Doug Parker Dishes the Inside Story of How Delta Ended Its Interline Agreement With American – And Then Asked For It Back

After American’s earnings calls the company’s executives meet with employees and take their questions. One of the questions was about the restoration of the most important element of an interline agreement between American and Delta, the ability for each airline to put their passengers into empty seats on the other carrier during irregular operations.

And Doug Parker, American’s CEO, wound up and took a swing at Delta that at the same time underscores for him that his airline has come a long way operationally in the two years since the agreement with Delta was first terminated.

I would love to talk about that. I’ll try to be polite. Robert [Isom] says tell the real story. I’ll tell the real story. This is a great way to talk about how far we’ve come and what a great job you all have done.

Right about the time we were going to integrate our two reservation systems, just before that, a process by the way that other airlines most notably United and Continental did and had huge customer disruptions. Right before we were about to go through that our friends at Delta contacted us and said ‘hey you know we have this arrangement whereby we can put customers on you and you can put customers on us when you have operational disruption and it’s at a fare lower than you would charge that person otherwise and that allows us all to deal with disruption it’s always been in place. You know that agreement we want to raise the price. Because you all are putting a lot more people on us than we are putting on you we don’t think that’s fair and we think you should pay us more than you’re paying for all the people who are out there.’

Again these agreements have been in place for quite some time. We have them in place with another large airline named United. They apparently made the same statement to United. We were offended by that comment. And said no we’re not going to agree..we’ll just cancel the agreement so we cancelled it with some anxiety amongst the team because that makes it harder for our team on the ground. We didn’t do it lightly we didn’t just do it out of hubris we just thought it wasn’t fair and right and it didn’t feel right to us. And indeed it was a motivating factor to say look these guys are basically saying they know how to run an airline better than we do so they want to charge us more, we’re not doing that.

So we chose not to and again knowing that again there are indeed times where we have a mechanical and they don’t and all of a sudden our customer service agents don’t have the ability to put our customers on Delta and that’s a disservice to our team and to our customers. We weren’t happy about that but we also weren’t happy with the alternative. We chose to cancel it and it’s been cancelled.

Our team went through the res system integration flawlessly, we didn’t have any disruption, and since that time just progressively got our operation better and better and better so I don’t know a few weeks ago somebody with their tail between their legs called Don Casey and said ‘hey you know that agreement? We think maybe we should put it back in place because it’s hurting our team.’

Don said okay we’re happy to do it at the old levels. They said no no we thought we’d put it at the higher levels. Don hung up on them. So then they came back and said we’ll do it at the old levels.

It’s a fun story to tell about Delta, but it’s really a great story about us. In some sense I think what they did was wrong and was arrogant on their part. But it reflected a view on their part that their operation was that much stronger than ours and it wasn’t fair to them and they thought we’d have no choice but to say yeah we’re in a tough time right now we’ve got to do this and we will. United chose to do that we didn’t. Our team rallied and now they came back to us, it’s a great story of what we’ve been able to accomplish.

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. Geez, Parker is delusional when he describes Delta as “arrogant.” Deflect much?

    Delta had a very good reason two years ago to ask for more compensation from the interline agreement. Parker comes off like a complete a-hole here.

  2. I don’t see that it says something great about AA.

    Also, if he thinks it’s wrong that Delta “are basically saying they know how to run an airline better than we do,” the why do they copy everything to do with that mantra in mind?

  3. These are supposed to be off the record town halls in an employees only setting.

    Your posting about them ruins the candid conversations that could and should take place in these settings. Despite your frequent admonitions for AA management to get their act together, it doesn’t help if everything they tell their team is instantly communicated to the entire world. Not every communication between employees and management should be made public.

    If you do feel they should be all be made public, then try posting about an airline besides AA for a change. I’m sure they also communicate with their employees in off the record settings.

  4. I really find stuff like this interesting. I am a loyal AA flyer (but in my opinion Delta has a better product and a better operation – you can disagree that’s fine) but when Delta did this two years ago it seemed kind of neighborly to me and a little arrogant.. I gotta say,, after several very public and very bad Delta meltdowns (at least one of which wasn’t their fault) I immediately wondered how wide the smile was on Parker’s face.

  5. Delta and their employees were very arrogant. Parker was right. And remember they lied and said that they had zero cancellations over Thanksgiving weekend. They had to admit that this was not true.

    They waited until the moment when AA/US were merging their reservation systems and then demanded more money because they figured that AA had no choice. DL also wanted $20,000,000 just to extend the deal and then charge AA more money. Parker told them to pound sand.
    I’m so glad that DL was humbled and humiliated.

  6. If only AA could now fix the oneworld through checking of baggage issues they have. Now that is nickle and dime stuff to spite their own face.

  7. When Delta called back the second time, Don should have said we’ll do it at 99% of the old rate and let the 1% be a reminder for Delta being a dick.

  8. Parker once again demonstrates that he is an arrogant douche. And in fact contrary to what he says it does demonstrate his hubris. His comeuppance shall come.

    Doing my part by flying SW, JB and Alaska

    PS, he is a stable genius

  9. How on earth is such a poorly spoken individual in charge of anything?

    He’s talking about feelings and fairness without actual data involved.

  10. First, I am always skeptical of any statements made by CEO’s, CFO’S, Politicians, lawyers, etc.
    DL, AA, UA, are not in competition with each other, they are competing with low cost similar restriction carriers, alternate forms of transportation, and technology.
    If airlines assume that customers prefer poor or non-empathetic service then eventually they will falter like Eastern, TWA, PanAm, etc.
    This is a high fixed cost business model that benefits customers and sellers if operating optimally, not when planes leave with empty seats and customers waiting at the airport.

  11. Those agreements exchange very little money per customer. It was built as a service amongst almost all airlines decades ago. It worked great when flights were 60% load factors.

    AA was putting something like 4 or 5 or 6 times as many people on DL as DL was on AA. DL was paid virtually nothing for that service. If were DL, I’d do the same thing; though ask it a little nicer.

  12. The story rings true, of course. But I don’t think it’s a big deal. DL thought they could make a buck off interlining with their better operation performance and gave it a shot. AA wisely said pound sand (while UA bit). DL has now realized that monetizing interlining isn’t a great idea, because they don’t have a willing buyer and it’s better to get your stranded customers on their way than leave them stranded. BTW, the ability and willingness to help stranded travellers is perhaps the single biggest advantage of flying a major carrier than flying a ULCC (and I say that as someone who was recently stranded by Frontier when they “forgot” to order de-icing fluid).

    What’s perhaps most interesting is what UA will now do. I’m pretty sure Scott Kirby is going to tell DL that they want AA’s deal. I’m guessing DL will say OK, but we’ll have to see. Otherwise UA is going to pull out!

  13. Interline agreements are constantly re-negotiated. Unilateral cancellations are not unheard of. Matter of fact, my company has canceled unilaterally, many times. It is a way to get what you want.

    AA was just as arrogant DL, because AA did not want to negotiate either. I think karma slapped DL in the face. AA thinks they are riding high right now, and can act high and mighty, but the fact is they run a sloppy airline, with poor service. UA is their competitor, not DL. Besides AA needs the ability to reroute their passengers way more than DL or UA. It all goes back to AA sending DL, 5 times as many passengers then DL sent AA. I can see this happening again in the future.

  14. Delta caving had nothing to do with ‘how far we have come and what a great job we are doing.’ Parker get it wrong again.

  15. Delta caving had nothing to do with ‘how far we have come and what a great job we are doing.’ Parker get it wrong again.

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