Project One Airline cost reduction plan - discussion and speculation
Oct 30, 2017, 10:02 pm
#16
Join Date: Aug 2012
Programs: AA PLT, SPG Gold
Posts: 2,405
I would think DUIg and co know better than to put explicity write stuff like that on slides that are going to be widely circulated on the internet
Oct 30, 2017, 10:13 pm
#17
Join Date: Jun 2001
Location: New York, NY
Posts: 3,698
The 13% data point never made any sense to me and now I understand why - they used the Sunday after Thanksgiving as the data point for their analysis. Of course you would expect more one-off leisure travelers on this day. While some road warriors may have traveled to see family, most I know would be doing whatever they could to stay home for the holiday instead of getting on another plane. I would hazard to guess that if they picked a random Monday during the year, the mix of regular vs. once-a-year fliers would look very different.
I totally agree that if they just looked at traffic patterns for that particular day they'd get wildly atypical results, but it seems so stupid that it's hard to imagine that's what they actually did.
Maybe if someone on FlyerTalk is an industry analyst or a shareholder, they can ask on the next earnings call or annual meeting to get to the bottom of this.
Oct 30, 2017, 10:20 pm
#18
Join Date: Jun 2014
Location: Over the North Atlantic
Programs: AA EXP
Posts: 494
Sure but given what I know, AA could save a lot more through operational improvements, upgrading to advanced decision/planning tools and increase automation rather than cutting some PDBs.
Some interesting stuff from those slides.
Aircraft Taxi Management technologies: could this be a similar technology to CDM?. Or maybe some integrated airport pushback control like the one described in this well-known paper (in the field) by Hamsa Balakrishnan's team at MIT?
Flight route, re-route planning, and optimize aircraft warranty recoveries: is AA finally going to employ "advanced" (it is in quotation because the research is fairly old) mathematical techniques to optimize scheduling and schedule recovery?
New airport ramp technologies: I wonder if this means new autonomous ramps which would eliminate the ramp workers.
New cargo operating system: autonomous or mostly autonomous cargo systems are being developed. Like the ramp, I wonder if this means the elimination of the majority of the cargo workers as well.
Improved asset/gate utilization at hub. Is AA finally going to implement mathematical optimization-based gate assignment scheme at their hubs. See this paper as an example of research in this area.
Redesign schedule seasonality. Has AA finally found a better model for predicting seasonal variability and its impact on routes?
Concentrate wide-body hub deployment. Wait you mean AA doesn't do this already?
Oct 30, 2017, 11:24 pm
#19
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Oct 31, 2017, 5:14 am
#20
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Posts: 4,477
And here is that famous data point about 87% of AA's customers only fly once a year (which I posted about in the other thread).
While I realize this was a presentation for Investors' Day, I'm curious how AA might convert some of that 87% to more than once-a-year fliers, because once a year does not have any loyalty or reason to come back to AA (expect for lowest price and being a hub-captive)
While I realize this was a presentation for Investors' Day, I'm curious how AA might convert some of that 87% to more than once-a-year fliers, because once a year does not have any loyalty or reason to come back to AA (expect for lowest price and being a hub-captive)
87% of customers fly ONCE per year or LESS
I would like to assume the following:
1, Customers may not mean passengers. Although they used heading of Passengers. It is confusing.
2, Less than once a year could mean flew once during their lifetime or not flying at all.
So there are several issues here:
1, Did AA count all dormant account in AAdvantage?
2. Did AA discount all non-rev passengers?
3, How about passengers with the same name, did AA actually go through the trouble to make sure people with same names are separated or combined the people did not register AA account?
I can totally see this happening: in International routes, there are bulk fares sold by travel agents. These passengers generate a certain degree of revenue and large in numbers. They would never come back to AA again as it is likely this trip to USA in group would be their lifetime trip. Shouldn't AA discount these traffic in order to achieve their conclusion that passengers travel by lowest price??
Thus me think the research is biased and flawed.
Oct 31, 2017, 5:58 am
#21
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You - and several others in this thread - are turning yourself inside out trying to discredit the data without pointing to any data yourselves. AA execs may be selective in terms of what they share but they're not amateurs - as you are, apparently.
Most Americans don't fly at all in any given calendar year. Not-one-single-flight.
Based on data from the Omnibus Household Survey, the Bureau of Transportation Statistics estimates that about one out of every three (74 million) adult US residents flew at least once on a commercial airline during the 12 months prior to the survey.
That study is ~15 years old but BTS knows what they're doing.
https://www.rita.dot.gov/bts/sites/r...pdf/entire.pdf
As muishkin pointed out, the list of areas for investigation is ops-related, not directly customer-facing. I wouldn't predict that the a la carte craze has ended but catering and elite benefits don't seem to be the focus here.
Most Americans don't fly at all in any given calendar year. Not-one-single-flight.
Based on data from the Omnibus Household Survey, the Bureau of Transportation Statistics estimates that about one out of every three (74 million) adult US residents flew at least once on a commercial airline during the 12 months prior to the survey.
That study is ~15 years old but BTS knows what they're doing.
https://www.rita.dot.gov/bts/sites/r...pdf/entire.pdf
As muishkin pointed out, the list of areas for investigation is ops-related, not directly customer-facing. I wouldn't predict that the a la carte craze has ended but catering and elite benefits don't seem to be the focus here.
Oct 31, 2017, 7:21 am
#22
Join Date: Sep 2008
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Oct 31, 2017, 7:40 am
#23
Join Date: Jul 2010
Location: SFO
Programs: AA EXP
Posts: 5,270
here:
1, Did AA count all dormant account in AAdvantage?
2. Did AA discount all non-rev passengers?
3, How about passengers with the same name, did AA actually go through the trouble to make sure people with same names are separated or combined the people did not register AA account?
1, Did AA count all dormant account in AAdvantage?
2. Did AA discount all non-rev passengers?
3, How about passengers with the same name, did AA actually go through the trouble to make sure people with same names are separated or combined the people did not register AA account?
Oct 31, 2017, 8:06 am
#24
Join Date: Feb 2000
Location: Vancouver, British Columbia
Programs: BA GGL, FPC Plat, HH Diamond, IHG Amb
Posts: 3,372
Sure taking the olives out of first class salads can produce some savings--but nothing like the scale of a few hundred million per annum. When airlines are looking at cutting costs on that scale, there's really only a handful of line items that are going to produce meaningful numbers: Labour, Fuel, Capital costs (financing and lease payments).
Cutting labour cost can come from reductions in strength, through process automation (more self-service on the ground), more contracting out and through recruitment of new employees to replace retiring employees on less generous terms. Look to see two-tier labour agreements, banking on existing bargaining unit members negotiating to keep their retirement benefits at the expense of new hires' earnings.
Cutting fuel means fleet replacement and more effective aircraft utilization. Fleet replacement comes at a capital cost, though. More effective aircraft utilization puts savings at the mercy of contingencies. Dispatchers at hubs are severely challenged already to put plane, crew, cargo and self-loading cargo at the same stand at the same time. The more that aircraft turnaround and crew hours are pushed to the margins the more challenging that will become. Look for on-time performance to suffer and MCTs to become increasingly fictional.
Capital and financing will be interesting in the next few years. The era of dirt cheap borrowing is not sustainable, and when it ends, the airline has to be ready not only for increased borrowing costs on its aircraft financing, but also a downturn in revenue. Look for lots of old equipment to be for the chopping block to reduce capacity, and for some new equipment to be sold to lessors.
Cutting labour cost can come from reductions in strength, through process automation (more self-service on the ground), more contracting out and through recruitment of new employees to replace retiring employees on less generous terms. Look to see two-tier labour agreements, banking on existing bargaining unit members negotiating to keep their retirement benefits at the expense of new hires' earnings.
Cutting fuel means fleet replacement and more effective aircraft utilization. Fleet replacement comes at a capital cost, though. More effective aircraft utilization puts savings at the mercy of contingencies. Dispatchers at hubs are severely challenged already to put plane, crew, cargo and self-loading cargo at the same stand at the same time. The more that aircraft turnaround and crew hours are pushed to the margins the more challenging that will become. Look for on-time performance to suffer and MCTs to become increasingly fictional.
Capital and financing will be interesting in the next few years. The era of dirt cheap borrowing is not sustainable, and when it ends, the airline has to be ready not only for increased borrowing costs on its aircraft financing, but also a downturn in revenue. Look for lots of old equipment to be for the chopping block to reduce capacity, and for some new equipment to be sold to lessors.
Oct 31, 2017, 8:43 am
#25
Join Date: Oct 2010
Location: San Diego, Ca
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$800 million in increased "cobranding" revenue - 2015 --> 2018???
This one is a headscratcher - Slide shows credit cards, which have become more difficult to churn, benefits have been reduced, mileage redemption significantly devalued. From this perspective, I would expect to see a reduction in total revenue, possible gains in the value of the Aadvantage program.
What else could they be referring to?
What else could they be referring to?
Oct 31, 2017, 8:45 am
#26
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Join Date: Jul 2007
Posts: 4,477
I think everyone is entitled to an opinion and should freely expressed themselves based on their understanding. Your criticism is harsh and are against the principle of free speech as well as the principle of any scientific research should be questioned before acceptance.
Of course we are amateurs, that is why we are questioning the data. We do not know exactly the methods of this research that is why we ask the questions. As you state AA execs may be selective in terms, which means there is a biased base. What is wrong to question the figure correlate to AA execs's selective use of such data?
What is the good it is if there is no amateurs or stupid people like us questioning the numbers quoted by already 'selective' quotations? And what is the good it is or what the point of discussion if us amateurs and stupid people just say oh yeah the AA execs are right and what is the next?
Most Americans don't fly at all in any given calendar year. Not-one-single-flight.
Based on data from the Omnibus Household Survey, the Bureau of Transportation Statistics estimates that about one out of every three (74 million) adult US residents flew at least once on a commercial airline during the 12 months prior to the survey.
That study is ~15 years old but BTS knows what they're doing.
https://www.rita.dot.gov/bts/sites/r...pdf/entire.pdf
As muishkin pointed out, the list of areas for investigation is ops-related, not directly customer-facing. I wouldn't predict that the a la carte craze has ended but catering and elite benefits don't seem to be the focus here.
Based on data from the Omnibus Household Survey, the Bureau of Transportation Statistics estimates that about one out of every three (74 million) adult US residents flew at least once on a commercial airline during the 12 months prior to the survey.
That study is ~15 years old but BTS knows what they're doing.
https://www.rita.dot.gov/bts/sites/r...pdf/entire.pdf
As muishkin pointed out, the list of areas for investigation is ops-related, not directly customer-facing. I wouldn't predict that the a la carte craze has ended but catering and elite benefits don't seem to be the focus here.
Oct 31, 2017, 8:48 am
#27
Join Date: Jul 2010
Location: SFO
Programs: AA EXP
Posts: 5,270
No, we're talking about different but related things. AA's stats would be from their passenger database (unique customers really is one of the most basic metrics a company tracks). The study cited by 3Cforme is not connected to AA but speaks to Americans' larger travel patterns, and supports the statement that the vast majority of unique passengers are infrequent flyers.
Oct 31, 2017, 9:00 am
#28
Join Date: Apr 2011
Location: New York
Programs: AA EXP 1.0mm, not sure where I am with hotels these days
Posts: 2,795
What I like about this data is:
87% of customers fly ONCE per year or LESS
I would like to assume the following:
1, Customers may not mean passengers. Although they used heading of Passengers. It is confusing.
2, Less than once a year could mean flew once during their lifetime or not flying at all.
So there are several issues here:
1, Did AA count all dormant account in AAdvantage?
2. Did AA discount all non-rev passengers?
3, How about passengers with the same name, did AA actually go through the trouble to make sure people with same names are separated or combined the people did not register AA account?
I can totally see this happening: in International routes, there are bulk fares sold by travel agents. These passengers generate a certain degree of revenue and large in numbers. They would never come back to AA again as it is likely this trip to USA in group would be their lifetime trip. Shouldn't AA discount these traffic in order to achieve their conclusion that passengers travel by lowest price??
Thus me think the research is biased and flawed.
87% of customers fly ONCE per year or LESS
I would like to assume the following:
1, Customers may not mean passengers. Although they used heading of Passengers. It is confusing.
2, Less than once a year could mean flew once during their lifetime or not flying at all.
So there are several issues here:
1, Did AA count all dormant account in AAdvantage?
2. Did AA discount all non-rev passengers?
3, How about passengers with the same name, did AA actually go through the trouble to make sure people with same names are separated or combined the people did not register AA account?
I can totally see this happening: in International routes, there are bulk fares sold by travel agents. These passengers generate a certain degree of revenue and large in numbers. They would never come back to AA again as it is likely this trip to USA in group would be their lifetime trip. Shouldn't AA discount these traffic in order to achieve their conclusion that passengers travel by lowest price??
Thus me think the research is biased and flawed.
Oct 31, 2017, 9:10 am
#30
Join Date: Jan 2017
Location: Fort Worth, TX
Programs: Hilton Dmd; AA Gld
Posts: 26
Is there anything wrong for someone to question the method and findings? Or you think everyone should just accept anything the 'authority' tells you?
I think everyone is entitled to an opinion and should freely expressed themselves based on their understanding. Your criticism is harsh and are against the principle of free speech as well as the principle of any scientific research should be questioned before acceptance.
Of course we are amateurs, that is why we are questioning the data. We do not know exactly the methods of this research that is why we ask the questions. As you state AA execs may be selective in terms, which means there is a biased base. What is wrong to question the figure correlate to AA execs's selective use of such data?
What is the good it is if there is no amateurs or stupid people like us questioning the numbers quoted by already 'selective' quotations? And what is the good it is or what the point of discussion if us amateurs and stupid people just say oh yeah the AA execs are right and what is the next?
I think everyone is entitled to an opinion and should freely expressed themselves based on their understanding. Your criticism is harsh and are against the principle of free speech as well as the principle of any scientific research should be questioned before acceptance.
Of course we are amateurs, that is why we are questioning the data. We do not know exactly the methods of this research that is why we ask the questions. As you state AA execs may be selective in terms, which means there is a biased base. What is wrong to question the figure correlate to AA execs's selective use of such data?
What is the good it is if there is no amateurs or stupid people like us questioning the numbers quoted by already 'selective' quotations? And what is the good it is or what the point of discussion if us amateurs and stupid people just say oh yeah the AA execs are right and what is the next?
The real question is why you repeated yourself in four paragraphs asking the same question in each?