What’s Gone Wrong With American Airlines?

October 9, 2019

When airline insiders gathered between 2012 and 2016, many people asked a simple question: What was wrong with United Airlines? They saw a company with great potential, including the hub of the largest market in the United States and an unparalleled Asian franchise, which repeatedly disappointed investors and customers.

But under the new leadership, Manchester United has regained its vitality. As a result, insiders move on and whisper (or send me a text message) asking for information about another American airline. They asked, what is the problem in the United States? Why is it underperforming in the industry and disappointing its best customers due to flight delays and often providing thoughtful service? When will the managers of Dallas/Fort Worth know that they are responding to the crisis?

This is the traditional view before Thursday, when Delta Air Lines captured a 20% stake in America’s most important Latin American partner. American Airlines has understated this move, saying that the cooperation with Ram Airlines generates only $20 million in incremental revenue each year. But American Airlines has a bigger plan for its relationship with Latam – the two airlines seek antitrust immunity in certain markets – it is worth noting that South America’s largest global airline will hand over the US aviation industry to Delta Airlines. By the way, this is bad news for Americans, who rely on South American routes for a large portion of their income.

Perhaps, if Delta Airways takes such a move, then others will benefit the United States. But this shows that the United States is not comparable to Delta Air Lines in a series of business plans related to passenger experience, operations and foreign partnerships.

The main point of the argument is that with the improvement of Delta Air Lines and United Airlines, US management seems to be working from an old manual, in which air travel is a commodity, costs must be kept low, and American carriers need to stay away from foreign entanglements, such as in a profitable but strategic global airline, such as Latam, or in Manchester United’s Avianca.

It’s easy to guess why Americans are going against the trend. Before the US company went bankrupt at the end of 2013, CEO Doug Parker and president Robert Isom and Scott Kirby, who now works at United Airlines, have Transforming American Airlines from one of the world’s worst-run airlines to one of the best airlines. They hardly need to upgrade their products or invest in distant aircraft carriers. They just want to let the airline fly.

When they choose Americans, they promise to change their way. In some ways, they have invested billions of dollars in the passenger experience and strengthened their relationships with a number of foreign partners, including Qantas. They even made a small investment in China Southern Airlines.

But they are slow to respond to other emerging trends. Investors noticed something wrong, pushing US stock prices down about 50% since January 2016. Although the US still maintains solid profitability, there is still news of whispers, and some investors may be urging changes in US executive leadership.

Jay Shabat, senior analyst at Skift Airline Weekly, said: “This airline is currently facing some big problems.” “I definitely believe that Parker has a chance to lose his job and a new management team will join.”