American Airlines has made a number of substantial changes to the carrier, but its latest advantage may make American the US airline to beat.
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American Airlines Gets Help From oneworld Upgrades
This week Brett Snyder (Cranky Flier) had a conversation with oneworld CEO Rob Gurney, and Nat Pieper, SVP Fleet, Finance & Alliances, and Treasurer for Alaska. A revelation from that conversation was that oneworld will offer alliance-wide upgrades to match Star Alliance’s current offering.
“Wait, did I say upgrades? It’s true that oneworld today doesn’t have a cross-alliance upgrade program like Star does, but it has been reported by others that it’s coming. Rob confirmed that and told me that the expectation is the upgrade program should be functioning around the time Alaska comes online later this year. I tried to push for further details — like whether it would only be on stupidly-high fares like other programs — but he wouldn’t budge on that just yet.”
This would be a major advantage for those with oneworld miles and a blow to Star who would no longer be the sole alliance to offer it, and to SkyTeam which would add this to a number of deficiencies for the group. Speculation is that American Airlines or Alaska Mileage Plan members (or any oneworld program) would be able to use their miles to upgrade on itineraries within the alliance even though the flight was not flown by the carrier that issued the miles. It might be a good time to pick up a oneworld carrier credit card.
Adding in the additional efforts by American Airlines partnerships with JetBlue and Alaska, this adds one more strength to American’s position and could help the carrier come out stronger when COVID-19 concerns have dwindled. It might be time to consider adding an Alaska Mileage Plan or American Airlines credit card.
United already had access to alliance-wide upgrades through its Star Alliance membership, though that program held little value for members.
The issue is that business class fares have been so heavily discounted the past few years as the world was at peak travel that full-fare economy often eclipsed available business class fares by as much as two-to-one. Why would anyone pay twice as much for the fare and spend miles on upgrades that they could achieve by purchasing the fare outright, keeping their miles, and earning more status and credit along the way?
Earnings Call Sheds More Light About Strategy
I have been unforgiving of Doug Parker’s job performance and the entire executive management team over the last few years at American Airlines. However, I choose to evaluate others by how they perform in a crisis, not when seas are calm.
Parker addressed a question on the AAL Q2 Earnings call this week that highlighted how his team views the coronavirus crisis as it affects American Airlines and it caused me to reverse my opinion of American’s leadership:
“As horrible as this crisis is and there’s not much good you can say about it, one thing, one opportunity that’s given us” “it gave us a chance post integration to literally start — to take the largest airline in the world and […] shut it down and start it from scratch. That’s a real opportunity that we’re going to — that we’re using. That allows us to only add back what makes sense. Things that might have taken us a very long time to continue to get through, getting management reductions out, getting older aircraft retired, getting more efficient throughout the airline, flying exactly where it makes sense instead of looking at the network and saying, in total, it makes sense, but some routes not doing, as well as others.”
He’s got a point. Many years ago, my industry was affected by an 86% drop in activity inside of six weeks. The way I got out of that impossible situation was to tear apart everything I thought I knew, start from scratch with the assets and people we had, and build something new. It defined my career and lead to greater growth than I could have ever imagined.
The team also spoke about the premium the carrier gets at Charlotte and Dallas that they don’t find in the Northeast or the Northwest. To remedy this, American is using the JetBlue partnership to remove 50-seat jets from the congested northeast corridor and… building the Seattle hub.
“In both of these cases, both the West Coast and the Northeast, the infrastructure is constrained. And we are in a situation where we’re really too small to win and too big to go and exit. And so we need to figure out a way — and there’s such a massive customer base that we need to find a way to go and access that revenue. So in our partnerships, both with Alaska and JetBlue, what it’s entirely about is creating a different and creative competitive alternative to the larger networks that our competitors offer on those coasts.
And that’s exactly what you see us doing. So we continue to go and build our Seattle hub. And together with Alaska, we will go and create the best network on the West Coast. With JetBlue, American Airlines is historically — and New York City is a great case study for this.” Vasu Raja, Chief Revenue Officer
Yes, American added a single Seattle-Bangalore flight (launch delayed due to COVID-19), and yes, Alaska joining oneworld will help integration in Seattle; but to my knowledge, this is the first formal mention of building a Seattle hub.
United and Delta Are Standing Still… For Now
United has not announced any new partnerships, no enhancements to their program and it seems like the Kirby-carrier is battening down the hatches (a safe bet) for the foreseeable future. They’ve extended status for members, reduced requirements for those able to fly this year and were at the forefront of those decisions – but that’s par for the course at this point.
Some could argue that Delta Air Lines made many substantial moves prior to the COVID-19 outbreak like taking ownership stakes in LATAM, Aeromexico, and Virgin Atlantic. But since the virus hit, the carrier hasn’t added any partners and SkyTeam doesn’t offer upgrades on other carriers. However, other than some questionable equipment retirements, the only substantial change is blocking middle seats.
Last week, I wrote that American Airlines had pulled off an unbelievable coup by adding JetBlue and Alaska as partners to support their weakest markets domestically. When oneworld announced that the alliance would add systemwide upgrades and confirming that Alaska would enter full membership in 2020, at least six months ahead of schedule, American received a further boost. American’s managerial approach to the coronavirus crisis as shared on the earnings call this week further cements that the carrier is on the right track. The changes they are making as they shut the airline down and start it back up adding only the aspects that are working is logical and may put American back in the driver’s seat in the US. They may have become the airline to beat in less than six months.
What do you think? Are American Airlines managers positioning the company to be the best in the US? Will oneworld alliance-wide upgrades further enhance their position or be more of the same like Star Alliance?
I have got to say that I am impressed by the moves American has made. Market share moves can happen easier in tough times than good times and American has stepped up to the plate.
I live in southwest Florida and with Alaska putting in nonstops to the west coast and the partnership with Jet Blue I may rethink my loyalty to Delta…but, then again, I have images of the extra leg room seat I paid for on an American 737 which wasn’t spacious enough for me to open my laptop computer and get some work done.
The real top prize would be if you were able to mix and match one world miles to pay for the entire ticket, or at least one type for the base fare and another for the upgrade.
Except that then you are flying more on AA. No legroom, grumpy old FAs, delayed flights. Knowing I won’t have to fly on them ever again takes the sting out of them shutting down my account.
SO GO FLY DELTAS OLD 757,767.
ILL TAKE AA ANYTIME!
LOVE ONE WORLD!
Delta has been getting rid of everything old for the past two years. This gave them all the sane opportunities as AA, and they’re all over it. Delta might end up with the newest fleet AND the best balance sheet when this is all said and done. Sorry AA, your plan is not original or exclusive.
Delta’s ‘old’ 757’s, 767’s are preferable to anything AA flies since the interiors have been refurbished and they have seatback tv’s
Unfortunately, Deltas interiors are worn.
IFE TECHNOLOGY OUTDATED.
STREAMING THE FUTURE!
AS FOR DELTAS NEW PLANES?
DELTA NEEDS CASH.
$5.8 BILLION SECOUND QUARTER LOSS HUGE.
NOT TO MENTION BAD INVESTMENTS.
I would agree that AA pulled off a coup if they added these partnerships to further strengthen their positions in the northeast and west coast.
However, AA added these partnerships because they were significantly underperforming the competition in those regions of the country. In addition to the quote you pulled from the earnings call above, Vasu Raja also said in that same response that “In the Northeast and the West Coast, however, we produced a 10% RASM deficit to the industry.”
This was not a coup, but a lifeline AA needed to address their Northeast / West Coast problem.
I (stupidly) bought some shares in AAL and then didn’t sell them when it bounced over $20 last month, so I’m stuck with them now, but feel pretty good after earnings. Here’s what I like:
-The JetBlue partnership
-Not blocking the middle seat, which is COVID theater
-Keeping planes full with lots of domestic deals
-Honesty with staff about the future
I’ll probably be stuck with these shares for a while now, but it does seem like the airline has one of the better strategies for navigating COVID-19.
AA’sload factor is only in the upper 30s/40s. Nobody is full
Okay, fair enough. I was speaking anecdotally about my two flights, which were totally full, and the Charlotte hub was a crowded mess. But I’m sure they’re also flying quite a few half-empty planes.
We flew on AA a couple of days ago and it was excellent. Friendly FAs and good service made it that much better. Our Boeing 787-9 was about 60%. The FA even announced that if would like to change seats in an effort to “social distance” to go ahead. Super cool!
Just hold on to What you have….an a couple of months you will be able to make money…!
I have a flight American Airlines for Aug 5th for Greece.. do you think in your opinion if Greece will allow this flight to proceed? American Airlines customer service has been excellent with me in my flights changing and giving me updates.. just worried about the ban on Americans if you think the ban can be lifted by the end of the month of July.. especially hearing the extra measurers the airlines are making to allow transatlantic flights open between the US and EU
I have flown United, Delta, US Air (before the merger), Alaska, Allegiant, and American. Ill take American every time. I only fly the others out of absolute necessity. I’ve always found the flight attendants to be pity and full of personality; however, I obviously haven’t flown with all of them.
A real innovative alliance concept would be to allow one’s status in the alliance to have the partners status. If a Lufthansa member with Gold Star Alliance could get the benefits of United Gold, such as Economy Plus at booking, and CPU access, that would be a coup. There would need to be limitations on the residency of the member and their native flyer program to avoid point arbitrage.
The OneWorld addition doesn’t appear to grant this boon, so an American elite will have limited recognition on JetBlue and Alaska, and may still look for that RJ to get their perks, especially post-Covid. Will their mileage – based upgrades clear in order of OneWorld status? Or only if they are flying on the ticket stock of the operating carrier with that carriers member number?