American Airlines Pilots Frustrated By Company's Business Model

American Airlines pilots recently negotiated a new contract, which gives them massive pay raises. That’s not stopping pilots from being frustrated, though, as union leadership is unhappy with American’s business model. I suspect this is a sentiment that many American frequent flyers share, but for different reasons.

American pilots union trashes American’s business model

Ed Sicher, the president of the Allied Pilots Association (APA), penned an open letter, expressing displeasure with the company (as flagged by View from the Wing). The letter is titled “1995 Just Called – America West Wants its Business Model Back.” Hah.

The letter essentially recaps how American’s management team continues to talk about how the key to profitability is to focus on short haul, leisure flying, while the union wants American to focus on long haul, premium flying. For those not familiar with America West, that was American’s predecessor (America West and US Airways merged, and then US Airways and American merged — the America West management team survived throughout all of this).

I think many will find this letter to be interesting, so let me just share it in its entirety:

American Airlines management has been busy for the past few weeks. For the first time in seven years, management hosted an “Investor Day” on March 4, using it to unveil portions of their updated business plan. The Investor Day and the J.P. Morgan Industrials Conference that followed gave us a peek into the company’s strategy and how it may affect our future flying.

Unfortunately, the news isn’t good from our pilots’ perspective. Chief Executive Officer Robert Isom sees future profitability as dependent on growth opportunities in underserved domestic markets, with the crux of his business plan revolving around these marginal locations. In other words, the airline management team responsible for producing profit margins that badly lag those of Delta and United believes that opportunity beckons by taking on Southwest Airlines and the ultra low-cost carriers. Not mentioned once: defending the cornerstone cities that American Airlines’ historical business plan was built on, which produced a revenue premium.

In his Investor Day remarks, Chief Commercial Officer Vasu Raja emphasized that “short haul is the foundation of value for customers and investors.” The importance of the Sun Belt, upgauging the airline (flying larger airplanes to smaller cities), and improving the domestic network were his primary focus. He mentioned “opportunities in El Paso” more than a dozen times. At least there’s good news if you happen to live in El Paso. But where are the legitimate opportunities for future growth that produce profits?

Vasu remarked that long haul will be used “only when demand peaks,” signaling an intention to revert to the regional operation this America West management team cut its teeth on, albeit on a larger scale.

Chief Operating Officer David Seymour followed up with an emphasis on operational reliability improvements and the airline’s ability to recover from IROPS “better than anyone else,” but he made little mention of how his original schedule construction will change to build robustness into the system from the get-go, thus avoiding the need to put the operation back together in the first place. He also didn’t address our persistently high reserves head count that far exceeds the industry average. American Airlines puts thousands of pilots on reserve who could be holding lines and flying more predictable, profitable, and efficient schedules. Our average reserve pilot flies approximately 55 hours each month, while the average lineholder flies more than 85 hours. Efficiency takes a back seat to reliability as long as David chases on-time metrics and emphasizes reliability while leaving thousands of reserve “firemen” on the schedule to put out the inevitable fires when his computer-generated schedules fall apart.

Boeing recently relearned the hard way that ignoring input from its most valuable resource, its employees, is not in a company’s best interests. Yet American Airlines management seems intent on doing the same things over and over while expecting different results. Our schedules have been broken since before emerging from the pandemic. Narrowbody trips continue getting longer and more onerous. Average line values have not moved down appreciably, our trips haven’t been broken up into more manageable pieces that our pilots can pick up between large chunks of flying, and our trip trade lights have remained stubbornly red since David locked them down in September of 2022. Despite the promises, we’ve witnessed little if any actual improvement.

Management’s “new” business plan doesn’t include a focus on improving operational efficiencies and instead centers on future short-haul revenue opportunities that may or may not produce profits. As we have seen from the recent foray into Austin, these well-intentioned plans are typically money-losers. The profits are almost never in line with our competition at Delta and United, which see the benefit of catering to the premium, business, and international customers that American Airlines appears to be abandoning.

There is another problem with the new business plan. The increased emphasis on short-haul domestic flying also leaves the company on an inevitable collision course with our Scope clause. Section 1 of our contract is the foundation of our flying agreement, capping management’s ability to fly regional jets while also limiting their ability to fly from non-hub cities to other non-hub cities with RJs (spoke-to-spoke). This was the source of the most recent Scope violation that we arbitrated in February, with the arbitrator’s decision pending. The only ways out of this “square corner” the new business plan creates are absorbing one or more of the wholly owned operations, putting RJs on our seniority list, or attempting to renegotiate our Scope clause, and the latter will most certainly be met with virulent opposition.

Investors didn’t like what management had to say, with American’s stock dropping while Delta’s touched a year-to-date high. It’s unclear why management wants to play in the ULCCs’ sandbox and try to compete for their price-conscious customers instead of fortifying and defending the strong hubs we once had in cities like New York that historically produced a revenue premium. If our paltry profit-sharing checks are any indication of the plan’s efficacy, we’re in trouble. The decisions made in the front office don’t bode well for those of us who thought we were being hired by a mainline flag-carrying airline that would provide us with widebody long-haul opportunities and remain solvent in the next inevitable downturn. America West 2.0?

As your advocates, we will continue voicing our concerns to management about their stated plans. While we don’t run the airline, we possess a tremendous amount of institutional knowledge thanks to serving as the airline’s frontline leadership. We see firsthand what works and what doesn’t, and we understand what’s in our best interests as pilots. We are convinced American Airlines needs a significant course correction, and we stand ready to help make that happen by working collaboratively with management, provided management is willing to work with us.

My take on the pilots union’s perspective

I think many American frequent flyers can relate to the core of the union’s complaint. American might technically be the world’s largest airline (at least by some metrics), but really the airline is heavily focused on domestic and short haul international flying.

As an American loyalist, it’s kind of depressing to watch United’s long haul network continue to grow. With United, you can fly to Cape Town, Hong Kong, Johannesburg, Singapore, Tahiti, and so many other destinations, while on American you can fly to Tampa and Tulsa.

Now, of course it’s important to understand why American pilots are frustrated by this kind of flying. Pilots are paid per flight hour, and it’s much easier to rack up hours when you’re working 16-hour flights than when you’re working a bunch of 90-minute flights. Never mind that long haul flights have relief pilots, so you potentially have up to four pilots working these flights.

The thing that I’m puzzled by is how the union is acting as if the current business model is something new. For years American has long been a largely domestic airline, trying to compete more with ultra low cost carriers than in the premium market. Sure, American briefly dabbled with the concept of expanding long haul flying across the Pacific, but that didn’t work out. But nothing has actually changed here. Rather, American’s management is just more vocal with trying to “sell” its strategy to investors.

I’d say the one point that the union makes that most of us will disagree with is about the number of reserve pilots. American has massively improved its operational reliability in the past couple of years, and that’s great news, because it’s an area where the airline previously struggled. That’s largely thanks to there being more reserve pilots (meaning they’re on standby for when things go wrong). Of course the union doesn’t like this, since reserve pilots typically get fewer hours, and have less predictable schedules. But from an operational reliability standpoint, more reserve pilots is great. Furthermore, being operationally reliable is a key part of winning premium business.

Bottom line

American’s pilots union is frustrated by the carrier’s business model, and about how the world’s largest carrier essentially just seems interested in being a primarily domestic airline competing with Southwest and ultra low cost carriers. Not only is the union unhappy with the lack of profits this is delivering (since they have profit sharing), but it’s also frustrated by the impacts that this has on flying opportunities for pilots.

While we have different motives, I think many American frequent flyers share that sentiment. We’d love for American to be more global and more premium, but that just doesn’t seem to be a focus for the airline.

What do you make about this letter from American’s pilots union?