7 things American Airlines has to fix right now

Frequent flyers are the lifeblood of any airline, and business-class flyers are one of the industry’s steadiest clientele groups. In a bid to capture more of their dollars, American tweaked its AAdvantage rewards program to favor customers who purchased flights from the airline directly. The change left so many business-class flyers upset that a company-commissioned Bain report detailing their displeasure that the airline has urgently kicked off…

Vasu Raja initiated the move away the previous points arrangement, and when it started to affect the overall business he had to take responsibility — and the fall. The company said that he has been relieved of his duties. For now, chief strategy officer Stephen Johnson is temporarily taking over the position, but an actual search is underway for someone to set things right. But that will be a lot harder if the carrier doesn’t find a way to end…

American’s flight attendants haven’t gotten a collective raise since 2019, when their last union contract expired. Five years later, some of them are sleeping in their cars and new flight attendants are being offered wages that could qualify them for food stamps. Were it not for a special set of labor laws that govern airline unions, the flight attendants would likely be on strike already. Representatives from their union, the Association of Professional Flight Attendants, said last week that federally mediated negotiations have yet to yield an agreement. If the government releases them from that mediation, they could possibly implement a work stoppage by Labor Day. And passengers upset that their American flights got cancelled wouldn’t be good for…

Bloomberg reported in March that American is negotiating a new rewards card deal with its providers Barclays and Citi. Airline cards can be worth billions of dollars to carriers — American got $5.2 billion from its arrangements with the banks last year — and American wants that revenue stream to be a bigger part of its business. Helane Becker, an analyst at TD Cowen who covers airlines, believes that deal won’t be wrapped up until next year. But it won’t be making as much money as it would like to thanks to the threat represented by…

Michael Linenberg, an airlines analyst at Deutsche Bank, pointed out in a recent research note that one of the factors weighing on American’s bottom line is how many of its routes are competing with low-cost carriers in an era where larger, more expensive airlines are trying to get a bigger slice of that pie.

“American has historically had the most exposure to low fare carriers given its larger domestic network than its peers,” he wrote. “However, more recently we have observed low fare carriers make numerous route changes, many of which are targeting American’s hubs. For example, for the September quarter, American’s capacity overlap with Frontier [Airlines] and Spirit [Airlines] will be approximately 22% and 19%, respectively, on an available seat mile basis, whereas for Delta and United, the overlap will be roughly 10 percentage points lower.”

Fighting with cheaper airlines for passengers surely won’t be good for…

At the investor conference where he made his “hole” remark, American CEO Isom said that it might have more flights on offer than customers actually want. (The company has already paused training for new pilots.)

“The domestic supply and demand imbalance has led to a weaker domestic pricing environment than we had forecast,” he said. “There’s more discounting activity than we saw a year ago. Now, industry capacity is expected to come down in the second half of the year and that should help. And finally, we expect that our own capacity growth would have been better absorbed as we moved into the higher demand summer months in the second quarter. But we haven’t performed as we thought.”

That capacity problem might also get exacerbated by…

In the background of everything that’s going on, American is still facing a lawsuit from several black passengers who said they were removed from a January flight because of “offensive body odor” only to be told by a member of the flight staff that it was likely a racial reason instead. The NAACP threatened to revive a travel advisory warning black passengers not to fly with the airline before CEO Isom apologized and American instituted an advisory counsel for diversity issues reportedly developed with the NAACP’s help. Despite that step, the suit remains ongoing and has the potential to create bad headlines that drive away flyers who get a bad taste in their mouth from the whole affair.