11.30.2011

No Wonder American Airlines Filed for Chapter 11

This article has nothing to do with 2D barcodes, but it does have strategic marketing written all over it. I welcome your comments. 

In the wake of American Airlines' announcement that it filed for reorganization under Chapter 11, I received the email below from Maya Leibman, President, AAdvantage Loyalty Program. If you take a minute or two to read the email, perhaps you will come to the same set of conclusions that I did and want to ask Ms. Leibman the same types of questions that I want to. Granted, Ms. Leibman does not represent the entire company, only the loyalty program, but regardless, I believe my questions are valid and worth asking.

Question: Why should it be "business as usual at American throughout our reorganization process?" Isn't it due to the "usual business" that American now has to file for Chapter 11? Wouldn't the norm be the last thing that American would want to do?

Question:  Ms. Leibman states, "As we and all airlines routinely do, we will continue to evaluate our operations and service, assuring that our network is as efficient and productive as possible." If that's the case then why is it necessary to file for Chapter 11? It seems as though someone dropped the ball in the past, and more than once. Obviously, the network was not running as efficiently and/or productively as possible. So, now what?

Why do airlines have such a hard time operating in a profitable manner for an extended period of time? Are there so many variables, known and unknown, that cannot be properly expected, planned for and managed? It can't all be about the relative price of fuel and whether or not the company hedged correctly. We can put a man on the moon, but we can't manage an airline successfully? Just strikes me as odd.
   
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Dear AAdvantage® Member,

As you may know, on Tuesday, November 29, American Airlines filed for reorganization under Chapter 11. We took this action as part of our efforts to secure our long-term success in delivering the highest standards in air travel. We are committed to meeting your travel needs with outstanding customer service and safety, and it will be business as usual at American throughout our reorganization process. More than 80,000 people at American appreciate your loyalty and look forward to continuing to serve you.

We want to assure you that your AAdvantage® miles are secure. The AAdvantage miles that you've earned are yours and will stay yours, subject to usual policies, until you choose to redeem them for a great award with us. Likewise, your elite qualifying miles and your elite status, including lifetime status granted under the Million MilerSM program is secure and remains intact. You will continue to earn miles through all our existing AAdvantage participating companies and you will be able to redeem those miles for the same great awards — flights, upgrades, car rentals and hotels just to name a few. And, throughout the coming year, we will be adding even more opportunities to earn miles, as well as new ways to redeem those miles.

American is honoring all tickets and reservations as usual, and making normal refunds and exchanges. And, we intend to maintain a strong presence in domestic and international markets. As we and all airlines routinely do, we will continue to evaluate our operations and service, assuring that our network is as efficient and productive as possible. Additionally, relationships with our oneworld Alliance and other codeshare partners are continuing to provide you with opportunities to earn and redeem miles for travel to hundreds of destinations worldwide, and we are honoring all tickets and reservations for travel on our partner airlines as usual. For information about American's reorganization process, please visit AA.com/restructuring.

Even more importantly, we remain committed to providing a superior customer experience with a focus on delivering what our customers value most — the newest fleet with our upcoming aircraft deliveries, network strength in the important cities of the world and world-class products, service and technology.

American Airlines has a proud history, and we will have a successful future. All of us on the American team thank you for your loyalty and we look forward to welcoming you aboard soon.

Sincerely,
Maya Leibman
President — AAdvantage Loyalty Program

2 comments:

  1. Mr. Marquis: the costs to the airlines are not only in fuel, but union labor, pensions, insurance costs, buying new planes (and they cost a lot), etc. Without coming from the airline business or knowing any details about it, it would appear to be a business with very thin margins, intense competition and because of these and other factors is not the the type of business which can rack in millions/billions of profit like other businesses. What I find more disturbing about the AA Loyalty Program is how restrictive it is in using it, yet the "marketing/adverts" make it seem so easy to use and apply. Reading AA's Annual Report a year or two ago, there were sections of it which discuss the Loyalty Program and use of miles. If I recall, AA loved that people have banked millions of miles, but also loved the fact that they (AA) kept the usage of them to certain levels ---i.e. the % of seats made available on flights for use with miles was kept at certain levels so the company could manage costs, etc. I have found over time, if you do not know your travel plans a year in advance and book very early the miles are useless. Anyway, love your blog.

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  2. Anonymous:

    Thank you for writing and I'm glad to hear that you enjoy the blog.

    Yes, of course, there are other costs involved with running an airline beyond fuel but, by now, hasn't the business model been in existence long enough to know how an airline can be run profitably? Maybe an airline can't be run to generate tens of billions/millions of dollars in shear profit, but what's wrong with a profit, regardless of how much or how little? Why the need to be so greedy? Or, the other option could be, create a new business model.

    With respect to air miles and the ability to redeem them, it is an absolute farce as to what goes on here. You are right, unless you know your travel plans well in advance, or are willing to work around black out dates, etc., good luck. This is what I love about the airline loyalty programs or the loyalty program of any other company, when they make it so restrictive you wonder, why am I bothering with the loyalty program and why am I bothering with this company in the first place? There are others to turn to.

    If an airline CEO actually put him or herself in the shoes of an individual or business consumer, and experienced the brand, the service, the process, etc., first hand, and really cared, they would be quick to change things for the better. IMHO.

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