American Airlines CEO Promises Big Changes Ahead

by Josh Lew
Last updated: 12:00 PM ET, Wed March 16, 2016

Photo via Wikimedia Commons

American Airlines has been dealing with a number of issues since its merger with US Airways. Unhappy employees and a sub-par product have hurt the carrier's image even as falling fuel prices have increased its profitability. A recent letter by the pilot's union, which has threatened a strike, said that employees were tired of apologizing for the airline's poor product and were fed up with the company's culture and the way workers were treated.

These are only some of the issues that employees have with the way the airline is being run. Many think that American owes them. Back in 2011, when AA filed for bankruptcy, those employees who stuck with the airline took pay cuts and gave up benefits. Now that the merger with US Airways is complete and the airline is once again in good financial shape ($7.6 billion net profit in 2015), those loyal employees (not just pilots) feel that it is time for them to get a reward for their loyalty.

Parker admits there is work to be done

American's CEO Doug Parker addressed the complaints and criticisms at the J.P. Morgan Aviation, Transportation and Industrials Conference in New York. He said that the airline will have to make some sort of deal with employees if it is to move forward. He also pointed out that several billion dollars would be invested in upgrading American's in-flight services, features and airport lounges.

American's issues with its employees can be traced all the way back to pre-merger, pre-bankruptcy days. Parker told the media that the issues had been going on for too long and that it was time to take (financial) steps to improve employee relations. "It's been long enough. If we can get this right, there's a huge upside."

Following Delta and United

This is not uncharted territory. American will be following in the footsteps of United Airlines, which recently gave its pilots a generous new contract and is now working on similar deals with other divisions.

Delta has been the leader of the three remaining legacy carriers in terms of changes to its business model and improvement of overall quality. Parker basically admitted that Delta was performing the best of the Big Three. However, he gave a logical reason for his competitor's strong performance: it was one of the first of the recent mergers (with Northwest in 2008). Parker conceded that Delta "was five years ahead of us, because they got their merger done five years ahead of us."

Better features for fliers

American has been upgrading its airport lounges all around the world to try and draw high-paying fliers. Business-class cabins will also get an upgrade (including lie-flat seats). The airline has also said that it will improve its in-flight entertainment by offering both better Wi-Fi and a better version of traditional seat-back IFE options.

So Parker wanted to make it clear that American is moving down that path that has brought Delta success. However, in saying this, he is also admitting that American is at the beginning of the process and it could be some time before fliers (and employees) see the improvements.