Changes are coming to the American Airlines’ popular frequent flier program, AAdvantage, next year.
On a conference call with Wall Street analyst, American president Scott Kirby said now that the airline completed its passenger service systems integration last week with little disruption to operations, American can focus on other projects.
“We have a huge backlog of projects,” Kirby said. “Two big areas are the frequent flier program and doing more innovation within the frequent flier program and secondly to do more to further disaggregate the product and really move to a world where we can offer fares that compete with low cost carriers....It’s all about giving our customers choice.”
Kirby declined to give specifics on what changes American is considering implementing in 2016 for its AAdvantage program that has over 100 million members.
“We think we have the best loyalty program in the world and we look forward to making it better,” Kirby said.
American merged US Airways’ Dividend Miles program into its AAdvantage program in March. When the company announced the merged program in late 2014, analysts were surprised that it did not include moving to a revenue-based system like Delta Air Lines and United Airlines where members are given more rewards for paying higher airfares.
Here’s a few other tidbits from Friday’s earnings call with investors and Wall Street analysts.
Fare matching low-cost carriers
American executives were repeatedly asked about the carrier’s airfares and passenger yields which have fallen as American has matched fares of low-cost carriers in key competitive markets, like Dallas/Fort Worth, in order to keep planes full.
Kirby pointed out that 87 percent of its customers flew the airline only one time last year and that represents about 50 percent of its revenue. Casual travelers typically look at fares before determining which airline to purchase tickets on.
“Given that 50 percent of our revenue is up for grabs in these markets and these [low-cost] carriers have had so much success when they weren’t matched, we know we have to match their fares,” Kirby said.
At Dallas/Fort Worth Airport, Kirby said its second biggest competitor is ultra-low-cost carrier Spirit Airlines which has 25 non-stop routes with 20 percent of the traffic on those routes. The company has also matched fares on routes added by Southwest Airlines out of Dallas Love Field after the Wright Amendment restrictions were lifted last year.
American chief executive Doug Parker said the new headquarters campus announced on Thursday is very exciting for the company even if they aren’t going to be able to move in to their new digs until 2018.
The company had been considering a headquarters move or to renovate its existing thirty-year-old buildings for over a year.
“Do we announce something now and get started on it? Or should we defer that? And we just came to the conclusion that now is the right time primarily because of the ability to acquire the land that we were able to get. Thanks to a lot of support from the City of Fort Worth, we were able to acquire some property that is over next to our learning center, next to our new IOC, next to our operations training center, next to flight operations and that’s where we think management belongs,” Parker said.
“We’re here to support the line and not to look down on the line from a mile away which is what it feels like now,” Parker said, adding that the older headquarters building is not conducive to collaboration between employees. “It literally is silos and that is not how we like to operate so this gives us an opportunity to go build a facility that is a lot more collaborative, a lot more open space and the ability to see more people.”
Parker said the company has not disclosed how much the headquarters project will cost because it is still in the planning phase.
“It is going to do a lot for the culture we’re trying to build in terms of management itself and really send management the message we want to send to management, which is we are here to support people that are out there taking customers and not vice versa,” Parker said.
Kirby’s 20th anniversary at the airline
Before he took questions from the analysts, Parker noted that Friday marked Kirby’s 20th anniversary with the company.
Kirby joined America West as senior director of scheduling and has been part of Parker’s management team there and at US Airways and now American during his career. Parker lauded Kirby as a “driver of change” in the airline industry.
“Thank you. That was embarrassing, but thank you,” Kirby said.
“That was the point,” Parker said laughing.
Apparently the anniversary celebration continued as Kirby was feted by employees who dressed in some of his previous Halloween costumes. Kirby has a tradition of dressing in drag as famous female celebrities including Lady Gaga and Keisha.