – it isn’t surprising that AA decided they had to try to push back.
    But American has resorted to reversing a number of strategic decisions they previously made in order to attempt to grow their network where DL and/or UA are stronger. The real question is what has changed that makes these decisions right when they weren’t just a few years ago. Maybe some of these decisions will turn out and maybe the economics do work this time -but in total it is unlikely for there to have been enough that has changed to make these strategies now work.
    Lots of people want to see AA do something but partnering with a carrier that has repeatedly demonstrated that it wants to dominate its partners for its benefit is just the latest AA strategy that questions if AA really has a long-term strategy or if they are just reacting to the latest moves by its competitors.
    And, in the absence of a real strategy, AA’s latest moves might not hold up well to whatever strategy any number of other AA competitors might roll out in the near future.

    Lucky got it right. This might all make sense but there is more than enough reason to have doubts until there is real evidence of success.

  44. Quote by Kelly
    “As an employee of this once great airline, the previous management had the company on auto pilot for years and the current management has lost the will of its employees. It’s a sad situation at AAL”

    My thoughts and prayers are with the many great folks that have stood by American despite its horrendous back stabbing clueless management
    As one who has spent 20 plus years flying American some of their customers have lost the will to do business with them.IMHO Autopilot was sensational compared to the aberration/poor choices known as American Airlines today.Hoping for a miracle and flying with its competitors for the past 3 years.Change can’t come quick enough if it ever does
    A Lifetime AA elite
    Cheers

  45. @ Adrienne — On award tickets on American metal there are no surcharges. They do have these on revenue tickets (which you would be seeing through AA Vacations), but on awards that shouldn’t be the case. Still don’t see any on AA metal, so don’t believe anything has changed, though if you see any specific dates/flights, I’m happy to take a look.

  46. @ KS — To be clear, I didn’t say Delta is always in the driver’s seat. I just noted the extent to which Delta is in the driver’s seat, which is to say that they lead more often than American and United, and that’s something I stand by. From dynamic award pricing in their loyalty program, to their onboard product, to basic economy, they very rarely follow the competition, but rather lead.

    To be clear, I don’t necessarily think Delta’s strategy is always that brilliant. Many of the airlines they’ve invested in aren’t particularly profitable, and I question if they’ll be able to get as much out of a LATAM partnership as American would have gotten.

    But regardless of whether or not they make the right decision, I do think they’re in the position to decide on things much more often than American and United, because they often do lead the way.

  47. For those gripe about why Lucky continues to fly AA or credit his miles to AA when he can is because AA miles allows lucky to fly ME3 and to certain extent, JAL, Qantas of the world at fairly low mileage cost. Sure, some of these airlines are even cheaper on Alaska. But good luck on finding award seats through Alaska. Overall, AA miles are good for flying anyone but AA metal thus the reason why Lucky continues to fly or credit AA. If Delta miles are good for flying those airlines I mentioned above, you can be sure Lucky will not bother to fly / credit miles to AA unless he absolutely have to. So yes, Lucky can drive up to FLL and take JetBlue. But JetBlue miles, not unlike Delta miles, are hard to/ nearly impossible to arbitrage. For now, AA miles can still be leveraged to more than 1 cent a mile.

  48. @Lucky
    You have to equally ask how profitable Delta’s partner airlines were before they got involved with Delta. I can’t think of one that was worse off after working with Delta and most are stronger.

    I don’t think Delta has any illusions about reworking the global airline industry; it does see opportunity to work closely with some foreign airlines that can help Delta and Delta can and has made them stronger in the process.

    It is because Delta has the money to invest that they can take relationships with other airlines to a level that most other airlines cannot.

    If AA and Latam cannot have a joint venture, it is doubtful they could have been stronger partners or helped each other more than any joint venture. If that isn’t true, then the whole philosophy of joint ventures in the airline industry doesn’t make sense.

  49. @ZJ1

    > Let’s face it, most airlines would much rather partner with Delta than American; this gives Delta first pick and relegates AA to the leftovers.

    Most airlines would rather partner with AA than Delta. Delta doesn’t respect their partners, and has generally won partners by dumping money into them for a seat on the board, which only works on bottom tier airlines. All the airlines that Delta can’t bully into submission tend to be the good ones. Delta’s leftovers are the first picks: the airlines that are in too good of a negotiating position to get stuck with Delta.

    They failed to get JAL (despite the bankruptcy), then they even failed to bully KAL (already a regional last pick, especially for Delta since they have Northwest’s 5th freedom rights) into a JV. Haneda changes eventually forced Delta to partner with KAL on more reasonable terms. Out of the Chinese SkyTeam airlines, Delta was only able to bully the worst (China Eastern) into a partnership, in the process losing China Southern to AA.

    Even Virgin Atlantic, Delta’s most desirable partner, is arguably a leftover pick compared to British Airways as a partner. They do have a better TATL product, but the BA route network is much more useful.

  50. Alaska isn’t getting bought by AA… not unless there’s an absolute meltdown over there.

    They said no to Delta not so long ago. Why in the hell would they OK to AA?

  51. @sas
    You might want to consider the definition of “joint” as you tout that Delta has only managed to pick up the losers while you think that American got the first string.

    JAL flies THREE TIMES the amount of capacity between the US and Japan that American flies.

    In fact, Delta flies twice as much capacity between the US and Japan that American flies.

    In the combined Korea/Japan to US market, Korean and Delta are the first and second largest airlines by capacity. Sounds joint to me.

    American doesn’t operate a single flight to China Southern’s hub while Delta serves Shanghai from four US cities (or they did before the corona virus)

    British Airways flies twice as much capacity from the US to the UK as American.

    Air France is the largest carrier from the US to France with Delta second while to the Netherlands, Delta is the largest airline and KLM is second.

    Delta and JAL could not have received antitrust approval for a joint venture at the time JAL was in bankruptcy because both were the largest from their countries at the time – exactly the same scenario that played out with AA in S. America with Latam.

    The verdict will not be issued tonight regarding how well AA or DL succeeds in the new environment in S. America or in Seattle or the Middle East or beyond. But it is clear that Delta has a far more coherent strategy that involves partnerships that build on each side’s strengths. Meanwhile, American has cobbled together a montage of strategies over the past couple weeks that likely won’t change the fact that American is still #3 out of the big 3 to both Europe and Asia 6 years after the USAirways merger even though one of the justifications of the merger was that the then-new AA would be capable of competing with Delta and United in the global marketplace.

  52. As far as the Bengaluru-Seattle flight goes, I believe it has a strong business case.
    Bengaluru is the tech hub of India housing the India headquarters of Amazon, Microsoft and countless other giants. There would be sufficient point to point demand from business travellers to make the route viable on a 787-9.
    Benguluru also has limited one stop competition particularly to the West Coast- barring Emirates the gulf carriers don’t fly to the west coast and doesn’t look like they will do so in the future. The European carriers too have limited capacity compared to Delhi and there is no completion from local carriers. American’s partnership with Alaska should offer this service connectivity beyond Seattle and Beguluru in itself is in close proximity to Chennai, Hyderabad (another emerging tech centre) and the entire Southern region. I see a strong case for the service. What is surprising however is American (versus Delta) deciding to launch it given that Seattle isn’t their hub and that this is an uncharacteristically bold move from a normally ultra-conservative American.
    Apart from launching a Mumbai service Delta itself has its hands full with all the recent JVs they have launched and probably does not want to launch a new service yet to India. Having said that they may just decide to preserve their local dominance and standing with the Seattle tech behomeths and decide to launch the route in retaliation with an A350 offering similar range and capacity. That would most definitely spoil American’s party and even lead to a cancellation of the route given Delta’s existing presence in Seattle- they would have a clear advantage over American.
    However American would have probably done their research and possibly betted on the fact that Delta still has limited A350 frames to be able to deploy on such a long route. Delta however has the clout to move around a few deliveries to get the aircrafts. The question is whether they will? I would be curious to see how this unfolds.

  53. Vasu Raja will have a job at American Airlines as long as he keeps telling Doug Parker how wonderful he is. Vasu is nothing but a lapdog.

  54. Lucky also has a “unique” way of “using” inverted commas. Come now. Dont point out others grammatical errors when you are guilty of the same errors. Meeeow

  55. Honestly, Ben, I agree that it is less a cohesive strategy and more a reaction leveraging what American can (partnerships vs internal capabilities to build a hub, which American lacks).

    If it can be called a strategy, I would call it: competition containment with short-term opportunistic revenue opportunity. SEA-India is an underserved direct market; lots of direct biz opportunity. I think it works. Anything through London gives them scale and good rev/margins at this point. I think this works. It boxes out Delta in market they’ve been trying to disrupt. But it all feels like 12-24 month horizon type stuff. Because of asset sizes, regulation and pre-booking windows (e.g. cash flow recognition), airline strategies need to operate on 5-7 year horizons. I don’t see anything like that here.

    Everything else: their pricing, merchandising, hard product, soft product, hub (other than DFW and maybe CLT), geographic strength (other than maybe trans-Atlantic), employee relations, loyalty and customer relations can only be described as short-term margin maximizing. Maybe their fleet strategy is slightly more comprehensive?

  56. You all Airline pundits act like knows everything.
    When AA announced Alaska partnership and bangloor route you all shocked didnt see that coming !
    Now AA announced QR partnership that’s another shocker you did t know nothing about it!
    You gonna see more Announcement which will shock you again probably very soon !
    You can all do a round table meeting to bash AA it’s funny when AA does any strategic move its all wrong and Delta does the same it’s all clever !
    People this Airlines knows what they are doing. They have done enough research before they makes this bold moves . American , Alaska, QR here for a game . And they were discussing about this from last year June!
    So stop saying DL and LA partnership scared AA too much. And they are doing this all to retaliate against delta . Because that’s not true .

    Just wanted to say you guys be ready for some Announcements so you can bash American around your dining table more .

    Ben there are lots of AA loyalist here ..do us a favour leave AA and marry delta . AA employees definitely will buy you a gift. I am EP for very long time .Everytime when I am in the lounge they appreciate my buisness and staff seems enjoying their job very much . Stop talking about employee attitude . Employee and employer problem exists in all the companies that’s including your favourite Delta .But poor delta staff they cant even join the union. Now slowly that frustration coming out.

    Mr Ben downplaying everything on AA ..And this company is here to stay !!

  57. When USAir bought American Airlines out of bankruptcy in 2013, it decided to dump the USAir name and keep the American name. Everything else about the current American Airlines is still USAir. Which was, and kind of still is, a kind of pokey regional airline. Their heart and soul–and brainpower–is not up to the level, or any of the challenges, of a major worldwide mega-carrier. Nothing in this piece surprises me, except the author’s hope that there is a major strategy lurking in there somewhere. Never gonna happen.

  58. Their planes are too cramped for Americans, have no on board TV screens or charging stations (USB/12v laptop chargers), no legroom for anyone above 5’8″, poor meals that’s barely enough to feed a child, and tastes like hospital food, often provided at times people are asleep. Drinks are served right after one another, in the hope that people will refuse them, or purchase drinks…
    Their main cost is staff wages. Zero investments in the hardware (planes).

    I no longer fly with them since 2007.

  59. As for the S. American market – specifically Brazil – American was left with no choice but to partner with Gol. There are 3 major players, LATAM, Gol and Azul in Brazil, which is a strong market for all major carriers. LATAM is now with Delta, Azul is with United, Gol was the only option. They have a strong presence in Brazil and South America and will definently fill the void left by LATAM, but as a budget airline, customers will see some downgrades especially in terms of premium services. But maybe this will also benefit Gol, as they will get more leverage and definitely more support.

  60. There is no American Airlines. Ever since the merger, it is clear they are USAir. They kept the paint on the planes, but everything about this airline reeks of USAir and their “It’s not very good, but it’s good enough for our customers” attitude. I don’t fly American, period. Not until some other airline buys it and fires everyone that ever worked for USAir. I’d pay more to fly any other airline, and regularly do. The funny thing is, I’m a practical person, and would fly them again in a heartbeat if they offered a product worth my money. Since I spend so much time in the air, things like hard/soft product, operational efficiency, frequent flier programs all matter to me. Let American fight it out with Frontier and Spirit for last place, and cater to the hub captives and lowest fare seekers (as if AA is cheap!).

  61. Anyone that is 6′ 2″ or above doesn’t fit in the seats. I feel that the main job of an airline is to deliver a comfortable flight. They fail in this job.

  62. If I get on another nasty ‘New American’ plane without power ports and/or TVs, I’ll go postal. Alaska airlines has done a better job with their merger than AA. I get on a plane and can’t tell if it’s Virgin or Alaska. That’s how a merger should go. My company contracted AA back in 2013 when they introduced new Airbuses and a more comfortable flight. Now they’re introducing longer routes on the most nasty old planes or cramped new planes. If we wanted to fly on US airways we would have signed on with them. Can’t wait to switch our corporate contract to Alaska(domestic)/Delta(intl) this year.

  63. I’m AA captive in at CLT – and when I say captive, I mean – it’s American or nothing. Well, except Lufthansa to MUC, the Delta shuttle to ATL and SWA to a few hubs. You should (and folk at DFW should) be thankful you have some international alternatives, and decent planes.
    As for employee satisfaction and labor disputes, see IAG.
    I honestly think Alex Cruz and Doug Parker went to the same school in how to run an airline.

  64. If I get on another nasty ‘New American’ plane without power ports and/or TVs, I’ll go postal. Alaska airlines has done a better job post merger than AA. I get on a plane and can’t tell if it’s Virgin or Alaska. That’s how a merger should go.

    My company contracted AA back in 2013 when they introduced new Airbuses and a more comfortable flight. Now they’re introducing longer routes on the most nasty old planes or cramped new planes. If we wanted to fly on US airways we would have signed on with them. Can’t wait to switch our corporate contract to Alaska(domestic)/Delta(intl) this year.

  65. I am cursed. Grew up in Upstate New York as a USAir captive, now in South Florida largely captive to AA. Lifetime Elite and avoid at all costs, esp. on long hauls to Asia. It is interesting to me as an economist that AA focuses on route expansion, alliances, etc. much more than improving its horrible service. Perhaps better service doesn’t translate into better number for Wall Street and bigger bonuses for the execs., while lower costs per jammed in seat miles, corner cutting and dirty planes fuel the bottom line. Management is not stupid; they have adopted the agenda and goals of their bankers, not their customers.

  66. The frosting on the cake would be for JAL to dump AA and partner with DL now that they will be the largest US carrier at Haneda. Poetic justice for a once great carrier that is now in the toilet.

  67. @ John S — Hah, unfortunately that’s highly unlikely, given that American and Japan Airlines have a joint venture for transpacific flights. It’s questionable if Delta could even get a similar transpacific joint venture approved, given that they already have one with Korean Air.

  68. “and code shares don’t count as U.S. flagged flights if the metal is foreign. ”

    That’s not true. UA has the government contract fare between Washington and Addis. I take the ET IAD -ADD flight all the time under a UA code share flight number.

  69. AA’s Philadelphia to Balogna, Italy, nonstops didn’t last more than a few months. I was on one of those flights and it was no more than 1/4 full, mostly Italians. The local Bologna government was vocally excited about a nonstop connection with the United States and I feel badly for them that AA, like a two-faced friend, pulled out quick. The decision to use 25 year old 767s didn’t help to sweeten the pot with travelers. Why fly an archaic aircraft to north central Italy when you can take a modern 777, 787 or Airbus to Rome then hop a train? I can vouch if it wasn’t for the empty flight that beat up 767 would’ve made for a miserable 8 hours especially if you were stuck in an aisle in coach with those odd boxes affixed under the seats leaving no leg room. A near empty flight, however, didn’t stop AA’s flight attendants from having their infamous midair meltdowns. I imagine the same scenario will occur with all these other nonstops from US cities to exotic off-the-wall locals like Doha and Croatia. People traveling to far-flung places want a pleasant flying experience not an awful one.

  70. To everyone who does not live in SoFla.. FLL is NOT near to MIA …it is a complete pain to get there… there is no Metrorail to get to it. You have to drive a good minutes in the express lanes praying that you do not hit traffic or likely an accident, which will then throw off even any sense of getting there on time. Then you have to park which is pricey.. the airport is older with 4 terminals that are only connected on the outside, exception is 3 and 4. It is a complete pain to get to. Then of course customs is the worse where I, a US citizen, have had to wait 3 hours in line before.

    MIA is quick, fast, more modern, great shopping, and customs is very fast. In fact I got back this morning on Avianca from Colombia, took 10 minutes to go through customs.. and 20 minutes or so, I am home in Brickell …this is why if we live in the 305, why we choose MIA over FLL even though it may be cheaper… time is also money….

  71. Seattle-Bangalore makes total sense- put it in the “absolutely brilliant” category. Here’s why…

    Both are tech hubs as you state. Many US tech companies hire contract employees from India under various work visa arrangements (e.g. H1-B). They are employees of 3 or 4 huge Indian corporations like Tata Consulting Services, HCL, etc. Microsoft, Amazon, Boeing, and many small companies obtain contract labor (engineers, technicians, call center workers, website maintenance) thorough the India companies, who have US offices and operations.

    The contract workers travel between US assignments and to/from India for business and personal reasons. I speculate AA has contracts with one or more of the India consulting firms to route travel through SEA from Silicon Valley, LA, Austin, Phonix, and other tech hubs. It may include domestic travel too. That’s a substantial chunk of business!

  72. Qatar needs American more than they will ever admit. Parker needed Qatar to cut its ties with Air Italy and eliminate MXP as a transfer point for its marginally profit making European flights so it was another airline marriage made in heaven. Gary Leff thinks I’m crazy but the whole IAG relationship was not going to see Qatar leave Oneworld. AA might begin to turn things around now that the below the wing contract is settled.

  73. The trouble with Parker and his tools from Tempe, is that all they know is how to chase after the bottom dollar travelers. America Worst was a garbage airline, and USAir was not much better. All Parker knows is pinching pennies and providing the minimum amount of service. He does not understand a premium seeking customer, and one that is willing to pay a premium for quality service. He would rather earth the business of Granny spending $49 to travel once every 5 years, than an executive paying 1000s of dollars a week.
    He has AA so far in debt, the only likely escape will be another visit to bankruptcy court, and this time they likely wont emerge.
    But hey it was the unions at LAA that wanted Parker so bad, now live with him running AA into the ground

  74. All this b*tching and griping you’re doing about American, yet you think Doug Parker is a genius. You are extremely contradicting in your article, as well as a few eggs short of a dozen..

  75. So as an American EP living on the west coast I am thrilled by their tie up with Alaska. I have written to them several times in the past 12 months suggesting that they should but Alaska !!! I think the tie up is a first step and it will provide a much needed west coast boost to American I only hope they see the high tech travel dollars and further expand their west coast presence especially outside LAX – I don’t really understand the blinkered focus on DallasFW. You need to go where the clients are, especially for the profitable long haul routes . I would love to see a bigger Bay Area presence, which is currently dominated by united, but that would take a significant long term strategy approach from American and it’s not clear if they are prepared to take on that fight.

    LAX, SEA, SJC or SFO to Singapore, Munich or Frankfurt would all be great routes to add!!!

    Maybe on less LAX to London or Tokyo and an LAX Singapore instead? Those other routes are well covered by alliance partners.

  76. Just flew QR long haul – DPS-DOH and DOH-LIS. Can say that it was a better experience than SQ MNL-SIN-DPS in both the soft and hard product (new SQ seats on 350-900 and 787-1000 are HORRIBLE).

    Our previous experience on QR CPT-DOH-LAX was not good. Hard product was ok but the soft was terrible. Cheap tasteless wines and poor food (only thing edible was a snack). Our latest experience placed QR somewhere above QA and SQ, about equal to CX and definitely below JAL which is now our favourite airline. The seats were good and the wine was much better selection.

    Long time since I flew AA J anywhere so would be willing to choose them as an experiment on a long haul if the alternative was SQ or QA. Might even experiment if the alternative was QR.

  77. I think it is humorous that people who never fly American or haven’t flown on American since 2007 have so much insight to AA’s product, aircraft, people and strategies. I have flown AA recently, today as a matter of fact, between YYZ and CLT and found them to be fantastic. Boarding went well, the CLT crew was friendly and engaging, the aircraft had entertainment to my own device with a fantastic selection of movies and live tv, fast wifi, power outlets were available, we arrived over 45 minutes early, had a gate, ground crew and and agent. Pilot and friendly flight attendant stood at the door, smiling, thanking everyone as we exited the aircraft. It was pretty text book.

  78. American is dropping thhe ball, big time! They should go with one airplane, the 737, with folding wings & quick removable drop tanks for fuel & range. Then, be sure and build round-tables at each gate so that more airplanes can fit in smaller spaces. (This provides much more versility and use of a lot of airframe parts that are in the bone-yard.
    Another idea: With the market down as far as it is, and you know that it will bounce up at least some from where it is now, It’s a good time for Congress to compensate the pilots & wifes that are still alive that lost five years pay at the whim of Congress, (& no statue of limitations applies!).

Leave a Reply

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Your email address will not be published. Required fields are marked *