American
Airlines may operate more daily flights than its biggest competitors, but
that has not translated into bigger profits.
The airline is
flying roughly 6,500 flights per day this year. Even so, United
Airlines made about $3 billion more than American last year, while Delta
Air Lines brought in nearly $5 billion more.
American Airlines
CEO Robert Isom is now trying to close that gap by making changes to how the
carrier operates. Those changes include improving on-time performance,
upgrading airplane cabins, building larger airport lounges and giving
passengers more opportunities to purchase premium seats.
Isom told CNBC in a
June interview that American’s “long-range plan is certainly making up the
margin gap,” though he did not give a timeline for reaching that goal.
Cashing in on
Premium Demand
One of American’s
biggest challenges is convincing more customers to pay extra for an upgraded experience.
Delta and United have spent years building up their premium offerings, giving
both carriers a head start.
American is now
remodeling cabins across its fleet and ordering new aircraft with more premium
seats and updated amenities. The carrier plans to begin refreshing the
interiors of its Boeing 787-8 Dreamliners, while redesigned cabins aboard its
larger Boeing 777-300ER aircraft could begin flying within the next few weeks.
Those planes will
include as many as 70 business-class suites. A lie-flat business-class seat can
bring in close to $10,000 on some international flights, compared with $2,000
or less for a seat in the back of the aircraft.
The airline is
also considering bringing seatback entertainment screens back to many of its
narrow-body planes. Meanwhile, American has also started adding Starlink
satellite Wi-Fi across its fleet.
Upgrading the
Airport Experience
On the ground, the
carrier is investing in the airport experience. American plans to build a
37,000-square-foot Admirals Club at Dallas Fort Worth International Airport, which
will become the biggest lounge in its network.
The entire airport,
which constitutes the carrier’s most massive hub, is currently undergoing a $12
billion overhaul. Part of that includes new gates that were recently opened in
Terminal C, an area where further expansion is still underway.
The airline is
also planning a grab-and-go Provisions lounge in Dallas Fort Worth’s new
Terminal F and a Flagship check-in area in Terminal D. These additions are
intended to appeal to premium travelers who are willing to pay more for added
comfort and convenience.
Improving
On-Time Performance
What’s more, American
ranked sixth among 11 U.S. airlines for on-time performance during the first
half of the year, behind both Delta and United.
To improve
reliability, the airline is spreading out flight schedules at major hubs
instead of packing too many arrivals and departures into tight windows. It is
also using artificial intelligence to predict maintenance problems before they
lead to delays or cancellations.
New Aircraft and
Lower Debt
Buying new
wide-body aircraft is another part of Isom’s plan. American could place an
order as soon as this year, and is considering purchasing planes manufactured
by either Boeing or Airbus.
The company is
also continuing to pay down its debt, which has fallen from around $54 billion
after the pandemic to $35 billion.
“I’ve never been
deterred, no matter what the challenges that we face,” Isom said.
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