American Airlines CEO Robert Isom has been widely criticized in recent times, due to the extent to which the carrier lags competitors Delta and United. This is true in terms of profitability, and it’s also true in terms of passenger experience.
Continue reading: Must-Read: A Yale Academic’s Bizarre Defense Of American CEO Robert Isom
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Data point for the exit package. Just a reminder to the board that he did what they wanted - paid down debt while just keeping the ship afloat. Took a little while to start putting the lipstick on the pig but they’ve been doing a better job with that in the last 12 months with the new planes and seats (despite their obvious flaws). Those were the aspirations and by those metrics he succeeded.
Well I do think Isom is getting more attributed to him in a short period of time than is reasonable and there is union posturing going on. For better or worse, Parker was probably the most consequential airline CEO of the 2000s. Richard Anderson the most effective. Prior to that, Gordon Bethune, Bob Crandall, Herb Kelleher.
Good things the writer is a university professor, because he would make a pathetic stock broker. Even worse if he ran a business
Unfortunately he's a fool who is teaching students
Herb and Juan Trippe belong in their own league if you ask me.
There is a lot of union posturing going on. It’s crazy to me to hear them complaining so loudly when they continue to so egregiously abuse the American consumer. Its like the ILA calling a strike that leads most Americans to discover how a small union is making their lives more expensive because it refuses to be reasonable and allow more labor into the market. You’d think the pilot unions would just keep their heads down.
On the wide body shortage, DO NOT forget that Isom made the decision to delay 787-9P deliveries that were supposed to be complete by 2028. One example of the continual blunders by the America West management we’re stuck one.
Ben- you ask if he independently arrived there. Best way to find out…follow the money trail
Some folks are so quick to blame Parker and downplay Isom’s role. Let’s not forget, Isom was President of AAL most of the time while Parker was the CEO, and yes, those are often separate roles within the major airlines, but, it’s not like Isom wasn’t around then. Like, if he wasn’t a fan of something Parker was doing, he could’ve spoken up.
Nope. Good news is this should be such low hanging fruit for the successor. Would be an obvious and easy early win.
Hot crackers. If I had known it was this easy for the mediocre to get a deanship at Yale, I would've quit school in the fourth grade and made my way to Connecticut.
LOL, Re: Boeing delays
UA has taken delivery of WAY more max's then AA has. As for the 787s, AAs were delayed due to their business class seats. Specifically the modifications and customizaitons that AA themselves made to the seats. While AA was waiting (not so) patiently for their seven planes that had already been built, UA was actively taking delivery of their previous batch of 787s. Yeah.
Now, UAs latest batch of 787s are sitting with their own seat problems, but that too is looking to be nearly over, as two planes have now been accepted by UA and should be being delivered imminently. This will have ended with one plane being effectively two and a half months late and one being about a month and a half late, and the third just a week or two. They seem to have done a little more homework when it comes to getting the FAA to certify their customizations...
At the end of the day I want AA to succeed so badly. I'm a slight AA apologizer, I've flown with them much more then any other carrier, I've held status with them, I'm really really rooting for them. But their leadership the past couple of years has just been dogshit. God I miss 2017 American Airlines.
There is always some shade thrown to the flight attendants . For context . Mechanics make 200 usd per hour, not uñincluding overtime. Agents make 30 usd per hour and something similar for the ramp agents. The airline has sooo many middle managers, that it is incredible .
Sonnenfeld is a big name in academia on management/leadership, and has been for many years....
Without knowing for sure, I'd wager a lot that this seemingly random, weakly supported argument has a backstory behind it...
The possibilities could be benign--hey he once spoke to my class and I owe the guy a solid/we summer near each other in the Hamptons and I kinda like the guy. Or they could represent self-dealing....like a consulting contract with American or some other interested party.
Who knows? But if I was an editor at Fortune I would make it by business to find out.
There is little obvious rationale to come to the vigorous public defense of a CEO who is underperforming competitors by a lot and who has manifestly lost confidence of his own workforce.
I am well acquainted with academia. Born and raised to a professor household in a R1 university town. Made it through a STEM R1 PhD program myself.
Business school is well known among academics to be 99.9% bovine excrement. Literally the only b-school faculty member that has ever been worth listening to was Ben Edelman at Harvard (HBS) until he left because he didn't make tenure.
MBA = Master of Barely Anything.
As we impugn the intelligence of this Yale SOM dude, please avoid painting all of academia with a broad brush.
"Yale professor" tells me everything I need to know. If you ever wondered why we went from a country of middle class with strong savings to a serf class with loads of debt during the past 50 years "Yale professor" would be a great place to start.
Yale professors of law are absolutely terrific, however. I say this as a YLS alum and V10 equity partner.
There is some truth, half-truths, and exaggerations.
The one thing I will respect from Isom is that he is holding himself accountable to keep the company moving, even with all this pressure, regardless of positive or negative movement. Think of when Vasu was axed; he had to get the right people in and work to handle the immediate situation. I am not absolving him, but he needs to do more real fast and with impact to stay in the role.
Yes, labor costs more with AA, compared to United and Delta. This is the biggest driver of the lack of profit, and AA has made that known. But if the market is not taking that reason and the same reasons of the dean, then the opinion has little value. Let's see how the investors react to the Q1 financials. The board has to react to the investors, even if they believe Isom can see this through, a new CEO may be the champion of Isom's work from all these years.
I'm showing a mixed opinion here because, truthfully, I can't clearly tell which way to side.
Hey, at least a decision was made, and Isom and the company are owning it, for better or worse.
Your view on elite institutions tells me everything I need to know - you didn’t go to one!
So easy to expect the worst lately. Maybe working to keep a PE buyout in play?
Parnel, you deem someone else a fool yet you think Stock Broker is still a profession. You either meant financial advisor or trader.
Lucky applied to only one college and got in.
HYPS is a great way to stamp your ticket into high society. (S, law school aside, barely counts - you really want the Ivy east coast prestige of HYP.) But Lucky was born into wealth. His dad was like a king of private equity in NYC.
Based on Lucky's "work product" on this blog he is clearly smart enough for standard issue HYPS. Would he survive Math 55 at H? Probably not. Would you?
For many years we have avoided flying American because quite simply they are CHEAP in every respect and grossly mismanaged at all levels. The final straw was a few years ago when on fully paid First Class tickets from MIA - PHX, a five hour flight, we were served no food whatsoever. Parker was terrible and Isom continues the trend - both grossly overpaid and under-qualified.
Lets see.... American sends aircraft out with broken seats, broken tray tables, and numerous other cabin defects that it would never have considered acceptable 10-15 years ago.
Inflight service all over the board.
No particular drive to improve, at least that I have seen based on other peoples comments.
Isom must go for AA to improve and I believe there is much room for said improvement
After working for a big org for long, frequently seeing super stupid mistakes people making while these mistakes take years to fix, I would not surprise these things or what the AA goes through. Everyone in a big institution has a different interest, some people’s interest is to maintain a job, even it means a CEO, someone’s interests are their passion to make the places better (though if you are on that path, you will most likely leave that place in a few years), someone has their own special interests in their friends or family’s business, someone may just want to control others, someone comes for fun. Most CEOs are just a job, they do not have to make the place better.
Two questions:
1. Can any of us **prove** (not merely offer an opinion) that Sonnenfeld isn't right?
2. Isom's airline blogger critics and commentators (including me) have been the CEOs of how many airlines?
In conclusion: It's easy to be a critic. It's easy second-guess after the fact, when one knows what happened in the past. Sports fans do that all of the time. It's much harder to make decisions in real time without the advantage of 20/20 hindsight. And even the most perceptive people sometimes draw the wrong conclusions from history. Were all entitled to our opinions. But that's all they are.
Oddly, I was struck with the wonderful memory of the movie, Back To School, and Rodney Dangerfield with his classic rebuttal to the professor, "Fantasy Land."
AA paid him a hefty consulting fee to write this piece. Only explanation. Unscientific in analysis and tone. Total sell out.
So many folks, including many of your readers/comments, seem to hate AA to the point where they seem to relish AA’s possible eventual demise. To what end? We’ll all be happy with two legacy carriers rather than three?
The only logical explanation is that he was commissioned by Isom and/or American's BOD to write the piece. Shame on Fortune for attaching their name to it.
What a bunch of nonsense. This so-called Professor (The Nutty Professor, perhaps?) seems to enjoy creating alternative facts...
It would be interesting to see how much money this fellow has received from AA/Isom
Delta and United fanbois forget as a condition for the US Airways takeover, it ceded hundreds of slots in New York and Washington to Delta. The Northeast Alliance with JetBlue was dissolved for antitrust, but more expansive United alliance is now allowed. Add to the facts that CLT is not scaled for 900 flights and LAX is being rebuilt. Management is poor, employees are expected to rest in terminals on junk furnishings, executives are over compensated.
Not a recipe for success, but major elements are from government policies. Allowing industry consolidation has not benefitted workers or consumers.
that is not true.
Delta and USAirways did a NYC-DCA slot swap before the American/USAirways merger.
The basic gist was that DCA slots were valued more because there were more LGA slots obtained by DL (1/4 of the then-total amount of LGA slots) for every DCA slot.
DL ended up w/ about 45% of LGA slots, a percentage that has remained fairly constant since then. US had more than 50% of DCA slots and the slot deal pushed them over 55%.
Both sides had to make relatively small divestitures (slots for about 8-12 flights/day) to low cost carriers.
That slot deal was negotiated on the USAiways side by Doug Parker and none other than Scott Kirby.
As part of the AA-USAirways merger, the DOJ required AA-US to essentially divest an amount of DCA slots roughly equivalent to the number of slots pre-merger AA had at DCA which was about the same amount of DCA slots that US obtained from DL as part of the slot swap. Either way, the DOJ did not allow combined AA-US' DCA slot percentage to grow beyond what it was at the time of the DL slot swap.
and UA-B6 does not have antitrust immunity, joint scheduling or revenue sharing, all of which existed with AA-B6.
All of the big 4 are the combinations of mergers over the past 20 years. AA simply did not do it as well in large part because US management - including Scott Kirby who was then at US - did some stupid things that hurt US and later AA.
as for the general theme of the article, Ben is correct - and everyone sees it. Isom is often painted as Satan incarnate in the airline industry - which is a stretch but he has done little to turn AA around; perhaps AA was too crippled when Isom took over but he hasn't done anything meaningful to change the trajectory.
The piece is interesting but as you point out suffers from a large number of half truths and omissions (purposeful or not).
The truth is that he will be very qualified to talk about management as a whole, but that is no guarantee that what he has posted is a reflection of the work he would've posted had he been performing academic work.
My best guess is that he's angling for a board position or consulting gig at American or has actively been paid by American/Isom to write the nonsense we just read. In fact at times it felt like what Isom would've written himself to justify keeping his job!
you do realize that Sonnenfeld hasn't been a CEO of any airline either?
apparently being a CEO (current or former) doesn't stop anyone from being a critic of one now.
that principle rightly applies to alot of leadership positions.
He's always been like this, just using multiple alts (Biglaw V10 Partner, Arps, Davis Polk, etc) to act condescending to others on this blog. Just ignore him.
"You either meant financial advisor or trader." Who as a group perform worse than the market in general. Once you net their customers returns by the fees they charge, only a small fraction do better than an low-fee SP500 ETF. Those that do in one year, can't seem to repeat.
R1 business Ph.D. here. It is easy to find questionable things in business schools, no question, but the STEM of business (accounting, economics, finance) are as solid as STEM faculty across the campus.
I don't read " because it was the right thing to do" as a moral judgment, I read it as "it was the right business decision." That remains to be seen, but let's look at the stock chart of American and United for the last six months. Up until February 9, AAL was slightly ahead. In the past couple weeks, with bad publicity, it shows only an 8.93% gain compared with 11.58% for UAL. By this time next week, it could once again be the leader. The people with money don't see much difference.
Interesting that you don't mention the name of the second author, who is less of an academic and more of a promoter of Yale's "Chief Executive Leadership Institute."
Isom is an OK CEO. AA makes money, but AA is a Texas Airline. Dallas is just a weaker hub than most want to admit. SWA unperforms too. DFW is uncompetitive trans Atlantic and uncompetitive trans Pacific. Domestic yield is poor. As we have gotten wealthier and trade more globalized, revenue growth has been transoceanic business class. AA’s only big stumble has been losing its lead at LAX. It has always been behind in NYC and CHI. Although this forum harps on product, lie flat business class is lie flat business class. Look at ZipAir. AAs problem is they have zero product LAX-PVG, KIX, LAX-ZRH, LAX-CDG, LAX-SIN or from ORD or from JFK.
Maybe the author trying to jawbone his stock higher. It always amazes me the number of folks willing to talk up the stocks they own, when the ownership angle isn't clear... Makes me distrust financial advice / advisors as a whole.
He is interviewed frequently on CNBC and has proven to me he has serious TDS...
If Yale MBA students get this sort of education, people should not be going to Yale for MBA or companies should not be hiring MBAs from Yale. Plain and simple.
Any conversation of American compared to United and Delta begins and ends with the boneheaded decision to retire very useful relatively low-cost aircraft whilst the others didn't and thrived and the other boneheaded decision to alienate its distribution network. The rest could be debatable, but these two actions have caused severe and to this point irreparable pain to AA.
How many points do you need to redeem to ride Lucky as hard as you do? He’s a travel blogger that makes money from travel and financial institutions advertising to you. It’s weird that you pretend to know how many schools he applied to. I’m not sure how some random internet stranger is supposed to verify that. U of F was certainly not what it is today (thanks football!!)
Regarding your point about math at Harvard. Do you honestly believe that course is any different than the math taught at any of the other T10s? I didn’t go to Harvard, and based in your constant touting of YLS, neither did you. So, again, for you to be talking about something you clearly have no insight to is weird and ignorant.
The Yale MBA is not of the same pedigree as the undergraduate rigor or law school. Great for consulting recruiting however.
Ok? Did I say they do their jobs well or that everyone needs them? You also don’t seem to understand what the job of a trader is.
I don’t understand how you thought your response to my quote was relevant.
first, AA does not and has not made money on its transatlantic or transpacific network; it makes no sense to keep flying routes that don't make money.
The root of AA's network issues - which are manifested in its fleet decisions - is its inability to compete in NYC and LAX.
DL grew to the size it did in NYC while AA tried an out of court restructuring and then took advantage of US' small size in NYC to pick up 1/4 of the LGA slots; AA wanted for the government to reduce the number of slots at LGA and JFK post 9/11 while DL wanted to get more and fly them.
AA couldn't compete internationally out of LAX and pulled back domestically as well; DL jumped on the domestic market there while UA has tried to protect its position in the international market but DL is quickly growing international at LAX and will likely become the largest domestic and international airline at LAX.
AA's distribution strategy screwup was self-inflicted and it is very possible they may not ever recover from it. There are very few cases of US airlines regaining share they once lost.
DL has become the largest at JFK and LGA as well as BOS and LAX while UA is largest at ORD; all of those are major airports where AA was once strong.
Their fleet decisions followed their underperformance which has not been fixed.
They don't need airplanes to fly routes they cannot make money flying.
lol are you trying to get couple of First or Business Class Free seats or something? See when you get this folks that think they know everything without a clue of how an airline runs and called Isom the best CEO ever is an insult to Robert Crandall CRSmith the Herb Kelleher, the Jim’s and Colleen’s at WN(SA) so again are you looking for free tickets?lol
Easy answer: AA paid him to write this article. I used to run a PR consultancy, and a very common request was for experts/scholars to write anti-hit pieces. Send them the talking points, give them some goals, and let a credible writer put his/name to it. I'm sure AA paid him very well to write this, or at least to motivate him to write it. It's too obvious.
The credibility of these so-called institutions has fallen. Slapping the name Yale, Harvard, Stanford on something does not cut it any more. There are proven institutions, not so much federally funded that have more truth in their words.
I no longer trust those institutions, the pandemic showed us alot about them.
So who knows if this article is worth any salt.
So, as the author of this item: are you saying that your opinion is more valuable than the opinion of the author of the article you are quoting? If so, why?
Mechanics 'only' top out at $70 per this comparison.
https://www.reddit.com/r/aviationmaintenance/s/AxikH7p66A
It seems everyone has their own critical story about AA to tell. Yes, they have had problems in the past. The issue is current problem frequency, perception, and corporate culture.
If needed, can an airline's culture be changed? The last person I can think of that did so was Gordon Bethume at Continental. Perhaps he should be a role model for AA.
My last flight on AA PDX/DFW was excellent in First Class. Had Beef Wellington as part of their 100th anniversary. Flight was an hour late leaving due to mechanical issues and 25 minutes late arriving. Connection DFW/CHA was on time and well staffed with great attitude. Generous beverage service.
I do think critics understand (or should) that flying would not be served with a duopoly of two major domestic/international carriers. Someone needs to figure out how to turn American around if this is not a perception problem anchored in the past. If it is a perception problem, then PR and facts need to be used to counter it.
ISOM didn’t do shit for its work groups, all contracts were complete under Doug Parker.