American Airlines lags behind luxury travel, falling behind Delta Air Lines and United Airlines

FORT WORTH, Texas — american airlines began pouring Champagne Bollinger to customers in its luxury lounges and cabins this fall. But it’s not yet time to celebrate at headquarters.

America has fallen behind its major rivals. delta airlines and united airlines Amid the post-COVID-19 luxury travel boom, spa vacations in Seoul and 40th birthday parties overseas have gone out of the window, and luxury rewards credit cards are now available to millions of consumers.

In the first nine months of this year, Delta Air Lines earned $3.8 billion and United Airlines earned $2.3 billion. The American earned $12 million. This means that by 2025, American Airlines, which flies more flights than any other airline, would account for just 2% of the profits ever generated by the three largest U.S. airlines, according to OAG.

This year, American Airlines ranked last in J.D. Power’s North American airline customer satisfaction rankings. The company is also working to recover from losses from a failed on-the-go sales strategy.

American Airlines, which branded itself “on-time” in the 1980s, ranked ninth out of 10 airlines in on-time performance in the first half of this year, according to the Department of Transportation.

The company is trying to turn all that around and elevate its brand after making strategic mistakes, being cautious about spending and being slow to take advantage of industry trends such as travelers’ willingness to pay more for bigger seats, current and former executives and industry watchers say.

To make that happen, CEO Robert Isom will need to rally more than 130,000 employees around American’s plan and attract both customers and investors. American Airlines stock is down 20% this year through Friday’s close, while Delta Air Lines and United Airlines have posted modest gains.

But last week, some investors noticed a change within American, with fourth-quarter profit estimates beating Wall Street analysts’ expectations. The stock rose more than 16%, its biggest weekly gain in almost a year.

“There’s going to be a three-month period where they have to define their story,” Conor Cunningham, an airline analyst at Melius Research, said of airline executives.

Larger changes take time and money.

“American Airlines hasn’t been paying attention to their customers for a long time,” said Henry Harteveldt, founder of travel consulting firm Atmosphere Research Group. “We believe that a meaningful rebuild is beginning… But a major airline like American Airlines will not be rebuilt overnight.”

American Airlines has tasked Heather Gerboden, who spent more than 20 years with American Airlines and US Airways in cargo and finance roles and is currently chief customer officer, to lead a major overhaul of the nearly century-old airline.

“Fifteen years ago, I don’t think there was a lot of thought in this industry that customer experience was really what differentiated airlines. I think everyone felt it was price and schedule and that’s it,” she said in an interview. “That’s changed, and we understand that.”

American Airlines fell behind in both retail fares and technology compared to its larger U.S. rivals. At Delta Air Lines, the most profitable airline in the U.S., executives noticed early on how customers were paying for more expensive first-class seats and valuable real estate that the airline and other carriers often offered as free upgrades. Offering buy-back services is now more common for all three companies, and American Airlines is looking for more ways to sell these seats and ensure it has enough seats on its own aircraft.

One challenge for American Airlines is that it was the last of the big three airlines to complete a mega-merger, merging with US Airways in 2013, while Delta Air Lines and United Airlines have had a head start over the years to weather consolidation and improve their products.

Galboden, who spent much of his career in finance, said it’s difficult to provide a Champagne-like return on investment for his team, but it’s still important.

“The customer experience, it’s not just champagne. It’s not just nice seats. It’s not just having the best lounge,” she said. “It’s the big picture, end to end, how we want it to feel.”

American Airlines expects total capital spending of $3.8 billion this year, including new aircraft, rising to about $4.5 billion next year, the airline announced Thursday. The company’s total debt is nearly $37 billion, and it plans to reduce it by at least $2 billion by 2028.

Here’s an example of how things have changed. Nearly a decade ago, American Airlines management decided to remove seatback screens from their aircraft to save money on equipment (and the fuel-consuming weight they added to the aircraft). Because at the time, customers said they were more likely to use their phones, tablets, or laptops to watch entertainment.

United Airlines, whose senior leadership team is partly American, including CEO Scott Kirby, is doing the opposite and is in the process of adding thousands of screens to its new and old narrowbody planes, including Bluetooth technology for wireless headphones.

Americans may change their attitude. “We’re thinking about what this technology was 10 years ago and what it’s going to be like today or in a few years,” Gerboden said. “We hope it reduces complexity.”

Gerboden said American is working on improvements to its website and app, including the ability to switch between paying for tickets with cash and miles, which executives hope will increase sales and encourage paid upgrades. Another goal is to use artificial intelligence to allow customers to search for vacation themes, such as “tasting the best spring wines,” instead of searching for flights between cities, she said.

American Airlines is also working to modernize many of its premium cabins on long-haul routes, announcing Thursday that it will be renovating the cabins. boeing The 777-200 is an upgrade to the Boeing 777-300, a large jet first announced three years ago, with a new business class.

“This is a big deal for us because as we extend the life of these vehicles and get them into service, we really get a capex holiday in terms of vehicle replacement,” Isom said on an earnings call with analysts Thursday. “So this is a win-win-win for the customer, for the company, and certainly for the investors.”

The plans have been years in the making, and airline executives are furious that high demand, supply chain issues and long certification waits have delayed the arrival of the luxury cabins.

On Thursday, American Airlines’ first Airbus A321 XLR, a long-range narrowbody jet planned to fly across the United States and eventually to Europe, touched down at Dallas-Fort Worth International Airport. First class will be eliminated in favor of a larger business class on all three aircraft types. A transatlantic flight can cost well over $600 on a later flight and $6,000 upfront.

The new suites, with sliding doors, large screens and a palette of dark brown, navy blue and tan, began flying this year as “Premium” on American Airlines’ Boeing 787 Dreamliner fleet (Subset P).

Meanwhile, the union representing American Airlines flight attendants is demanding the airline add more crew members to accommodate larger business class cabins.

“We will staff our planes as a world-class airline should and provide a competitive in-flight experience in every cabin,” the Association of Professional Flight Attendants, pilots unions and airline unions said in a message to staff Friday, targeting the airline’s underperformance compared to rival airlines.

American Airlines’ latest updates also include rethinking in-flight beverages. The airline recently signed a coffee provider agreement with Italy’s Lavazza to bring aircraft water to its headquarters in Fort Worth for coffee testing, allowing staff to evaluate the taste of brewed coffee onboard. Lavazza decided.

The airline on Thursday named Nat Pieper as chief commercial officer. alaska airlines Delta and Isom called him “exactly the kind of leader we want at American Airlines.” American Airlines fired former CCO Vasu Raja last year after his business travel strategy backfired and drew ire from travel agents.

There are signs of progress.

“With this year’s exit, we expect to be able to fully recover the revenue share lost through our previous sales and distribution strategy,” Isom said Thursday.

American Airlines also just signed a new credit card deal city And last week, it announced it was introducing a new intermediate card with a $350 annual fee.

American Airlines has been an industry leader for decades. The company was the first to launch a frequent flyer program, AAdvantage. Loyalty programs make money primarily by selling frequent flyer miles to banks and are now the lifeblood of many airlines.

The airline announced new measures this year to improve reliability. One change: 5 minutes will be added to boarding time. A US spokesperson said this would help avoid bottlenecks and last-minute gate-checked bags, and said the number of bags had fallen by 25% since May 1.

Some of Americans’ challenges are quite recent. In 2023, a federal judge blocked a regional partnership with American Airlines. jet blue airlinesThat left it without partners in major, wealthy markets such as Boston and New York, where United Airlines and Delta Air Lines had a presence.

United Airlines partnered with JetBlue this year to let customers earn and spend miles on each other’s airlines, but stopped short of coordinating schedules and routes. The measure went into effect Thursday, as American Airlines was reporting its third-quarter results.

American Airlines dominates and profits from its strongholds in Dallas and Charlotte, North Carolina, but lags in the Northeast. Other companies are eyeing the Sunbelt’s growth as the population increases.

Executives at United and Delta Air Lines attribute their success in part to having more flights to large coastal hubs that attract wealthy travelers, but United has also increased service to major markets such as Denver, Houston and Chicago.

American Airlines has been reluctant to make big investments, but United Airlines Chief Executive Officer Kirby told investors earlier this month that the airline is spending more than $1 billion a year to improve the customer experience.

United Airlines recently joined Delta Air Lines and JetBlue Airways in starting flights with free Wi-Fi provided by SpaceX’s Starlink. American Airlines plans to introduce free Wi-Fi to most of its fleet next year.

United Airlines said these investments will take years.

“We’ve had a generational lead in this space,” Andrew Nocera, United’s chief commercial officer, said in an interview, adding that new products are coming in the next few years. (He declined to provide details.) “We think this is substantive, and we don’t want to give up an inch of that foundation to whatever our competitors do to innovate over the next 10 years.”

However, some customers continue to appreciate the convenience American Airlines provides and remain loyal.

Todd Bryan, 41, who holds executive platinum status with American Airlines, said a big reason he chose the airline was that Fayetteville, Arkansas, has the highest number of frequencies in his area.

The 41-year-old sales account manager, who works in the consumer goods industry, said he gets upgrades on most flights, but he’s noticed American Airlines aggressively offering cash or mile purchases.

Even though it’s usually at the top of the list, he said he would consider taking the offer instead of betting on a free upgrade for solo travel if he “thinks it’s cheap enough that other people would buy it too.”