American Airlines Continues to Dig Its Own Grave

Last quarter (3Q11), American Airlines lost over $160M.  Each time they have a bad quarter I hear the same thing…blame it on the price of a barrel of oil.  But is that really what’s going on?  Or, are they simply making bad decisions that are forcing their captive market to make significantly different decisions on the way they travel?

Like a lot of DF/W residents, I’ve been traveling on American for more than 20 years.  I was here when the “big airport” was built and the Wright amendment went into effect (which, by the way was, and still is, one of the worst things for the air traveler and competition ever).  I’ve held Platinum, Gold, and “Tin” statuses as an AA traveler, most of the time due to the type of job I’ve held.  I currently hold the “tin” status with more than half a million miles. 

I can only imagine the backroom conversations in the corporate offices when they determine how to maximize their profits.  What kind of rules can be created that will add directly to the bottom line without completely pissing off our loyal customers (those with “status”) while really sticking it to the travelers who might not be flying with us next week, next month or next quarter?  Profit optimization what-if scenarios are being performed with a complex computer model showing the effects of a rule or fare change to the bottom line.  Who can argue with the numbers?  We need to stay afloat another quarter.  Our shareholders are expecting returns.  It’s the typical short-term outlook and vision of many large corporations.  The bottom line is, when you have no status on AA, you get screwed at every opportunity and the rules bear that out.  But I digress…

I have no problem with corporations, large or small, but one can definitely tell when a corporation has had a lot of government influence.  By that I mean AA existed during the era of government regulation of the airline industry when prices were controlled.  Therefore, their corporate infrastructure was built around more of a "cost plus” mentality, not a mentality of superior customer service.  The newer airlines have had the luxury of building their infrastructure around open competition (I use the word “open” loosely) and have had to seriously compete and find their niche in order to compete with the big boys.  We’ve seen the big ones, and some small ones, come and go.  I can’t really  knock a new startup airline for failing because their business plan didn’t pan out (unless, of course, it was based on business criteria from a decade or two ago), but I can knock a large, heavily capitalized airline for failing to recognize the changes in the marketplace and be able to change its business plan to compete in the “new” marketplace.  This behavior reminds me more of a large government entity.

Which leads me to my main point.  I, like a lot of my friends and coworkers, look at air travel as a burden…a burden that is to be avoided, if at all possible.  I find myself doing the travel math to determine whether I would much rather get in my car and travel for four hours or go through the hassle of traveling to the airport, parking the car, checking in, checking bags, being vetted by “Thugs Scaring Americans,” playing the gate change game, getting on a flight that may or may not be on time,  retrieving bags, getting a rental car, and on and on and on.  Heck, four hours is nothing in a car.  Insert bag, insert key, start engine and drive.  Cruise control is great!  When you arrive, you are at your destination.  Plus, you get to see some stuff along the way.  I’m finding more people who are not only willing to take a four hour drive, but also that day-long 12+ hour drive.

American Airlines instituted yet another “tin traveler” status rule (in February of 2011, I believe).  If you want to travel standby and you have a “cheap” ticket, you get to pay the “bend-over $50” fee.  Why?  Because they can.  Because the market will accept it…at least in the short term.  And that’s my point.  Many people, me included, will pay the $50 fee…in the short term.  However, my, as well as others’ behaviors, will change.  I can tell mine is already changing.  I am looking for alternatives to AA when I travel.  Instead of thinking “I’ll book it on American” I’m thinking “What are my other options besides traveling on American?”  If I’m going to be treated as part of an optimized business profit solution then I’m going to insert my own parameters into the equation, and many of my resulting decisions will lead me away from AA. 

One of the primary obstacles to making alternative decisions is the Wright amendment.  When it is gone in its entirety, I’ll be “free to move around the country” more efficiently on an airline like Southwest.  And I, like others, will remember my experiences on American and bid them adieu. 

P.S.  I write this as I am traveling on a regional jet from DFW to CVG.  I guess my $50 change fee was not enough to cover the repairs to the restroom at the rear of the aircraft, as the door was broken and would not lock (I held it closed with my foot), hence the light was flickering, and their was no running water, only moist towelettes, with which to wash your hands.  The flickering light reminded me a bit of an Alfred Hitchcock movie, but thankfully, no one died.


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