The Truth To The Rumors Around American Airlines Corporate and Chicago

American Airlines, a Fort Worth based carrier, has been subject to various corporate rumors. Today, I will present a factual analysis of these rumors.

One allegation against American Airlines is that it incurred a loss of $800 million in Chicago. Chicago competitors have also claimed that the airline was compelled to dehub. Additionally, there have been rumors of the potential dismissal of CEO Robert Isom.

While American Airlines maintains that these allegations are unfounded, many of them are speculative and unlikely to come to fruition. I have previously covered the financial issues of the carrier, but today I will focus solely on the facts.

United Airlines, the largest competitor to American Airlines and headquartered in Chicago, has been the subject of numerous rumors surrounding the airline and the city. During a recent earnings call, CEO Scott Kirby revealed that American Airlines was losing approximately $800 million annually on its Chicago network, while United was expanding its market share and operations there. Kirby stated that American Airlines would soon need to dehub Chicago. While it is true that American Airlines lost $114 million overall last quarter, the notion that Chicago is experiencing a loss is fully plausible. However, the idea of a loss exceeding $100 million annually is highly improbable. Furthermore, American Airlines announced during its last earnings call that its most significant increase in loyalty program members came from Chicago. The airline anticipates having over 500 daily flights from Chicago by next summer season, compared to their current 484. Chicago is among the most premium destinations in American Airlines’ network. From Chicago, American Airlines has expanded its long-haul frequencies to London Heathrow with premium-heavy Boeing 787 aircraft, achieving some of its best fill rates on this route. Additionally, American Airlines’ new daily route to Honolulu has consistently recorded fill rates exceeding 90% in business class, with significant fill rates in all other cabins. These statistics strongly dispel the notion that Chicago needs to be dehubbed or that the airport is experiencing a loss of $800 million. Regarding Chicago and American Airlines’ network, it is true that active routes are being reduced in terms of aircraft size in several key markets, such as Europe. However, the airline has increased its presence in other destinations, including Orange County, Fort Lauderdale, and New Orleans. This strategic shift is driven by the fact that American Airlines does not perceive Chicago primarily as a connection hub but rather as a high-demand destination. The airline has scheduled connecting tickets from Europe to optimize travel times and reduce costs for cost-focused hubs such as Philadelphia and Charlotte. This strategy aims to minimize expenses associated with larger flights at smaller airports. By utilizing less expensive hubs, the airline avoids the need to utilize costly hubs for flights with limited nonstop traffic. Instead, these hubs offer more competitive rates for all services, including crew, fuel, taxes, and airport fees. While this approach may appear cost-effective for the same product with a different connection, it may inadvertently discourage premium customers and reduce demand for flights, particularly during the low season. Even with connecting passengers, demand from smaller cities is significantly lower. Consequently, Chicago is experiencing a decline in frequencies in certain areas while simultaneously increasing frequencies in locations where it can fill nonstop flights. While some of these claims may contain some truth, they are likely exaggerated and unlikely to be fully accurate.

Another rumor circulating is that American Airlines CEO Robert Isom is about to be fired and should resign from his position, as he has allegedly ruined the airline. While I do not intend to spread rumors or share personal opinions, I believe Isom is far from being fired. He is likely being unfairly blamed for situations beyond his control, and the company is facing multiple challenges. A new CEO is not a quick fix for these problems.

The most significant complaints about American Airlines revolve around its public relations and customer experience, as well as its coverage from major city hubs such as New York, Chicago, and Los Angeles. These issues have contributed to the airline’s decline in revenue since the pandemic. While competitors like United and Delta have enhanced their customer experience and network from these cities, American Airlines was reducing costs and attempting to compete with budget carriers like Spirit. While this strategic approach was sound, it yielded no tangible benefits. As a result, American Airlines has incurred substantial nine-figure losses and has implemented a strategic plan. This plan revealed that cost-cutting measures were not the solution and that the company should prioritize serving major cities. However, the airline’s attempts to address these issues have been hindered by an excessive number of extreme cost-cutting measures implemented by upper management. These measures will require a significant amount of time to rectify.Despite the airline’s ongoing efforts to address these problems, the excessive cost-cutting measures by upper management pose a significant challenge. While it is understandable that rumors surrounding Isom are prevalent given his role in strategy and operations, termination is unlikely due to the management’s commitment to resolving the issues. For termination to occur, there must be a valid cause, and this isn’t a valid cause because the team is working to rectify the issue.

In summary, the internet is often filled with extreme claims, and the notion that American Airlines is planning to dehub one of its major hubs and fire the CEO is highly improbable. As I have discussed in my previous blogs covering American Airlines, significant changes are expected in the future.

*all of this is speculations and has no oppinions and is aimed to be a factual informal presentation, please contact me if there is conflict