Philoj

Sparked by this post:
http://www.flyertalk.com/forum/showthread.php?t=545531

About AA's CFO trying to "work within the system to cut costs and raise revenue" - if you were the CFO and could do whatever to improve profits for AA, what would you do?

UA's E+ system? Improvements to aa.com to make it easier to book? FF improvements? More flights/different flights/cut flights?

Personally, I think that "cutting costs" is generally nickle/dime and stopgap at best, while a change in customer service, if managed properly, can have broad and repetitive effects.

I think the first thing I'd do is adopt UA's E+, making domestic flights somewhat "three class" - if you want the better seat pitch, you pay for it. FF's get access to E+ at a discount (still more than steerage, but cheaper than everyone else pays) - this gives another benefit to status.

Other thoughts?

JDiver

For one, it would be relatively easy to configure an E+ / WT+ type area on 763s and 777s (the 763 minicabin , and perhaps three rows on the 777.)

Service differentiation would indeed help retain, and get some folks to switch from other Sick Six airlines, but I think that's a bridge too far, particularly without serious leadership from union and managament sides.

I'll keep my eye on this thread and see what my FT colleagues suggest - and maybe add more as I think about this a bit. Great topic!

chiil1974

Without a doubt the first thing I would look into is a product equivalent to E+. I am honestly surprised that they haven't rolled something out sooner considering that they compete with UA out of ORD. Probably the second thing I would look at would be the digiplayer type of IFE similar to what AS uses. I flew AS to SEA and used that service on the outbound trip and really liked it. For me it was well worth the $10 on a 4.5 hour flight. I can't imagine it would take that much usage to make your money back and it would then take away the sting of having to fly to the west coast on the M80 (I like the aircraft by the way, just hate that there is no IFE on a 4.5 hour flight).

martin33

if they can get the details right, IFE rentals seem a good source for midcons.

E+ is tricky. UA announced as part of their bankruptcy exit that E+ had recently reached break-even; a bit scary considering that was after 5 years in operation. The sticking point is that it seems doubtful AA could do an E+ scheme without also shrinking the F cabins (which tend to be smaller on UA as well). Also, unlike UA, AA decreased many F fares following the big Delta fare simplification. They must be happy with the resulting paid F revenue, so why tamper with config yet again so soon after the (partial) undoing of MRTC.

Connexion internet service could be a good revenue source over time.

SAN-man

Maybe they could look into a program where they block the middle seat for top tier folks up in the front of coach. Call it Executive Coach? Oh, wait, they already tried that too.

bbkenney

When we really want to drive more revenue, we turn up the heat on customer service and work harder to exceed their (the customers) expectations. I would think enticing/keeping 1,000 customers would make AA a lot more money that removing pillows (I could care less about the crummy little pillows, it was just a point).

gemac

I would look at routes where my revenue/seat mile was higher than average, and consider doing more of that. I would look at routes where my revenue/seat mile was lower than average, and consider doing less of that. I think that would mean more international and less domestic.

I would also try to figure out what my differentiation from my competition would be. I would then market that differentiation. Compare that to the current marketing campaign, which implies that AA is different, but doesn't say how.

justageek

Beef up AA.com so it can handle the myriad of things you currently have to call an agent for (mileage upgrades, partner awards, ticket changes, ticket purchases in a specific fare bucket, standby, etc. etc.) and then increase the agent fees. Maybe change the 800 numbers to 900 numbers?

Oh, and merge with JetBlue! Seriously!

tdo-ca

Unfortunately, it is a pretty simple economic picture. With load factors running very high already (market share), either fares go up (unlikely to be accomplished unilaterally in a time when airlines are viewed as a VERY interchangeable commodity, particularly in competitive markets) or costs go down (which is what has been happening all over the map).

I believe fares are too low and we are getting to the point where there's no blood left in the metaphorical turnip. I do not believe (again IMHO) that there is very much product differentiation actually driving purchase decisions for the majority of passengers, even the high rev ones.

logicalrealist

The digiplayers were going to be my suggestion, though I'm curious how much AS is clearing on those, or if they're mostly just helping keep customers happy.

Expanded food-for-purchase is of some interest for me (whether or not it'll make more money for AA) -- I've had a decent number of tight connections lately where I haven't had time to buy food ahead of time. There have also been a couple transatlantic flights where I would have happily paid for more food or F/J leftovers.

It's a good topic, but thinking about it, I have to imagine that AA has already run the numbers on these, so I just feel like an armchair critic.

MJonTravel

Focus on service. If your people don't want to get on board with a customer focus, push them through the performance improvement process until they do get it, or fire them. Everyone at American Airlines should be employed by the "Customer Service" department first, and their individual line of business second. (At least in spirit!)

I can feel myself about to get preachy so I'd better stop with this.

Daze

Sooner or later, ONE airline will come to a decision: We are going to charge our passengers fares that at least equal to our expenses (Fuel, Maintenance, Wages) and if some passengers won't pay, others will.

Sure, load factors will fall off at first, and some routes that have a large number of carriers offering service will be axed, but eventually, since capacity has dropped so much and demand is so high, increased fares will be matched by other airlines, and maybe profits can be on the horizon.

I know, you're all saying that any carrier that does this will be committing suicide. But, they are all committing suicide now by charging so little. It's a race to the bottom, and we're already at the point where fuel costs alone aren't covered by fares. How long can AA, or any other airline keep losing money at the rate they currently are? How long can major airlines go for decades without buying new aircraft? At some point they will all be broke. Even if the employees were to work for free some flights won't make money. Eventually revenue has to equal costs, and all of this stuff like charging you a dollar for a soda is just a few drops in the bucket. Even WN will be facing a day of reckoning when fuel hedges end and costs stay high.

Maybe AA will be the airline that decides to charge fares equal to costs.

(braced for flames.....)

gemac

If you don't have some product differentiation, nobody will pay more. Think about it. Would you pay $200 more for the same thing?

All airlines are uncompetitive on some routes, but if any of the legacy carriers was more expensive across the board, without first doing something pretty major to give customers a reason to pay more, then I would advise shorting their stock.

FWAAA

No flames here - but your post requires that we assume that the management of all major airlines is incompetent and has failed/refused to charge as much as they possibly could over the past several years, and that's just too fanciful for me.

I could believe managers at one or two airlines being that stupid, but all of them?

Fares will rise when the supply/demand situation changes. Like when some capacity is removed from the domestic supply of high-cost seats.

shoodawg

and cease the nickle and diming...