INEQUALITY IN FLIGHT

Half of American Airlines’ revenue came from 13% of its customers

Obsession
Getting There
Obsession
Getting There

On an Oct 25 conference call with stock market analysts, American Airlines president Scott Kirby gave a peek into the lopsided economics of his company, saying half of its revenue last year came from the 87% of its customers, who only flew the airline once.

Kirby was responding to a question about American matching the prices of low-cost airlines like Spirit. He said there are a lot of customers “who want a lie-flat seat to fly when they go overseas, and are willing to pay a premium for a better product,” but that doesn’t change the fact that 50% of the company’s revenue comes from passengers “for whom air travel is largely a commodity.”

The airline has little incentive to treat these commodity passengers well because they’re not coming back. Kirby notes that American’s most direct competitor is not Delta or United, but in fact Spirit, a carrier notorious for its poor customer-satisfaction rating. American competes with Spirit on 28% of its domestic capacity, according to Kirby.

On the other side of this equation are the 13% of American’s customers who give the airline an equal sum of money. These passengers are generating on average of 6.7 times more money for the company than the “commodity” flyers. With that kind of inequality it should be no surprise why some customers are treated better than others at the airport.

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