American Airlines' CEO Robert Isom expressed serious concerns about Boeing's recent production issues during an earnings call on Jan. 25. Despite American Airlines not being directly affected by the recent problems with Boeing 737-9 exit door plugs, Isom stressed the need for Boeing to improve its performance.
American Airlines CEO Criticizes Boeing Amid Production Challenges
The Federal Aviation Administration (FAA) had just denied Boeing's request to increase production of its 737 MAX jets on January 24. This decision is significant for American Airlines, which expects to receive 20 Boeing 737-8s in 2024.
Isom mentioned that these planes are likely already being made, and he does not foresee any problems with their delivery. Additionally, American Airlines plans to accept six Boeing 787-9s and two Airbus A321neos this year. According to the Aviation Week Network, American Airlines' current fleet includes 900 aircraft, 458 of which are Boeings.
The Dallas-Fort Worth-based airline predicts a 3.5-5.5% drop in total unit revenue in the first quarter of 2024 and a potential decrease of up to 3% for the entire year. This contrasts with United Airlines' expectation of stable total unit revenue in the same period. American Airlines anticipates an improvement in domestic and short-haul Caribbean flights, while transatlantic, transpacific, and long-haul Latin American routes might show steady or slightly declining performance.
For the fourth quarter of 2023, American Airlines reported a 1% decrease in total operating revenue, reaching $13.1 billion. However, the airline's full-year revenue grew by 7.8% to $53 billion. American Airlines' expenses also rose, leading to a net income of $19 million for the fourth quarter, down from $803 million in the same period in 2022. The full-year net income stood at $822 million, a notable increase from $127 million in 2022.
Revamps Basic Economy to Attract More Customers
American Airlines is making changes to appeal to its passengers, especially in its basic economy class. This move comes as airlines are rethinking their strategies to keep customers happy. In recent years, many airlines introduced new airfare classes that often cut back on included services. This led to customer dissatisfaction and opened the door for competitors like Southwest Airlines to disrupt the market with more transparent pricing and better services.
Unlike its competitors United and Delta, American Airlines is not making its basic economy fares overly restrictive. As reported by The Street, these fares usually mean passengers just get a seat on the plane, with extra charges for choosing seats or checking bags. However, American Airlines aims to make their basic economy more appealing. They want it to be an entry-level option that encourages people to use their services and join their AAdvantage program.
Gary Leff from View From the Wing noted that American Airlines' approach differs significantly from United, which does not allow basic economy passengers to bring a full-sized carry-on or use the mobile app for check-in without a bag. Delta also cuts frequent-flyer mile credit for these passengers.
Chief Commercial Officer of American Airlines, Vasu Raja, emphasized that their basic economy is not meant to be a product that people hate. Instead, it is an introductory product to get customers familiar with the airline.
American Airlines is also focusing on being adaptable and quick in responding to customer needs. Isom highlighted their investment in technology to stay competitive and responsive in the market. He assured that American Airlines is now capable of quickly adapting to changes and challenges, unlike in the past.
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