Going For Great
A Conversation With Doug Parker, Chairman and Chief Executive Officer, American Airlines
When two companies merge, their leadership must examine every part of the business to ensure new strategies incorporate the best attributes of both organizations. That’s precisely what American Airlines’ and US Airways’ management did when they merged into one big, happy, successful family.
Since the 2013 merger, and the beginning of the new American Airlines, the carrier has come out stronger than ever. In both 2014 and 2015, the airline achieved record-breaking financial results, with revenues of more than US$40 billion each year. American Airlines Group also topped Fortune magazine’s list of best business turnarounds in 2015. And it doesn’t stop there. The airline is “going for great,” a motto splashed throughout its website and marketing channels and has become part of its brand promise to its customers.
What this means, in part, is that the airline’s leadership and employees are determined to make American the No. 1 airline travelers want to fly, people want to work for and in which investors want to put their money.
“We’re treating our employees like customers and investing more than US$3 billion to create a world-class travel experience,” said American Chairman and Chief Executive Officer Doug Parker. “Our goal is to restore American Airlines as the greatest airline in the world.”
Keen Employee Focus
The new American Airlines’ leadership team has a new philosophy about one of its strongest, most valuable assets … its people. It focuses on treating its employees like customers with the understanding that if they are treated well, they can focus on and better serve the airline’s customers.
In a recent interview with Ascend, Mr. Parker provides insight into what it takes to combine two large families, undergo a massive turnaround and put one of the world’s most well-known global airlines back on top.
Question: Clearly, significant changes had to happen to turn American Airlines around. In addition to the merger with US Airways, what are some of the biggest changes that have been and are being made to help American regain its position as an industry leader?
Answer: We’re focusing more on treating our employees like customers. If we treat our people well, they can focus on and better serve those traveling with us.
Everything we’re doing is designed to figure out how we can best reach and listen to the team so we pull them together. I spend most of my time doing this — going out and talking to employees, answering their questions, learning from them and working on ways to better support them.
Q: What were some of the biggest challenges of merging two large workforces? How were they overcome?
A: We’ve made a lot of progress in turning two airlines into to one and done it all very smoothly, but integration is hard, grinding work and not particularly fun. It creates a lot of change, so we can’t communicate or engage with our people enough. We need to make sure we’re always out there explaining it so employees understand the what, when and how we’re doing this integration work.
There is also a transformation happening in our industry that everyone in our company needs to embrace. We now have a business model that can work and provide a return to our investors. We have to look to the future and for ways to provide the best product to win our customers’ business and loyalty. It is not about just surviving anymore. It’s about getting our team to realize the world has changed and, therefore, we need to change the way we do business.
Q: A project as sizable as the American Airlines/US Airways merger is clearly a considerable undertaking. In which areas did the merger go more smoothly than anticipated? What lessons can be learned from this process?
A: We still have some major integration projects ahead, but we are well on our way having completed some major and challenging milestones flawlessly. Our integration to a single frequent flyer program was seamless. Our reservations cutover did not cause a single customer disruption. We expected that to go well and it went even better than we had hoped — it was the best reservations integration in airline history.
If there is a guiding principle in our integration work, it’s reducing risk. Big milestones are being achieved at different times. AAdvantage was done before our reservations integration, even though it meant more work to do the two separately. Close alignment between the business, IT and IT partners like Sabre is also essential. We all have to work as one team, collaborate and communicate with one another to make these enormous integration projects successful.
To say it has been a busy year doesn’t really do justice to the work all our team is doing. All the integration work I’ve described is being done while operating nearly 7,000 daily flights and transporting more than 190 million people every year around the world.
Q: What differences do you see in the overall culture of American Airlines as a result of the merger?
American Airlines Headquarters
Based in Fort Worth, Texas, just south of the Dallas/Fort Worth International Airport, the new American Airlines has achieved significant results since the 2013 merger with US Airways. It realized record-breaking financial results the last two years, with revenues of more than $40 billion each year.
A: We are more open and transparent and really focused on treating our employees as customers. We now have an airline that can be successful long-term, so we are able to invest more in our people. If we are going to be the greatest airline in the world, our employees’ compensation should reflect that, and they should have the tools and resources they need to do the jobs they perform so well. Employees that have reached a joint collective bargaining agreement have received huge wage increases and lead their peers at other airlines in base wages.
We’re doing a better job at engaging our team members across the company, but we still have some work to do. Specifically at American, there is a labor and management history that is hard to get employees to move past. We are working to earn that trust back by doing the right thing and creating an environment of coordinated, collaborative teamwork and mutual respect.
Q: What are some of the primary benefits your customers have realized as a result of the merger?
A: We are now one airline for our customers, and they have seamless access to the largest airline in the world, operating the youngest fleet with a single loyalty program. They have a single point of contact with reservations, at airports and online.
We are also a more stable, viable company when we come together, so we can make more long-term investments in the customer experience. We’ve recently announced some significant changes that reflect that — adding a Premium Economy cabin on international wide-body flights, complimentary snacks and more free inflight entertainment options in the main cabin. We expect even more enhancements in the future, which will all create an even better travel experience for our customers.
Q: It has been said that to become the greatest airline in the world, the new American cannot just be a bigger airline. Rather, it has to be the best at consistently delivering what is promised to customers. What steps have you already taken and what will you do going forward to ensure the best possible customer experience?
A: We want customers to choose American every time they fly. Because we are no longer essentially running two airlines following our reservations integration, American has significantly improved our performance metrics since the beginning of the merger. If you stack us up against our peers at the same time they were going through their mergers, we are way ahead of the game. We got through integration and will only get better from here. Our goal is to be the best, not just the biggest. We are not where we want to be with our performance yet, but we are headed in the right direction and committed to running the best operation in the business.
And when it comes to products, we are upgrading our food and beverage offerings. We are in the midst of the largest Admirals Club makeover in company history and updating gate areas at airports. More planes, including two-class regionals, are getting inflight Wi-Fi and our international wide-body fleet will start featuring a new class of service in between business and the main cabin called Premium Economy in late 2016. We are aiming to set ourselves apart from the competition and elevate the customer experience to the next level.
Q: How are you empowering employees to ensure they consistently deliver superior customer service?
A: Our employees are the source of our success. There is a clear connection between the way we treat our team and the quality of the experience we can give our customers. Better engaging our team members is a top priority, and we also need to give them the tools and resources they need to do their jobs.
While the customer-facing integration is mostly done since we are all on the same Sabre reservations platform, there are still many employee-facing systems that need to be completed. The biggest one is FOS, our flight operating system that coordinates crews, planes, schedule and many other behind-the-scenes, operational needs. By the end of the year, we expect to have a single FOS in place for pilots, with the equivalent for flight attendants arriving in 2017.
We will also roll out new uniforms for all employees, and merge our human resources systems to help us work, look and better preform as one team.
Q: You are investing more than US$3 billion to give your customers a world-class travel experience. What will these investments go toward to boost customer experience?
Red, White And Blue
The new American Airlines livery represents a blend of the former American Airlines and US Airways. While the look is new, the United States colors of red, white and blue remain the same and continue to be a mainstay for both airlines.
A: Travelers in all of our cabins are going to see the benefits of the US$3 billion we are investing in the customer experience. We have started 2016 by expanding complimentary in-flight entertainment options in the main cabin. In February, we rolled out complimentary snacks and expanded entertainment offerings with more free movies, TV shows and music in the main cabin. In March, we launched a new series of custom-made Cole-Haan amenity kits for our premium-class customers. And there is even more to come that customers will be excited about that we will be announcing throughout the year.
Q: American leverages social media to stay connected with its customers. How has social media benefited your customers and, therefore, your company?
A: Social media gives our customers easy access to news about American and is a valuable resource for assistance wherever they are in the world, 24/7. We have a dedicated social team who shares internally what our customers are saying, and act quickly to pass on the feedback so it is timely. They sit in the middle of our operations center, right next to dispatchers and the rest of the team. This move to real-time service, information and insights is beneficial to customers and our company in many ways.
Q: The recent cutover to Sabre was extremely involved and complex. What is your overall feeling about the cutover? In what ways did it meet or exceed your expectations, and what lessons could be learned?
A: We had the best reservations cutover in industry history. More than 90 percent of our flights arrived on time and we didn’t cancel a single flight the day we switched to Sabre. Preparation, planning, clear communication, alignment between IT, the business, our partners and vendors like Sabre, having hundreds of employees on hand for support and millions of hours of training all led to our cutover going so well. For two years we were heads-down focused on it.
Leading up to our cutover day, we felt confident we had done everything possible to mitigate risk. And it still exceeded our expectations in every way. Our cutover was a really proud moment for us because everyone involved — our employees around the world from every department in company, partners, vendors, airports — really came together to make it happen.
Q: It is said that diversity and inclusion is not an inspirational goal, but rather it is the way American achieves success. What are some examples of “diversity” and “inclusion”? Why is diversity and inclusion vital to your airline’s success?
A: We want to have employees that are as diverse as the customers we serve. We are always working to recruit, develop, retain and engage the very best people — those with unique perspectives and ways of thinking who can help us become the global leader we are poised to be. We also hold all leaders accountable for cultivating an inclusive work environment to help employees reach their potential and celebrate everything a dynamic workforce has to offer.
American looks at diversity and inclusion as long-term commitment to our employees, customers, communities and suppliers. It has long been a core value, and American has received the highest possible ranking by the Human Rights Campaign in the 2016 Corporate Equality Index for 14 consecutive years because of it.
Q: What are some of the biggest incentives the traveling public has to fly the new American Airlines?
A: We are the largest airline in the world with the best people, and we have the best alliances and network in the world that can take people anywhere they want to go. Our fleet is the newest among the majors, and it is only getting younger, and our award-winning AAdvantage program rewards them for flying with us.
Q: What, primarily, sets your airline apart from your biggest competitors?
A: Our people set us apart. They are the best in the business and building an airline that travelers will want to fly.
We are also making a lot of significant long-term investments in the customer experience. We are adding more fully lie-flat seats, international Wi-Fi, in-flight entertainment options and power outlets. All of this is in addition to American’s historic fleet renewal, which has delivered 215 new aircraft since 2014 and more than 90 new planes are expected in 2016.
Q: Where do you see your airline in 10 years from now?
A: We are already thinking about and planning for 10 years from now. Now that we have the network to compete with global airlines, we will continue to innovate our products and invest in our people. We’re well on our way to restoring American to the greatest airline in the world, and in 10 years, we’ll be working to keep it there.