Recently I saw someone’s comment on my Facebook feed that what you think about American Airlines corresponds directly to whether you fly mostly international business class and premium cabin transcon flights (New York – Los Angeles / San Francisco) or whether most of your travels are on their domestic network. That seems right to me.
American Airlines has made a huge investment in its product — but not where most people sit. Internationally we get good fully lie flat business class seats, better bedding, and better lounges while domestically even in their premium cabin we get less legroom and removal of seat back entertainment.
LAX Flagship Lounge
They’re moving seats closer together throughout their aircraft which they say they’re making up for with thinner, less comfortable seats that have less recline.
There is a difference of vision between American’s premium international product and their domestic product, and between an American that sees customers as demanding low revenue transportation and airlines seeking to earn a revenue premium by providing a better product.
American Airlines New Standard Domestic Seats
Delta incidentally just announced they wouldn’t squeeze more passengers into coach on their Boeing 777s, retaining 9-across seating in each aisle while American is 10-across.
This difference is visible from airline Chairman and CEO Doug Parker’s response to an employee asking a question about media criticisms of their 737 MAX (and really it is much broader than that just the one new aircraft type, since this is where American is going with their whole domestic product). The question was about more low revenue passengers versus higher revenue from a better product.
An employee asked Parker in a ‘crew news’ session last week, “Has accounting determined that offering more of an inferior product drives more revenue than perhaps offering a superior product that could command higher [revenue]?”
Parker began acknowledging that of course it’s about the economics of the product,
I’ll answer your question without biting at the poor accounting team. You asked the right question. What we need to do is make sure we’re putting the right product out there for our customers and for all of our team who wants nothing more than to take care of our customers.
Then he makes the case that the 737 MAX interior is no worse than any other,
As it relates to this airplane, have you flown the airplane 737 max yet, it’s ok if you haven’t. I only ask because… I don’t want to sound defensive of something that… we’ve gone and intentionally done that we have the right aircraft for the future but also know that we can make changes over time as the competitive dynamics tell us that we should.
This aircraft, whatever we have in the fleet now.. 10, 15 of these airplanes now flying in the system. The feedback from the customers anyway, likely to recommend scores etc. look pretty similar to all of our other aircraft types That’s not to suggest we shouldn’t do even better with a new airplane. The main feedback we’ve gotten is, we’ve addressed the water pressure was too high for that shallow of a sink, it was splashing on people, the team fixed that. The doors opened into each other from the lavs, it made it hard for people to get through, that is being addressed. The ones that are flying around today still have it, but new ones are being delivered without It and we’ll get those fixed over time.
But some of this also has become, and this is where I’ll sound defensive, but some of what you just described, I should also mention it has the largest overheads in the industry which is great, which is one of our huge customer issues, satellite wifi allows everyone on the aircraft to stream Netflix at the same time, so those things are all positive.
American’s Boeing 737 MAX With Bins Open
Stop and think about his for a moment: they’ve engineered an aircraft that’s brand new, has bigger overhead bins so customers don’t have to gate check, and offers high speed internet. And indeed for several months they were offering high speed internet for free. And they’re still not getting happier customers than with the old legacy US Airways ‘basket of deplorables’ fleet that doesn’t even have seat power. That alone should tell them they’re doing something wrong, but Parker argues it means they’re doing something right.
Parker then makes the case that packing seats in tighter is fine, because customers have less padding in their seats.
On the seat itself we indeed have, we put in a new technology seat.. you’ve gotten to the point where the old seats that were an inch and a half wide now can be half inch wide, my math is probably off, two inches to one inch, whatever it is, they’re about an inch slimmer so when we have a 30 inch pitch on that airplane to the customer, and the customer space, is exactly the same as the 31 inch pitch on the wider seat. And that’s what we have on that airplane. So the 30 inch pitch on the new MAX is the exact same customer space as the 31 inch pitch that we have on a lot of our airplanes today. So that doesn’t seem to be an issue.
I’ve flown the seat. I don’t think it’s tighter than the worst configurations American offers in coach today. I can deal with it if I’ve got an aisle seat. But the biggest issue is that in order to get that space they’re using uncomfortable, less padded seats. It was fine, or close enough to fine, flying Miami – New York LaGuardia but the 737 MAX is designed for long range missions and they’ve scheduled it to fly Washington National – Los Angeles.
The 737 MAX also has less space in first class and in Main Cabin Extra, too, and it’s competing on that route against Delta which offers a lie flat seat up front.
A month ago American acknowledged that Parker still hadn’t even flown their new standard domestic product. This isn’t just about the 737 MAX. It’s the new standard experience in coach for their whole domestic fleet. They’re taking existing planes with more space, bigger lavatories, and retrofitting them to have less space and smaller lavatories. And you know the customer experience isn’t key to their domestic product when their CEO hasn’t even tried what they’re selling.
The American Airlines corporate communications team had been offering the excuse for the lavatories they’re using that when they purchased the MAX Boeing wasn’t offering other lavatories in their standard catalogue, implying that they had no choice in the matter. The Boeing standard catalogue certainly now includes different lavatories. No one is requiring American to retrofit their whole fleet with these lavatories. And Parker now admits that if the lavatories had been available earlier, he’d have wanted to use them which sort of undermines the ‘we had no choice but to accept them’ excuse.
Indeed he says they choose the smaller lavatory because that’s what customers want,
And the bathroom you mentioned you’re right, it’s two inches more narrow than what we have on other 737s. But that’s a new product that wasn’t available when we put the old 737s in place. My guess is that if it was that’s what people that chose to bathrooms who chose to put bathrooms on airplanes a long time ago would have put in, because that allows you two more inches of space in the main cabin, and that’s where customers would rather have it. You can’t get too narrow of course, but that two inches more narrow is sufficient. Indeed Delta’s been flying that same lav around on their airplanes for a couple of years now, and we’ve just introduced it.
American Airlines New Standard Domestic Coach Lavatory
Presumably the argument he wants to be making is that customers are still buying the product, not booking away from it, so their revealed preference is a willingness to put up with it. And to the extent customers choose on fare and schedule and not comfort it doesn’t make sense to invest in comfort.
In contrast Delta argued in its earnings call that passenger experience is driving a revenue premium in other words customers are willing to pay more to fly Delta because they believe they’ll get a better experience. So we have a difference in vision. And it isn’t primarily about lavatories.
What’s the alternative to going from 150 seats on a 737 to 160 under Parker’s leadership and now to 172? He offers this straw man,
Of course you could decide to have the airplane with 60 inch pitch and everyone’s gonna have lie flat seats, but that airplane won’t work. We’ve got to have one that works but also meets customer needs. And that’s what we think on the 737 MAX at this point.
Of course the issue isn’t a smaller lavatory and 30 inches between seats or 60 inch pitch and lie flat seats. The decision American Airlines is making is between 160 seats on the aircraft, 31 inches minimum between seats and a lavatory customers can turn around in along with a more premium first class experience and one that has 172 seats, 30 inches minimum, and that smaller lavatory — along with removal of seat back entertainment screens and less legroom up front too.
American Airlines international business class and premium cabin transcon is getting real investment. That’s not what most of their customers are flying. American relies more heavily on domestic for its revenue than United, for example. And the domestic product that isn’t flying between New York and Los Angeles/San Francisco is getting worse.