29 December 2010

AA - A Different Road

For many years the path to success in the airline business was either based on mega volume or low cost - meaning low fares.

The industry has therefore polarized into these two groups which - with few exceptions - define the world of airlines.

It is doubtful that Alfred Khan who died this week envisaged such a turn of events when he laid out his vision of how the American Air Transport system should look.

For the models in the USA - we have Southwest Airlines championing the low cost model. And we have Delta and new United in the new mega category with their partners AF/KL and LH+NH (and no I didn't forget AC) respectively. So where does this leave American Airlines - once the biggest carrier in the world now a distinct number #5 in the global pecking order (based on RPKs/RPMs).

It seems that AA has gone back to basics as this article from the Chicago Tribune group and reprinted in the Seattle Times - shows. It has avoided the two opportunities to clean up its balance sheet - bankruptcy (which it flirted with a few times) and a merger which would have given them also the chance to emerge with a new fitter financial structure as DL and UAL have.

On the face of it AA looks like it is falling away from the top table. It is fighting a hard battle with Direct Connect. It is the last to the Global Alliance table with its AA/BA/IB/FI/RJ JV. It has an aging fleet. As analyst Henry Harteveldt opined in a media call recently American Airlines was "Nothing Special In the Air"

But look closer and you see a company that is very focused on fundementals.

AA is moving to a lowering the cost of its distribution. A bold move but as many would agree a necessary one to lower those costs it can.
AA is moving to a next generation internal reservation system. Neither DL nor UA are doing that preferring to stick with the current generation products while their international colleagues have more modern systems at the core.
AA is going back to basics and looking at the customer proposition particularly in an area where it has been less than stellar in the past.

The airline is focusing on making the company better faster and more agile than its competitors.

The jury is going to be out for a while but sticking to their guns is something that AA does well. Recall if you will their now retired leader Robert Crandal's jihad against through flight code numbers and airline code sharing. Despite being late to the table AA has turned this into a nice revenue generator.

While AA has been characterized as an aloof player - perhaps we are witnessing a turn around where they will really start to "*move their tail" for you.

(*With acknowledgment to the former National Airlines readers - I do know where that came from!)

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