The Powerpoint Slide American CEO Doug Parker Wishes He Had Never Shown

American Airlines revealed last week that they’ll be introducing the worst, least comfortable seats in the history of US legacy airlines.

The distance from seat back to seat back in coach will be as tight as 29 inches, down from their current 31 inches, on new Boeing 737 MAX aircraft. Compare that to more generous legroom on competitors:

  • Southwest Airlines offers 31 to 33 inches
  • JetBlue offers 32
  • Delta and Alaska both offer 31 inches

Quite simply when price is the same on American and other airlines there will be a stronger reason than ever to choose a different airline. And there will be a reason to spend more money to avoid American Airlines if necessary too.

What’s so striking about the decision to offer the worst product among its peers is that just two months ago American Airlines CEO Doug Parker gave an investor presentation saying the airline’s upside lies in ‘closing the gap’ in unit revenue with its competitors.

Parker says American earns less for its flying than United and Delta do. They’re already profitable but they have more room than their competitors to offer a better product and earn an outsized return doing so, since all they have to do is catch up.

Doug Parker warned against short-term thinking, and instead emphasized the need to invest in the airline’s product, in this slide from his presentation at the J.P. Morgan Aviation, Transportation and Industrials Conference:

Yet here we are. Parker outlined a path towards profitability growth, and the airline seems to be taking a 180 degree turn from the strategy of investing in a better product to catch up to its peers in revenue per seat.

How exactly is American supposed to increase PRASM (passenger revenue per available seat mile) — the amount each person pays to fly in their seats — by offering worse seats, the tightest least comfortable seats in the history of legacy airlines, and by eliminating the lead it held over competitors with its AAdvantage marketing program (and in important ways allowing the program to fall behind)?

This only works in the “Bizarro Jerry” episode of Seinfeld.

The CEO of the world’s largest airline appears to believe that the way you earn more money from customers is to provide the worst possible product which is less attractive than the one offered by competitors. That’s the opposite of how it usually works, and it’s the opposite of what he was telling investors only two months ago.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. At this rate, we should keep a watch-out for Doug Parker getting poached by Alitalia. They love executives with a “have your cake and eat it too” management-style.

  2. I think parker believes the product/seats does not matter, they will come once you build it. there is to an extent you can milk the cow based on past customer perception and tolerance. so he can invest little and expecting a short term boost, before customers realize what happens but it could take a while. he will be enjoying his margarita in the sunset.

  3. I guess I’m confused by his use of PRASM in this context. Because available-seat-miles is the denominator for that metric. When you add seats to existing planes, if you see the exact same number of tickets at the same prices, PRASM goes down. If you sell a few more of those additional seats, and don’t lose customers avoiding the cramped quarters, you may actually achieve both higher revenue and higher profits – even though overall PRASM declines.

    If all AA wanted to do was increase PRASM, they should rip out half their coach seats, and go to 60 inch pitch. PRASM would soar, but revenue and profits would tank.

  4. We all need to pass these articles along to everyone we know and link them to every site we visit, in hopes that it will bring the heat on AA and Parker will get canned along with these plans.

    That and hurt them with the loss of our $$

  5. Just off a B6 A321 transcon where I had 33″ pitch, fast (free) wifi, great IFE and better snacks.

  6. Better seats up front, worse seats in the back. It will work.

    Pretty sad reality the mirrors the divide in the US economy these days too.

  7. Excellent post. And ktc nails it in the head.

    But you forget to mention that these seats will lack seat-back screens too. While other airlines are adding screens (Delta retrofit, 100% of the fleet on JetBlue, Virgin, etc.) because it is shown that a seat with a screen appears more spacious (less time to focus on how cramped you are, especially if you’re juggling a phone or laptop to get your entertainment), AA is getting worse in this area as well.

    A double whammy: tight seat and no screens.

  8. OK, so we know you don’t like this move by Parker. That’s fine — lots of people don’t like it. I think Brett gave AA his “cranky jackass” award for it.

    But that doesn’t mean you’re not spouting nonsense here. First, Parker himself has said there won’t be 29 inches. It will be 30. So you’re just refusing to believe him.

    Second, why you may not think you can increase unit revenue by offering slightly less legroom (In a new seat they you don’t like, but that others seem to think is just fine), there’s no evidence this is true. AA has been aggressively increasing the density on its aircraft (putting more seats on many of its planes) and it’s currently whopping the industry in unit revenue growth!

    For better or worse, there’s no evidence that passenger comfort in economy class leads to more unit revenue for USA airlines. I know you’d LIKE it to be true, because we’d all prefer more comfort, but reality and wishes are different things.

  9. Parker can yap all he wants. What we’re seeing is if you haven’t left AA yet, now would be a good time to leave.

    I’m no longer going to bother retaining status with AA.

  10. @iahphx – there will be 30 in most rows, that doesn’t mean there won’t be 29 inches.

    There’s no evidence that AA can INCREASE unit revenue with a product that is (a) worse than they currently offer and (b) worse than what competitors offer.

    EVEN IF they can bank on customers not knowing any better at time of booking, that (1) would be an argument they could RETAIN but not increase unit revenue, but (2) fails to account for lucrative corporate business which WOULD be savvy enough to book away.

  11. @swag – correct, he’s really saying he wants to earn more for each seat [and in effect see PRASM go up even as they add seats]

  12. … They are already closing the gap. Over the last two quarters, RASM at AA is growing at a higher rate than it is at DL And UA . They just upped their projection for next quarter. So the trend continues.

  13. It worked for trump, why can’t it work for parker?

    All he needs is 50% of the flying population to be part of the 50% of stupid, uneducated ignorants that voted for trump and his plan is sure to succeed.

    If you can make them vote against their own self interests, you can make them fly on the worst product too.

  14. @ Gary Leff, FF21 — Right, unit revenue is currently going gangbusters at AA. They are leaving their competitors in the dust this year. I personally think it’s more Latin American economic rebound (AA is big there) and the end of WN’s growth at DAL than brilliant management, but I can’t be sure.
    Parker IS a very good airline manager, starting with almost nothing (America West) and becoming number one. As far as corporate bookings go, I’m sure AA will always be competitive. That’s what the big US airlines always do; it’s why flying the “big three” is pretty much interchangeable. If you’re going to argue that pax comfort equates to outperformance on USA unit revenue, good luck with that.

  15. I just redeemed 600k AA miles on QA and Fiji and all I see of AA is in the rear view mirror. Electric cars solar and Middle Eastern airlines. Life is good in California.

  16. Gary why do you keep acting like you know what Doug thinks? You are astute on loyalty programs and have ridden the social media wave for self-promotion on this blog but when it comes to understanding the airlines you have no clue!

    You and all the bloggers were upset when old management went 3-4-3 on the -300ER even though you knew you wouldn’t sit there since, at the time, upgrades were plentiful. You don’t like it now since your upgrades are more limited, fewer and far between!

  17. @Josh G I do not know what is in his mind. I know what he says, and I know when actions are inconsistent with those. Why do you keep acting like I write things other than what I actually write?

  18. Yes, Doug is a good manager. But that leopard is used to running a cut-rate airline that charges for a soda, and he should quit pretending that he will run a quality operation at American. Plainly that’s not going to happen.

    The only uncharacteristic thing that Doug has done is to hand out raises to the unions that were not contractually required. And as payment, the unions spat in his face.

  19. Parker stole American Airlines by making behind closed door meetings with Union Leaders to make AA do a merger (better named-take over). They were promised lots of financial and productivity improvements and they got it from Parker.

    It just hurts to see or read American Airlines has done, will do or has become……..

    American Airlines is history. What you have now is US Air operating under the name American Airlines and ruining everything that was American Airlines. Only one executive survived the merger because she runs the IT Group and US Air had no one to replace her.

    So, “pitch” a fit when you have no legroom in the main cabin. Remember, “More Room in Coach” was a great deal until Dougie and company arrived.

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