The CEO of American Airlines, Robert Isom, had some good news on American’s earnings call this week. Here, let’s let him speak in his own words:
The big news is this. We’re really pleased to report a quarterly profit for the first time since the start of the pandemic, that’s two and a half years, that’s driven by the strong demand environment and the hard work of our team.
“Profit.” It’s a very important part of they “why are we even running a business?” equation.
And I’ll admit, at the start of the pandemic, I wasn’t sure we’d come through on the other side (assuming we are on the other side) as a country that still had at least four big airlines (and a bunch of smaller ones.)
So, congratulations are due. But, American Airlines — and yes, all the airlines — are also facing a summer of immense challenges and struggles.
Canceled flights. Pilot shortages. A redistributing of demand, as the big, corporate accounts that once bought flights nonstop (pun intended) for their employees have scaled back, leading to a change in the customer makeup of airlines themselves.
Yet, I wasn’t prepared for five other pressures that Isom explained American Airlines faces. Actually to be more accurate, four of the five were surprises; the last one was pretty obvious.
Again, here’s Isom:
[T]here’s not a day that goes by where we don’t have issues with provisioning our aircraft with pillows, blankets, plastic cups, food. At various times, we have issues with fueling. It’s just — the concessionaires at the airport.
It’s just a myriad of things that have to — that all have to come together to put an aircraft in the air. And yes, the supply chain for aircraft parts is one thing that we monitor closely. But it’s all these other things that we really are dependent on so many other parts of the system.
You know that old saying: “For want of a nail, the shoe was lost; for want of a shoe, the horse was lost,” and it goes all the way to a war or a kingdom being lost?
Isom was speaking here in response to a question from airline reporter Mary Schlangenstein, and his answer got me thinking: both about how to make airline travel more comfortable, if you’re back doing a lot of it, and also about opportunity.
- Let’s start with the “pillows, blankets, plastic cups, [and] food,” which are customer comfort items, more or less. I suppose the solution for passengers is clear: In 2022, if you’re going to be on a plane, bring your own food, along with comfort items like blankets and an inflatable pillow.
- As for “fueling,” this one is harder to have missed. As I wrote earlier this month, American Airlines, Delta Air Lines and United Airlines are at a potentially big disadvantage right now compared to their quirkier-modeled competitor Southwest Airlines on this front.
Why? Because Southwest has been trading and hedging against increased fuel prices for years, while American, Delta, and United gave up on the idea in the mid-2010s. The result is that earlier this year, American was paying an estimated $3.92 to $3.97 for a gallon of fuel, while Southwest paid only $3.30 to $3.40.
Longtime readers know that I think just about anyone in any industry should follow the airlines. What other big, commodity industry has so many publicly traded players whose smallest moves are tracked by an army of analysts and reporters?
(I asked American Airlines if they wanted to comment further, but I didn’t get a reply.)
Still, as I write in my free ebook, Flying Business Class: 12 Rules for Leaders From the U.S. Airlines, the industry offers a nonstop parade of business school case studies that can help you overcome challenges in your business.
Today’s lesson? Profits matter most, but unforeseen problems can lurk around every corner.
I mean: “Pillows, blankets and plastic cups?” I wouldn’t have seen it coming.
