1995 Just Called – America West Wants its Business Model Back

American Airlines management has been busy for the past few weeks. For the first time in seven years, management hosted an “Investor Day” on March 4, using it to unveil portions of their updated business plan. The Investor Day and the J.P. Morgan Industrials Conference that followed gave us a peek into the company’s strategy and how it may affect our future flying.

Unfortunately, the news isn’t good from our pilots’ perspective. Chief Executive Officer Robert Isom sees future profitability as dependent on growth opportunities in underserved domestic markets, with the crux of his business plan revolving around these marginal locations. In other words, the airline management team responsible for producing profit margins that badly lag those of Delta and United believes that opportunity beckons by taking on Southwest Airlines and the ultra low-cost carriers. Not mentioned once: defending the cornerstone cities that American Airlines’ historical business plan was built on, which produced a revenue premium.

In his Investor Day remarks, Chief Commercial Officer Vasu Raja emphasized that “short haul is the foundation of value for customers and investors.” The importance of the Sun Belt, upgauging the airline (flying larger airplanes to smaller cities), and improving the domestic network were his primary focus. He mentioned “opportunities in El Paso” more than a dozen times. At least there’s good news if you happen to live in El Paso. But where are the legitimate opportunities for future growth that produce profits?

Vasu remarked that long haul will be used “only when demand peaks,” signaling an intention to revert to the regional operation this America West management team cut its teeth on, albeit on a larger scale.

Chief Operating Officer David Seymour followed up with an emphasis on operational reliability improvements and the airline’s ability to recover from IROPS “better than anyone else,” but he made little mention of how his original schedule construction will change to build robustness into the system from the get-go, thus avoiding the need to put the operation back together in the first place. He also didn’t address our persistently high reserves head count that far exceeds the industry average. American Airlines puts thousands of pilots on reserve who could be holding lines and flying more predictable, profitable, and efficient schedules. Our average reserve pilot flies approximately 55 hours each month, while the average lineholder flies more than 85 hours. Efficiency takes a back seat to reliability as long as David chases on-time metrics and emphasizes reliability while leaving thousands of reserve “firemen” on the schedule to put out the inevitable fires when his computer-generated schedules fall apart.

Boeing recently relearned the hard way that ignoring input from its most valuable resource, its employees, is not in a company’s best interests. Yet American Airlines management seems intent on doing the same things over and over while expecting different results. Our schedules have been broken since before emerging from the pandemic. Narrowbody trips continue getting longer and more onerous. Average line values have not moved down appreciably, our trips haven’t been broken up into more manageable pieces that our pilots can pick up between large chunks of flying, and our trip trade lights have remained stubbornly red since David locked them down in September of 2022. Despite the promises, we’ve witnessed little if any actual improvement.

Management’s “new” business plan doesn’t include a focus on improving operational efficiencies and instead centers on future short-haul revenue opportunities that may or may not produce profits. As we have seen from the recent foray into Austin, these well-intentioned plans are typically money-losers. The profits are almost never in line with our competition at Delta and United, which see the benefit of catering to the premium, business, and international customers that American Airlines appears to be abandoning.

There is another problem with the new business plan. The increased emphasis on short-haul domestic flying also leaves the company on an inevitable collision course with our Scope clause. Section 1 of our contract is the foundation of our flying agreement, capping management’s ability to fly regional jets while also limiting their ability to fly from non-hub cities to other non-hub cities with RJs (spoke-to-spoke). This was the source of the most recent Scope violation that we arbitrated in February, with the arbitrator’s decision pending. The only ways out of this “square corner” the new business plan creates are absorbing one or more of the wholly owned operations, putting RJs on our seniority list, or attempting to renegotiate our Scope clause, and the latter will most certainly be met with virulent opposition.

Investors didn’t like what management had to say, with American’s stock dropping while Delta’s touched a year-to-date high. It’s unclear why management wants to play in the ULCCs’ sandbox and try to compete for their price-conscious customers instead of fortifying and defending the strong hubs we once had in cities like New York that historically produced a revenue premium. If our paltry profit-sharing checks are any indication of the plan’s efficacy, we’re in trouble. The decisions made in the front office don’t bode well for those of us who thought we were being hired by a mainline flag-carrying airline that would provide us with widebody long-haul opportunities and remain solvent in the next inevitable downturn. America West 2.0?

As your advocates, we will continue voicing our concerns to management about their stated plans. While we don’t run the airline, we possess a tremendous amount of institutional knowledge thanks to serving as the airline’s frontline leadership. We see firsthand what works and what doesn’t, and we understand what’s in our best interests as pilots. We are convinced American Airlines needs a significant course correction, and we stand ready to help make that happen by working collaboratively with management, provided management is willing to work with us.

CA Ed Sicher
APA President