American Airlines CEO: Our goal is to passionately pursue efficiency.
Gary Leff at 15. March 2021.
In early February, I wrote that American Airlines has three business goals, and two of them are strange. What stood out was the purpose of the passionate efficiency of the training the carrier.
At the J.P. Morgan Industrials conference, he told investors about the company’s goals to stay ahead of the competition.
America has become more efficient. They decommissioned five fleet types and 150 aircraft. They’ve eliminated about 30% of their non-union workers. And they accelerated the Boeing 737’s conversion from 160 nicely finished seats to new interiors with 172 slimmer seats with less space per customer, by removing the entertainment screens at the back of the seats. They can now carry passengers more efficiently (172 on a 737!), even if they don’t feel comfortable doing so.
Parker urged employees who could unite to work together, especially to push for wage support, following the lead of former American Airlines CEO Gerard Arpey, who urged his team to stick together to win.
And he pointed out that tracking down customers means Americans are stealing from where people want to steal. Jeff Bezos says the most important key to success is customer focus, but beyond this reference to the route network, the customer is not mentioned.
During the discussion, Parker cited the $3 billion in additional money American is getting from a third-party airline (the package was actually more than just a passport for employees, but you already knew that), as well as $400 million in pension payments that will boost reserves, and dismissed the idea that the massive debt burden makes bankruptcy restructuring likely.
American entered 2020 with more debt than any other airline and its financial performance was underwhelming. They now have more debt than any other airline in history. According to Parker, they have only increased their net debt by $8 or $9 billion, if you take into account all the money they have in their accounts, most of which comes from the government, and their interest costs are only $500 or $600 billion higher.
He stated that the increase in their interest expense is funded by a 30% staff reduction in non-union staff. Another way to look at it is that their superior efficiency is absorbed by the interest on the debt, while other airlines have lowered their costs without this compensation.
Although the calculations are somewhat different in each case, Delta and United said at the conference that they had broken even, while American did not revise its negative figure of $30 million a day.
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