FLLDL

Again, it really is all about the labor costs.

US Air has terrible quality product, poor intl route network, little or no presence in Asia/South America etc, general anti-customer attitude and yet they still made $200MM this quarter while AA can't even breakeven.

All of the product differentiation suggestions in this thread won't solve the core problem with AA's business - high labor costs.

eolesen

Yep. The shake-up in management announced today may be a good start at that. Horton's now President, and they've named new VP's for both Flight and Onboard Services. It's a fresh start in some ways. Arpey didn't exactly fall on his sword, but he's definitely taking a step out of the limelight.

AA also named a new CFO and a new CCO.

socalterp

US also has an efficient and profitable fortress hub at CLT...

FreequentFlier

This is a good point, but Doug Parker has mentioned that US' network gives it an approximately 12% disadvantage in terms of revenue per seat (CLT and PHL are not as good of a global gateway as say, JFK and ATL), but their costs are about 12% lower, so it's a wash.

AA is the worst of both worlds in some cases - both the highest costs in the industry and a management team that is too conservative to take any chances. The network is there to potentially fly to the Middle East, Africa, etc.

But the will isn't.

eolesen

Perhaps, but nothing says "TARGET" like a red, white and blue airplane with "American" written on it.... That's one decision I happen to agree with AA on - let the traffic flow over MAD and LHR, especially now that ATI is there.

ramalama8

You really think that has anything to do with it? I'm not sure that AA feels it is limited from serving a market because of it's name and colors - I think it's more because management is chicken. It might, however, make a very interesting case study in Middle Eastern perceptions (and Americans' perceptions of Middle Easterners).

fishferbrains

It absolutely has an impact on how I fly, but it's part of the entire network/product package.

I seek out point-to-point TATL flights. I fly AF/KLM (great food, "eh" J class seats) and BA (great lounges, good J seats, terrible food) a lot more.

When it's faster/cheaper to fly J to YVR and down to SFO/SJC on BA/AS; it's a prime example how even in-network AA is losing my business.

I'm loyal to AA for my EVP qualifications, but now I'm Platinum on AF, etc and even considered straddling the BA program until the ATI news came out.

I'm curious of how other peoples habit have changed.

FWAAA

I'm certain that eolesen is correct. Dollar-wise, AA (and UA) suffered more (and suffered longer) than did DL, NW, CO or US from the September 11 attacks. Management tend to have long memories of horrific images of their planes flying into the World Trade Center and the Pentagon. Even though AA might be able to attract superior yields on some routes not currently flown, it is apparent that management has determined that the risks outweigh the potential benefits.

Along the same lines, as long as current management is in charge, the odds that AA will purchase a single Airbus aircraft are probably zero. Airbus' shameful attempt to blame AA pilots and AA procedures for the demise of flight 587 cemented AA's resolve to continue its exclusive deal with Boeing despite no legal obligation to do so.

In both cases, the Business Judgment Rule is at issue; management isn't "chicken" for weighing the alternatives and choosing (in its view) the more prudent path. Flyertalk is full of armchair analysts who know for sure that AA's current problems lie in its failure to fly its own metal to Korea or Hong Kong or Africa or Australia or the Middle East. And those armchair analysts may be correct. I'm betting that the people with access to the real numbers have, by and large, made the better call than the armchair analysts (or "aa" for short).

AAerSTL

+1. Many folks on this board relentlessly complain about AA's cutbacks in certain markets as part of the new strategic plan of focusing on 5 core markets. It's easy to sit back as a (somewhat informed/knowledgeable) customer and critique management decisions-but without being privy to route performance, costs, and operational information such analysis is meaningless.

demkr

I agree. It doesn't take a genius to realize that when premium OR economy passengers are shopping for flights, they are looking at two things: A) Who has the lowest price? (not AA), and B) Who's going to get me there faster? (likely, not AA). "B" being slightly favored in the premium department, and "A" being slightly favored in the economy department.

Basically, unless you are near JFK, ORD, DFW, MIA, or LAX--what is the incentive to fly AA? IMHO, there are none. And I'm puzzled that this is the way management wants it, otherwise, why have the strategy?
I'm relocating to SFO and will remain loyal because most of my routes are still direct, but not everyone is like me!

My thoughts on what AA needs to do to return to profitability:
1. Stop immediately cutting routes due to competition. These things should be assessed and scrutinized--because even in some markets like the Bay Area and the former SJC hub, there are loyal passengers that still want to fly, but won't if mgmt makes routing impossible or inconvenient.
2. Labor costs cannot be astronomically higher than the competitions.
3. Lie-flat seats anyone?
4. Do something "more" with AS other than the ability to earn miles.

ramalama8

I totally see your point. Maybe "chicken" isn't the right word for management in this scenario. But I do think they've sat a little too contently as their competitors do bigger and better things.

fishferbrains

^
IMO the sentiment of AA till now is a lot like "prevent defense".

You're trying to try avoid losing more money by cutting costs, "tweaking" the current model for incremental gains and hoping that the market returns to where you once were successful. In the meantime you're missing the opportunities as the market/game changes around you. Corporate size and memory prevents them from seeing the forever changed and reacting quickly.

AA is somewhere around #1500 on the list of market caps. There's a good chance that many "aa" FT member work at 1-1499 at a level that if they saw "the real numbers" they'd make substantively different and better decisions.

Let's hope that the new management team takes the blinders (and gloves) off and generates more creative ideas.

sts603

What about the hundreds of city pairs served by no or limited non-stop competition? RNO-TPA, SMF-RDU, OMA-MDT, MSP-BCN, and on and on and on?

fishferbrains

Reno to Tampa? That's like the poor stepchild of LAS-MIA.

Have you been to Reno lately? <shudder>

kebosabi

AA/OW doesn’t have many int’l destinations out of LAX. As such it doesn't give me THAT much incentive to stick with AA for long haul int'l flights out of LAX either. Especially in the number of non-stop direct flights to/from Asia and Europe, it's rather pitiful.

UA & *A has:
North & Central America: YYC, YUL, YYZ, YVR, MEX, PTY
South America: none
Asia: PEK, HND (soon), NRT, ICN, SIN, BKK
Australia & Oceania: APW, TBU, RAR, AKL, MEL, SYD
Europe & Middle East: LHR, FRA, MUC, ZRH, IST

DL & ST has:
North & Central America: GDL, MEX, CUN, AGU, CUL, HMO, BJX
South America: GRU
Asia: PVG, CAN, HND (soon), NRT, ICN
Australia & Oceania: PPT, SYD
Europe & Middle East: SVO, CDG, FCO, AMS

AA & OW has:
North & Central America: YYZ, CUN, GDL, MEX, PVR
South America: LIM, SCL
Asia: NRT, HKG
Australia & Oceania: AKL, SYD, BNE, MEL
Europe & Middle East: LHR