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Author Topic: AA CHANGES???
Dick Nicklas
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Carrier could adjust everything from airfares to seats
12:20 AM CDT on Tuesday, May 18, 2004

By ERIC TORBENSON / The Dallas Morning News

Months into an aggressive reassessment of American Airlines Inc.'s in-flight services and its fare structure, results from the research are starting to trickle out.

The Fort Worth-based carrier will keep expanded legroom on the vast majority of its jets, deciding that customers value two to four inches of extra space. American officials had thought about moving seats closer together again to increase its capacity at very little cost.

After considering offerings such as satellite television at every seat, American will, at least for now, focus its efforts on giving more passengers power ports. The thinking: Many passengers already tote their own entertainment, but they could use electricity from the plane.

And American is expected to experiment again with some kind of simplified fare system. American chief executive Gerard Arpey has already been presented with a plan but has told airline executives it needed more work.

Major changes to American's business plan aren't imminent, airline officials cautioned. But serious revisions remain likely over the coming months as the airline works through the research it's gathered from a core team of 100 front-line employees who were brought together in January to help change the airline. Reports from teams of the employees are due in a few weeks, covering everything from how passengers get their bags to how they respond to various fares.

"It's an ongoing continuous improvement process, just as we've done with our cost cutting program," said Roger Frizzell, a spokesman for American. They're "looking at our customer service and looking for options on how we can improve our interaction."


A smattering of details could emerge Wednesday at parent AMR Corp.'s annual shareholder meeting, including an announcement that American will upgrade about 100 planes previously operated by Trans World Airlines. The carrier posted on its Internet site the news that the planes would all receive in-seat power ports.

The focus on strategic planning contrasts sharply to last May's AMR annual meeting, when Mr. Arpey unveiled his turnaround plan and the carrier's fate remained uncertain. Now Mr. Arpey wants to sharpen his company's swords to battle discounter airlines such as JetBlue Airways Corp., especially in the Northeast.

"Any time you can do even something minor for passenger comfort, it's a lot better than a kick in the butt," said industry consultant Darryl Jenkins, a visiting professor at Embry-Riddle Aeronautical University. "Everything is going to help."

Here's what could change, analysts say:

Customers' experience

All areas where American customers have contact with the airline are being "process mapped" and evaluated for improvement.

For example, American's business class airplane seats aren't competitive with new offerings from trans-Atlantic competitors, and the airline may invest millions for improved seats that can lie completely flat like a bed.

Also under consideration: Raising the quality of items such as toiletries in amenity kits handed to international travelers. Meals and other services offered on pricey overseas flights also could improve.

Much of American's growth is focused on international flying, where it faces far less discount competition and has found better results lately. American has added Asian routes and wants to find new ways to grow its limited Pacific schedule.

As for in-flight entertainment, American realizes it offers an inferior product to discounters such as JetBlue, which has free satellite television at each seat. But Mr. Arpey is wary of investing millions for new systems in each of its planes, which can add up quickly in a fleet of 726 aircraft. But many concepts remain on the table for discussion.

Mr. Arpey seems to favor providing the infrastructure, such as electric power and possibly Internet connections, relying on customers to bring their own notebook computers and portable DVD players.


Mr. Arpey has sent his executives back to the drawing board on pricing, according to a source close to the airline.

Analysts and consultants expect American to experiment, though it probably won't shake things up to the extent of its ill-fated Value Pricing simplification, which wreaked havoc throughout the industry in 1992.

"They're going to have to do something," said Mr. Jenkins. "They still do have some pricing power out there, but it's a lot less than they have before."

Corporate fliers are chaffing at paying high walk-up fares at American and other traditional carriers.

The premium of flying at short notice on a traditional carrier can easily reach $1,000.

Discount carriers are forcing American and others to lower those top-end prices by expanding their service onto traditional airlines' top routes.

Transcontinental routes previously served as American's bread and butter.

Now yields, or what passengers pay per mile to fly, are down nearly 20 percent on key cross-country routes, thanks to discounters.

New price structure?

American and other airlines aren't financially strong enough to support an overhaul in ticket pricing because such a change would cost tens of millions of dollars in lost revenue, at least initially, Mr. Jenkins said. But the alternative is losing even more of their best customers.

The new structure would probably be a combination of cheaper last-minute fares and more expensive leisure fares to help make up some of the lost revenue.

And the new system wouldn't work well on routes with discount competition, where Southwest Airlines Co. and others are the ones setting the prices, he said.

The world's largest carrier has lost a lot of swagger on Wall Street as attention has focused on low-cost, low-fare darlings such as JetBlue and AirTran Airways Inc. American fights a difficult perception that it's a high-fare airline.

Image adjustment

Dan Garton, American's executive vice president for marketing, said in a recent interview that the carrier launched a campaign in New York that doubled the perception among residents that the carrier offered low fares. The bad news: the new number believing the carrier has low fares rose to just 14 percent.

"It's a start," he said.

The carrier is giving plenty of thought to refreshing its image with consumers and hopes to lean on its strengths – experience and global reach – to reintroduce itself.

As it works through the decision-making, American has purposefully slowed down some thinking in order to let the employee-led committees study issues and make presentations, said Mr. Frizzell, American's spokesman.

Summer bookings are strong, and the airline is reluctant to make huge changes now – with the busiest travel months around the corner.

Many of the changes may be announced in coming months but probably won't take effect until the fall or even next year because the airline planning cycle can be pretty long.

"No stone is going to go unturned," Mr. Frizzell said.

Posts: 164 | From: 4555 S. Landings Dr Ft Myers Fl 33919  |  IP: Logged
Post Captain
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another hat for Arpey.

Posts: 366 | From: CLE & The Space Coast  |  IP: Logged
Post Captain
Member # 123

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American may rehire some pilots...

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Post Captain
Member # 430

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Yawwn! Yeah, right.

They'll keep us out as long as possible, trust me.

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Bob Bayless
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What's that about furloughing in Oct.?
Posts: 220 | From: 1348 S. Victoria Ave, Columbia, Mo. 65201  |  IP: Logged
Post Captain
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Originally posted by Bob Bayless:
What's that about furloughing in Oct.?

It is official, 123 more pilots hit the streets on Oct1. I got the call today.


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Post Captain
Member # 2324

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And no recalls in 2005. If you're waiting to go back to work with AA . . . . don't. And even if you do, retirement will probably be down to a 401k w/ 3% matching and JetBlue 190 rates. And that's assuming that it survives at all. Stick a fork in it, it's done, gentlemen.
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Dr. Dave
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For what it's worth, reducing fares by almost 50% for the coming winter during a time when current fuel prices are at an all time high is at best risky. In my judgement, there doesnt appear to be much thought for future stock holder earnings. Maybe I am not so smart when it comes to finance, and I certainly don't make a million dollar salary, but I would wonder what the logic is. Jet Blue may know something. Southwest just declared a 50% loss in the last quarter and prior to their latest earnings report they were the most efficient and profitable airline. Jet blue must be using water for fuel. I'll stick with the big dogs, they have been there and built the infrastructure that the smaller airlines are using. This should be an interesting year. I will tracking this decision.

Dr. Dave

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