The Customer Last: What American Airlines Management Is Doing Wrong
Amazon makes it so easy to buy things. I’m walking around the house and I realize I’ve just used the last of something, I don’t need to put it on a list and buy it later. I have my phone in my pocket. I pull it out, the item is right there usually at a pretty good price, and a click buys it. I don’t have to worry for the most part whether I’ve purchased enough items for free shipping. So I click order, and it shows up, usually pretty quickly.
There are a lot of reasonable criticisms of Amazon, but they’ve got the scale (either through their own items or letting sellers list through them) to have pretty much anything I’d want to buy (A->Z). It is the most frictionless buying process out there. And so they get an outsized share of e-commerce even where I may be giving up a little bit on price or rewards.
Jeff Bezos for years has preached a simple mantra: that the biggest mistake companies can make is focusing on what their competitors do, rather than what their customers want – and working backwards from satisfying the customer to figuring out the product.
I’m reminded of this thinking about the latest American Airlines policy change to no longer allow most customers to run up to the gate and get on an earlier flight. They’ll even be turning away lifetime Platinum two million mile members. For what?
Of course, this isn’t the only policy that works backward from what’s easiest for the airline or benefits its employees rather than the customer. In fact, former Chairman and CEO Doug Parker once remarked “we work really hard to match our service to our competitors” – precisely what Bezos makes clear is the wrong approach.
- American Airlines has the biggest domestic network and most hubs, yet when US Airways management took over they imposed a rule that said customers could no longer make same day changes that alter their routing. Want to confirm an earlier flight home? You have to connect in the same city, and that may mean there are no other flights available.
They’re presumably worried that some consumer somewhere might buy a cheaper ticket and improve their itinerary on the day of travel, while taking away the entire benefit to the customer of the network and their hubs.
- American Airlines will stop awarding miles on tickets purchased through some travel agencies but they haven’t told customers which ones, and the list will change every six months.
- My other pet peeve: They’ll no longer through-check bags on separate tickets. That’s true even when you’re booking award travel. So if you use AAdvantage miles to fly from New York to Abu Dhabi on their partner Etihad, and there’s no award space on American’s flight to get to New York, you’re going to give American extra money buying that flight.
In exchange for spending even more, American will refuse to through check your bags onto the Etihad flight. You’ll have to exit security, go schlepp your bags yourself and re-check them in with the other airline, possibly missing your flight.
- Someone thought that $1 shelf-stable pasta was a domestic first class meal, while the airline decided it was no longer necessary to set the table for customers in Flagship first class since that would mean less work for flight attendants.
- Deadheading pilots now have priority over the airline’s best customers for upgrades at the airport. (United does this, too.) Don’t think the inmates are running the asylum? A couple of weeks ago on arrival in Austin, a flight attendant made an announcement welcoming passengers on behalf of their union.
When American Airlines came up with their new standard domestic product – that squeezed more seats in, removed seat padding, and ripped out seatback TVs – they didn’t build a cabin mockup first to see how the thing would work in practice. They squeezed first class too much and eliminated underseat storage. The bathroom doors opened into each other. The sinks sprayed back onto customers. It’s a product that gave customer experience so little thought that their CEO never even tried it until it was in the marketplace for over six months.
American Airlines has become far more reliable. Their thesis has been that if they improved reliability, they’d generate profits. They failed to realize that reliability was mere table stakes. Their 2023 net margin was a mere 1.5%, and all of that profit was accounted for by selling miles to banks.
The airline’s Chief Commercial Officer describes their network as their product, failing to understand that the product is just as much the experience as the schedule. The network is table stakes.
American Airlines is a high cost airline. When they raised checked bag fees to $40 and I wrote that they were leading the industry in doing so, they pushed back pointing to potentially higher bags fees on ultra-low cost carriers like Spirit. And this made my point.
When Robert Isom took over the reins as American Airlines Chief Executive two years ago, his message to employees was not to spend a dollar they don’t have to rather than figure out how to invest profitably in their customers.
This is an airline that cannot make money transporting passengers without earning a revenue premium because they will never be the low cost leader. And they cannot earn a revenue premium until they start by thinking relentlessly about the customer: (1) who is their customer and (2) what does that customer need?
To be sure, American Airlines is not the only airline whose policies go out of their way to make their customers’ lives more difficult. United Airlines bans customers on their cheapest tickets from bringing full sized carry-on bags on board, and basic economy passengers who aren’t checking bags are not allowed to check in online or through their mobile app – instead they’re required to stand in the check-in line at the airport.
And the Spirit and Frontier business model if precisely to make passengers shift their behavior to lower airline costs. Not uncoincidentally, United sees its basic economy fares as meant for Spirit and Frontier passengers, not as a way of introducing the most price sensitive customers to the airline and upselling them over their lifecycle. Scott Kirby, who came from American (and US Airways and America West) has described their product strategy as “keeping up with the Joneses” (competitors), again rather than focusing on the customer.
But this just points to the nature of the heavily regulated airline industry that lacks sufficient competition and operates more as a utility than a business, to the detriment of customers.
How do you think that turning away customers who rush to the gate in time to get on an earlier flight and make it home for dinner is a good thing for convincing people you take care of them (‘on life’s journey‘) and so they want to be loyal customers willing to spend more with you in the future?
