American Airlines Public Relations Campaign Proposal
AMERICAN AIRLINES CAMPAIGN PROPOSAL
American Airlines Public Relations Campaign Proposal
November 21, 2012 COM 313: Public Relations Theory Judy del Castillo Mila Salahuddin Richard Jow Tyler Adamson
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Defining the Problem Intro and Background/History Since the start of the airline industry, American Airlines has been one of the leading airlines nationally and globally. American has continually stayed ahead of other competitors both in technology and in resources. By the end of the 1930s, it was the nation’s number one domestic carrier. In the 1950s, it built the American Airlines Stewardess College, the world’s first special facility for flight attendant training. It also became the first airline to offer coast-to-coast jet service with the Boeing-707 airplane. In the 1960s and 70s, newer aircraft entered its fleet, routes were expanded to the Caribbean, and the Super Saver was introduced, the most popular fare offering discount fares from New York and California. In the 1980s, American introduced a revolutionary marketing program to reward frequent fliers. Ever since the turn of the century, American has continued to add new routes, update their technology, and offer many services and programs to their customers (American Airlines, 2011). However, global economic uncertainty, rising fuel prices, and intensifying competitive challenges are just several factors that have caused a $10 billion loss for American Airlines over the past decade (American Airlines, 2012). “American Airlines, once the largest U.S. carrier, is now third behind United Continental Holdings Inc.'s United Airlines and Delta Air Lines Inc, both of which used Chapter 11 to cut costs and later found merger partners” (Daily & Peterson, 2011, para.3). American filed for bankruptcy protection in late 2011 in attempt to cut labor costs. Since filing for bankruptcy, American has formed an organizational restructuring plan. This proposal called for a $3 billion annual financial improvement by 2017; $1 billion in revenue from
AMERICAN AIRLINES CAMPAIGN PROPOSAL fleet renewal and optimization to product improvements and $2 billion in restructuring savings from employee-related cost savings to grounding older planes (American Airlines, 2012). Throughout 2012, American management has gone through many negotiations with different unions in the organizations. This was a difficult process for both parties. Managers saw the desperate need to cut costs for restructuring savings. On the other hand, employees were facing a restructuring proposal that called for a reduction in the workforce, discontinuation of company-subsidized retiree medical coverage, some outsourcing, and termination of benefit pension plans (American Airlines, 2012). On August 8, 2012, Senior Vice President of People stated in a letter to the American team that the company has ratified agreements with all seven Transport Workers Union groups except the pilots (Lynn, 2012). Contract negotiations with pilots were a roadblock for the company. In response, the company filed Section 1113 to reject American pilot contracts. After the court ruled in favor, American moved forward with changes for pilots that were necessary for restructuring, as stated in another company letter on September 12 (Lynn, 2012). The Problem and Concern The primary issue that is affecting American Airlines internally is its business relationship with their pilots. The root of this problem dates to August 2012, when a judge sided with the airlines and threw out the pilot’s contract against the Allied Pilots Association, citing a bankruptcy code that allotted the airlines to impose their own contract terms. In evident defiance, the pilots responded with increased rate of calling in sick by 20% in comparison to last year (Saporito, 2012), which resulted in an increased
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number of cancelled flights. The pilots at American Airlines have also threatened to initiate a full strike against the airline unless the contract that was drafted by the Allied Pilots Association was fulfilled. What’s Happening Now? American Airlines’ restructuring process is affecting pilots and, in turn, customer satisfaction. Situation Analysis Strengths: 1. One of the largest airlines in the world 2. Well developed, strategically focused domestic network 3. Number of routes 4. Fleet size 5. Partnerships with other airlines around the world Weaknesses: 1. Financial position 2. Management-pilot/union relationship 3. Low customer satisfaction 4. High number of flight delays and cancellations 5. Unmotivated workforce Opportunities: 1. Increase in travel 2. Information technology 3. Newer aircraft
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Threats: 1. Fuel prices 2. Intensifying competitive challenges 3. Economic uncertainty American Airlines can save in the long run by grounding older planes and purchasing newer ones. This might lower maintenance costs and issues and increase customer satisfaction. American can also increase motivation of its workforce to take advantage of the increase in air travel, thus bringing the company ahead in the airline industry. Problem Statement An increase in the number of delayed and cancelled flights is resulting in decreased customer satisfaction with American Airlines. Planning and Programming The cancellation of flights has consequently led to the external issue of decreased customer satisfaction with American Airlines. Currently, it seems as though customers are divided between continuing business with the airlines despite its problems or taking their business elsewhere. The stated problems also present an opportunity for American Airlines to reconnect with their customer base as well as company pilots. As a result of conducting a situational analysis and compiling quantitative data, American Airlines will gain a competitive edge as it will be better prepared to hone in on what it is their publics need from them and what American Airlines can provide in terms of service. This will serve as
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a way for American Airlines to gain better traction amongst the airline industry as a whole. Program Goal Statement To decrease the number of delayed and cancelled flights and, in turn, restore customer satisfaction with American Airlines by November 15, 2013. Existing Communications, Actions, and Events American Airlines has made their restructuring plans, employee progress reports, and other updates available to their employees and the general public on their website. However, airline customers are more influenced by online reviews and news media such as Facebook, Twitter, and Skytrax, which is the world’s largest airline review site. American has a Twitter and YouTube account but did not post anything regarding the loose seats incidents. Past Public Relations Attempts/Failures American Airlines’ public relations has tried to explain their current situation with employees. They have also tried to minimize uncertainty with the public. The airline has continually updated their employees through company letters, fact sheets, and a restructuring outline that explains management decisions, changes in the organization, and company goals. American has also given several explanations to the loose seats incidents in which rows of seats on American aircraft had unhinged from the floor on three separate occasions all within a week. American spokeswoman Mary Frances Fagan said people spilling sodas, popcorn, coffee and other substances can gunk up the locking mechanism that locks the seat to the floor (Pearson & Smith-Spark, 2012). In an earlier explanation, American said it was simply a mechanical failure on certain seat models
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“and how they fit into the tracking used to secure the seats” (Barnett & Hetter, 2012). In regards to the increased number of flight cancellations and delays, the airline said pilots calling precautionary maintenance checks before take-off that lead to nothing wrong were slowing American flights, according to spokesman Bruce Hicks (Barnett & Hetter, 2012). In either case, American public relations attempts had mixed results. While the Allied Pilots Associations (APA) said pilots were not taking part in any organized job action, including an increase in sick day requests and pre-flight delays (Hugo, 2012), many were not buying into American’s explanation of the loose seats. Kate Hanni, executive director of FlyersRights.org, said, “What outsourced company would be so stupid so as to not bolt down seats? That made it very clear to me, this was definitely a P.R. move on behalf of the American pilots’ union” (Miller, 2012, para.9). Whether the fault was on the union workers or not, most American customers and stakeholders have perceived the airline in a very poor light. Target Publics 1. Internal •
Pilots
•
Customers
2. External
Current Relationship with Each Named Public Internal (Pilots) In regard to internal publics, American Airlines and their pilots’ union have been playing the “blame game” on who should be held responsible for the problems that have recently plagued the airlines (Hetter, 2012). For instance, in regard to the loose seat
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incidents, American Airlines initially stated that the problem was a mechanical issue and that they had sent their maintenance crew to “evaluate the aircraft and determine the next course of action” (Barnett & Hetter, 2012). However, Allied Pilots Association spokesman Gregg Overman asserted that the maintenance crew that was sent to inspect those planes was, in fact, third-party workers (Barnett & Hetter, 2012). More recently, the airlines announced that it plans to hire 2,500 new pilots within the next five years (Isidore, 2012). Tom Horton, CEO of American Airlines, addressed this statement in a letter to his employees and added that this move would open up more international and domestic flights, as well as create new jobs for pilots and an overall increase in income for employees (Isidore, 2012). The Allied Pilots Association, on the other hand, are unconvinced. Currently, American has about 7,500 pilots than the 13,000 that they previously had (Isidore, 2012). According to Tom Hoban, a spokesman for APA, it seems unlikely that American would hire new pilots when the number of current pilots is clearly shrinking in size, and “unless they ink it in the contract, it doesn’t have a lot of credibility with the pilots” (Isidore, 2012). The tumultuous relationship between American Airlines and the APA began when American decided to cut costs in the midst of bankruptcy procedures. The ensuing battle between the union and the airlines reached a high peak when American Airlines won in court the right to throw out the union’s contract with the pilots (Sapporito, 2012). Since then, the two parties have been struggling to come to an agreement on contract terms, with the APA rejecting the company’s last offer when it failed to meet the pilots’ demands (see Appendix 1).
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External (Customers) As for external publics, a recent poll taken by CG42, a consulting firm based in Connecticut, surveyed 9,252 airline passengers from American Airlines and others, and they have discovered that more than half of American Airlines customers are displeased with the airlines’ recent lack of performance and service (Jean, 2012). Despite that number, however, research also shows that in spite of the mechanical failures that have troubled the airlines, only one-third of participants worry about the safety of American flights, with three quarters of them stating that they would not yet consider switching airlines (Jean, 2012). Taking these favorable numbers in consideration, Stephen Beck, a CG42 consultant, believes that the airlines should “rally its loyal base of frequent flyers to prevent further damage to its brand” (Jean, 2012). In fact, it seems as though American Airlines is paying attention because as of November, the organization is now offering “double elite-qualifying miles” to each and every customer who flies with American from now until the end of the year (American Airlines, 2012). According to the airlines’ website, it’s their way of saying thank you to their loyal customers who still continue to do business with them despite all of their recent troubles. Another example is when the company issued an apology to those who were first affected by the delays and cancellations in the early months of September and October. For those who were delayed over two hours, customers were given the option of receiving a refund if they were not able to board their flight or have the opportunity to switch flights (American or another airline) at no additional cost as long as seats were available (Koenig & Mayerowitz, 2012).
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Action and Communication 1. Target Internal Public (Pilots) Objective: To improve American Airlines AQR score from -1.24 to 1 by Nov. 15, 2013, by reconnecting with pilots and reducing late and cancelled flights. Strategies: Management must reach out and reconnect with its pilots and emphasize that, although its restructuring process has caused unwanted changes, it is absolutely necessary and they must work together in order to navigate and prevail through these tough times. Tactics: American Airlines management must re-engage in negotiations with pilots in order to come to a mutually beneficial agreement. Message: American Airlines must issue a company wide press release to all of its pilots indicating the need to re-enter into negotiations and work together to stop late and cancelled flights in order to collectively push American Airlines back to the top of the industry. Additionally, incentives should be offered in exchange for the pilots’ cooperation. 2. Target External Public (Customers) Objective: To restore customer satisfaction in American Airlines by increasing its ACSI (American Customer Satisfaction Index) score from 64 to 70 by Nov. 15, 2013. Strategies: American Airlines must communicate to its customers its commitment to excellence in customer satisfaction. Tactics: American Airlines must engage its customer base in new and creative ways allowing for the exchange of information and ideas with an emphasis on increasing customer satisfaction.
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Messages: Using a combination of traditional and new media, American Airlines will communicate to its customers its commitment to excellence and also allow for customer interaction in the process. Traditional media (such as television commercials) will allow American Airlines to communicate its commitment to excellence to its customers and new media (social media) will allow American Airlines to communicate with and engage its customers in a realtime setting. Additionally, double points for frequent fliers should be extended through the 2013 calendar year. Evaluation A quantitative method of gathering data will be implemented, which will utilize American Airlines’ Airline Quality Rating in order to track the number of on-time arrivals, involuntary denied boarding, mishandled baggage and 12 customer complaint categories. Using the Airline Quality Rating, it was reported that American Airline’s AQR score for 2011 improved slightly. The slight improvement in the AQR score (-1.24 in 2011 compared to -1.28 for 2010) reflects a combination of ratings for on-time arrivals (79.8% in 2010 compared to 77.8% in 2011), denied boardings (0.86 in 2010 compared to 0.92 in 2011), and customer complaints per 100,000 passengers (1.44 in 2010 compared to 1.46 in 2011). Improved mishandled baggage performance (3.55 in 2011 compared to 3.82 in 2010) was the only area of gain for 2011. Another quantitative method for measuring data will use the American Customer Satisfaction Index (see Appendix 2). This will serve as a way to measure customer satisfaction directly. Since 1994, American Airlines customer satisfaction according to the ACSI has dropped 8.6 points; the fourth largest customer satisfaction drop-off among all leading airlines.
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The results of the evaluation could help American’s management to adjust their restructuring program accordingly. For example, if the number of delayed and cancelled flights decreases in the next year and customer satisfaction also decreases, American would need to reevaluate the cause of the dissatisfaction. It could be due to in-flight services, seating comfortability, quality of food, or a number of different categories. On the other hand, if the number of delayed and cancelled flights increases in the next year but as well as its customer satisfaction, American might reevaluate their internal structure to see if it is pilots who are still causing delayed and cancelled flights or if it is mechanical issues. If it were mechanical issues that are causing the increase in delayed and cancelled flights, it might be because of American’s aging fleet. American Airlines must fix their internal problems with their pilots first. The internal changes will affect the external issues of customer satisfaction. American needs to reassure their customers and the public that the management is bringing the airline into a successful future by being open and upfront about the company’s problems, plans, and progress. If American rebuilds a strong and mutually beneficial relationship with their pilots and their customers, the airline will be able to decrease the number of delayed and cancelled flights and increase customer satisfaction by the following year.
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Appendixes Appendix 1 List of APA’s Demands (Ahles, 2012) • • • • • • • • • • • •
Eliminate Group II pay band and move the A-319 into Group III, with a weighted industry average before year three Pay rates that align us with our network-carrier peers at Delta and United Codeshare restrictions in line with those in the US Airways conditional labor agreement Contract duration that is shorter than the six-year duration in management’s “last, best, final offer” Hard furlough protection that reflects date of signing for the junior pilo An industry-standard pension An equity claim that can be monetized and has an established “hard floor” protection A non-punitive sick policy, with APA control of sick vendor for verification of usage No-cost items such as deadhead priority Contract language governing layover hotel selection Industry-standard per diem Scope limits that include a hard cap or percentage limits on the 50- to 760 seat jets
Appendix 2 American Customer Satisfaction Index
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References Ahles, A. (2012, Oct 19). American pilots union wants shorter contract, codeshare restrictions and pay rates like Delta and United. Star-Telegram. Retrieved from http://blogs.star-telegram.com/sky_talk/2012/10/american-pilots-union-wantsshorter-contract-codeshare-restrictions-and-pay-rates-like-delta-and-uni.html American Airlines. (2011, Nov). American airlines. Retrieved from http://www.aa.com/i18n/amrcorp/corporateInformation/facts/history.jsp American Airlines. (2012, February). American airlines reorganization update [PDF document]. Retrieved from http://www.restructuringamr.com/documents/FINALFEB1_BusinessPlanPublicPr esentation.pdf American Airlines. (2012, Nov). Double miles. double thanks. American Airlines. Retrieved from http://www.aa.com/i18n/utility/double-miles-thank-you.jsp American customer satisfaction index - airlines. (2012). Retrieved from http://www.theacsi.org/?option=com_content&view=article&id=147&catid=&Ite mid=212&i=Airlines Barnett, J., & Hetter, K. (2012, Oct 2). Who wants to fly American airlines? Cable News Network. Retrieved from http://www.cnn.com/2012/10/01/travel/americanairlines-customers-complaining/index.html Bowen, B., & Headley, D. (2012, 04). Airline quality rating 2012. Retrieved from http://www.airlinequalityrating.com/reports/2012aqr.pdf Daily, M., & Peterson, K. (2011). American airlines files for bankruptcy. Reuters, Retrieved from http://www.reuters.com/article/2011/11/29/us-americanairlinesidUSTRE7AS0T220111129 Hetter, K. (2012, Oct 5). How would you save American airlines? Cable News Network. Retrieved from http://www.cnn.com/2012/10/05/travel/american-airlinesturnaround-ideas/index.html?iref=allsearch Hugo, M. (2012, September 21). American airlines cancels hundreds of flights through october. Los Angeles Times. Retrieved from http://articles.atimes.com/2012/sep/21/business/la-fi-american-airlines-20120921 Jean, S. (2012, Oct 16). Survey: passengers are frustrated with American airlines, but not enough to make them shift to another carrier. Dallas News. Retrieved from http://aviationblog.dallasnews.com/2012/10/survey-passengers-are-frustratedwith-american-airlines-but-not-enough-to-make-them-shift-to-another-
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carrier.html/ Koenig, D., & Mayerowitz, S. (2012). American airlines stumbles on path to recovery. ABC News. Retrieved from http://abcnews.go.com/m/story?id=17454997&sid=81 Lynn, D. (2012, August 8). Letter from denise lynn, svp – people, to employees [PDF document]. Retrieved from http://www.restructuringamr.com/documents/AATWUAPAResults080812.pdf Lynn, D. (2012, September 12). Letter from denise lynn, svp – people, to employees [PDF document]. Retrieved from http://www.restructuringamr.com/documents/AATWUAPAResults080812.pdf Miller, J. (2012, October 4). Could bankruptcy, bad pr and angry pilots ground American airlines. Fox news, Retrieved from http://www.foxnews.com/us/2012/10/04/rashbad-publicity-could-ground-american-airlines-permanently-expertsays/?test=latestnews Pearson, M., & Smith-Spark, L. (2012). Really? American blames loose seats on spilled beverages. CNN, Retrieved from http://www.cnn.com/2012/10/05/travel/american-airlines-problem/index.html Saporito, B. (2012). American airlines vs. the pilots union: The flying public loses. Time Business. Retrieved from http://business.time.com/2012/09/24/american-airlines-vs-the-pilots-union-theflying-public-loses/
American Airlines Public Relations Campaign Proposal
November 21, 2012 COM 313: Public Relations Theory Judy del Castillo Mila Salahuddin Richard Jow Tyler Adamson
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Defining the Problem Intro and Background/History Since the start of the airline industry, American Airlines has been one of the leading airlines nationally and globally. American has continually stayed ahead of other competitors both in technology and in resources. By the end of the 1930s, it was the nation’s number one domestic carrier. In the 1950s, it built the American Airlines Stewardess College, the world’s first special facility for flight attendant training. It also became the first airline to offer coast-to-coast jet service with the Boeing-707 airplane. In the 1960s and 70s, newer aircraft entered its fleet, routes were expanded to the Caribbean, and the Super Saver was introduced, the most popular fare offering discount fares from New York and California. In the 1980s, American introduced a revolutionary marketing program to reward frequent fliers. Ever since the turn of the century, American has continued to add new routes, update their technology, and offer many services and programs to their customers (American Airlines, 2011). However, global economic uncertainty, rising fuel prices, and intensifying competitive challenges are just several factors that have caused a $10 billion loss for American Airlines over the past decade (American Airlines, 2012). “American Airlines, once the largest U.S. carrier, is now third behind United Continental Holdings Inc.'s United Airlines and Delta Air Lines Inc, both of which used Chapter 11 to cut costs and later found merger partners” (Daily & Peterson, 2011, para.3). American filed for bankruptcy protection in late 2011 in attempt to cut labor costs. Since filing for bankruptcy, American has formed an organizational restructuring plan. This proposal called for a $3 billion annual financial improvement by 2017; $1 billion in revenue from
AMERICAN AIRLINES CAMPAIGN PROPOSAL fleet renewal and optimization to product improvements and $2 billion in restructuring savings from employee-related cost savings to grounding older planes (American Airlines, 2012). Throughout 2012, American management has gone through many negotiations with different unions in the organizations. This was a difficult process for both parties. Managers saw the desperate need to cut costs for restructuring savings. On the other hand, employees were facing a restructuring proposal that called for a reduction in the workforce, discontinuation of company-subsidized retiree medical coverage, some outsourcing, and termination of benefit pension plans (American Airlines, 2012). On August 8, 2012, Senior Vice President of People stated in a letter to the American team that the company has ratified agreements with all seven Transport Workers Union groups except the pilots (Lynn, 2012). Contract negotiations with pilots were a roadblock for the company. In response, the company filed Section 1113 to reject American pilot contracts. After the court ruled in favor, American moved forward with changes for pilots that were necessary for restructuring, as stated in another company letter on September 12 (Lynn, 2012). The Problem and Concern The primary issue that is affecting American Airlines internally is its business relationship with their pilots. The root of this problem dates to August 2012, when a judge sided with the airlines and threw out the pilot’s contract against the Allied Pilots Association, citing a bankruptcy code that allotted the airlines to impose their own contract terms. In evident defiance, the pilots responded with increased rate of calling in sick by 20% in comparison to last year (Saporito, 2012), which resulted in an increased
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number of cancelled flights. The pilots at American Airlines have also threatened to initiate a full strike against the airline unless the contract that was drafted by the Allied Pilots Association was fulfilled. What’s Happening Now? American Airlines’ restructuring process is affecting pilots and, in turn, customer satisfaction. Situation Analysis Strengths: 1. One of the largest airlines in the world 2. Well developed, strategically focused domestic network 3. Number of routes 4. Fleet size 5. Partnerships with other airlines around the world Weaknesses: 1. Financial position 2. Management-pilot/union relationship 3. Low customer satisfaction 4. High number of flight delays and cancellations 5. Unmotivated workforce Opportunities: 1. Increase in travel 2. Information technology 3. Newer aircraft
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Threats: 1. Fuel prices 2. Intensifying competitive challenges 3. Economic uncertainty American Airlines can save in the long run by grounding older planes and purchasing newer ones. This might lower maintenance costs and issues and increase customer satisfaction. American can also increase motivation of its workforce to take advantage of the increase in air travel, thus bringing the company ahead in the airline industry. Problem Statement An increase in the number of delayed and cancelled flights is resulting in decreased customer satisfaction with American Airlines. Planning and Programming The cancellation of flights has consequently led to the external issue of decreased customer satisfaction with American Airlines. Currently, it seems as though customers are divided between continuing business with the airlines despite its problems or taking their business elsewhere. The stated problems also present an opportunity for American Airlines to reconnect with their customer base as well as company pilots. As a result of conducting a situational analysis and compiling quantitative data, American Airlines will gain a competitive edge as it will be better prepared to hone in on what it is their publics need from them and what American Airlines can provide in terms of service. This will serve as
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a way for American Airlines to gain better traction amongst the airline industry as a whole. Program Goal Statement To decrease the number of delayed and cancelled flights and, in turn, restore customer satisfaction with American Airlines by November 15, 2013. Existing Communications, Actions, and Events American Airlines has made their restructuring plans, employee progress reports, and other updates available to their employees and the general public on their website. However, airline customers are more influenced by online reviews and news media such as Facebook, Twitter, and Skytrax, which is the world’s largest airline review site. American has a Twitter and YouTube account but did not post anything regarding the loose seats incidents. Past Public Relations Attempts/Failures American Airlines’ public relations has tried to explain their current situation with employees. They have also tried to minimize uncertainty with the public. The airline has continually updated their employees through company letters, fact sheets, and a restructuring outline that explains management decisions, changes in the organization, and company goals. American has also given several explanations to the loose seats incidents in which rows of seats on American aircraft had unhinged from the floor on three separate occasions all within a week. American spokeswoman Mary Frances Fagan said people spilling sodas, popcorn, coffee and other substances can gunk up the locking mechanism that locks the seat to the floor (Pearson & Smith-Spark, 2012). In an earlier explanation, American said it was simply a mechanical failure on certain seat models
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“and how they fit into the tracking used to secure the seats” (Barnett & Hetter, 2012). In regards to the increased number of flight cancellations and delays, the airline said pilots calling precautionary maintenance checks before take-off that lead to nothing wrong were slowing American flights, according to spokesman Bruce Hicks (Barnett & Hetter, 2012). In either case, American public relations attempts had mixed results. While the Allied Pilots Associations (APA) said pilots were not taking part in any organized job action, including an increase in sick day requests and pre-flight delays (Hugo, 2012), many were not buying into American’s explanation of the loose seats. Kate Hanni, executive director of FlyersRights.org, said, “What outsourced company would be so stupid so as to not bolt down seats? That made it very clear to me, this was definitely a P.R. move on behalf of the American pilots’ union” (Miller, 2012, para.9). Whether the fault was on the union workers or not, most American customers and stakeholders have perceived the airline in a very poor light. Target Publics 1. Internal •
Pilots
•
Customers
2. External
Current Relationship with Each Named Public Internal (Pilots) In regard to internal publics, American Airlines and their pilots’ union have been playing the “blame game” on who should be held responsible for the problems that have recently plagued the airlines (Hetter, 2012). For instance, in regard to the loose seat
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incidents, American Airlines initially stated that the problem was a mechanical issue and that they had sent their maintenance crew to “evaluate the aircraft and determine the next course of action” (Barnett & Hetter, 2012). However, Allied Pilots Association spokesman Gregg Overman asserted that the maintenance crew that was sent to inspect those planes was, in fact, third-party workers (Barnett & Hetter, 2012). More recently, the airlines announced that it plans to hire 2,500 new pilots within the next five years (Isidore, 2012). Tom Horton, CEO of American Airlines, addressed this statement in a letter to his employees and added that this move would open up more international and domestic flights, as well as create new jobs for pilots and an overall increase in income for employees (Isidore, 2012). The Allied Pilots Association, on the other hand, are unconvinced. Currently, American has about 7,500 pilots than the 13,000 that they previously had (Isidore, 2012). According to Tom Hoban, a spokesman for APA, it seems unlikely that American would hire new pilots when the number of current pilots is clearly shrinking in size, and “unless they ink it in the contract, it doesn’t have a lot of credibility with the pilots” (Isidore, 2012). The tumultuous relationship between American Airlines and the APA began when American decided to cut costs in the midst of bankruptcy procedures. The ensuing battle between the union and the airlines reached a high peak when American Airlines won in court the right to throw out the union’s contract with the pilots (Sapporito, 2012). Since then, the two parties have been struggling to come to an agreement on contract terms, with the APA rejecting the company’s last offer when it failed to meet the pilots’ demands (see Appendix 1).
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External (Customers) As for external publics, a recent poll taken by CG42, a consulting firm based in Connecticut, surveyed 9,252 airline passengers from American Airlines and others, and they have discovered that more than half of American Airlines customers are displeased with the airlines’ recent lack of performance and service (Jean, 2012). Despite that number, however, research also shows that in spite of the mechanical failures that have troubled the airlines, only one-third of participants worry about the safety of American flights, with three quarters of them stating that they would not yet consider switching airlines (Jean, 2012). Taking these favorable numbers in consideration, Stephen Beck, a CG42 consultant, believes that the airlines should “rally its loyal base of frequent flyers to prevent further damage to its brand” (Jean, 2012). In fact, it seems as though American Airlines is paying attention because as of November, the organization is now offering “double elite-qualifying miles” to each and every customer who flies with American from now until the end of the year (American Airlines, 2012). According to the airlines’ website, it’s their way of saying thank you to their loyal customers who still continue to do business with them despite all of their recent troubles. Another example is when the company issued an apology to those who were first affected by the delays and cancellations in the early months of September and October. For those who were delayed over two hours, customers were given the option of receiving a refund if they were not able to board their flight or have the opportunity to switch flights (American or another airline) at no additional cost as long as seats were available (Koenig & Mayerowitz, 2012).
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Action and Communication 1. Target Internal Public (Pilots) Objective: To improve American Airlines AQR score from -1.24 to 1 by Nov. 15, 2013, by reconnecting with pilots and reducing late and cancelled flights. Strategies: Management must reach out and reconnect with its pilots and emphasize that, although its restructuring process has caused unwanted changes, it is absolutely necessary and they must work together in order to navigate and prevail through these tough times. Tactics: American Airlines management must re-engage in negotiations with pilots in order to come to a mutually beneficial agreement. Message: American Airlines must issue a company wide press release to all of its pilots indicating the need to re-enter into negotiations and work together to stop late and cancelled flights in order to collectively push American Airlines back to the top of the industry. Additionally, incentives should be offered in exchange for the pilots’ cooperation. 2. Target External Public (Customers) Objective: To restore customer satisfaction in American Airlines by increasing its ACSI (American Customer Satisfaction Index) score from 64 to 70 by Nov. 15, 2013. Strategies: American Airlines must communicate to its customers its commitment to excellence in customer satisfaction. Tactics: American Airlines must engage its customer base in new and creative ways allowing for the exchange of information and ideas with an emphasis on increasing customer satisfaction.
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Messages: Using a combination of traditional and new media, American Airlines will communicate to its customers its commitment to excellence and also allow for customer interaction in the process. Traditional media (such as television commercials) will allow American Airlines to communicate its commitment to excellence to its customers and new media (social media) will allow American Airlines to communicate with and engage its customers in a realtime setting. Additionally, double points for frequent fliers should be extended through the 2013 calendar year. Evaluation A quantitative method of gathering data will be implemented, which will utilize American Airlines’ Airline Quality Rating in order to track the number of on-time arrivals, involuntary denied boarding, mishandled baggage and 12 customer complaint categories. Using the Airline Quality Rating, it was reported that American Airline’s AQR score for 2011 improved slightly. The slight improvement in the AQR score (-1.24 in 2011 compared to -1.28 for 2010) reflects a combination of ratings for on-time arrivals (79.8% in 2010 compared to 77.8% in 2011), denied boardings (0.86 in 2010 compared to 0.92 in 2011), and customer complaints per 100,000 passengers (1.44 in 2010 compared to 1.46 in 2011). Improved mishandled baggage performance (3.55 in 2011 compared to 3.82 in 2010) was the only area of gain for 2011. Another quantitative method for measuring data will use the American Customer Satisfaction Index (see Appendix 2). This will serve as a way to measure customer satisfaction directly. Since 1994, American Airlines customer satisfaction according to the ACSI has dropped 8.6 points; the fourth largest customer satisfaction drop-off among all leading airlines.
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The results of the evaluation could help American’s management to adjust their restructuring program accordingly. For example, if the number of delayed and cancelled flights decreases in the next year and customer satisfaction also decreases, American would need to reevaluate the cause of the dissatisfaction. It could be due to in-flight services, seating comfortability, quality of food, or a number of different categories. On the other hand, if the number of delayed and cancelled flights increases in the next year but as well as its customer satisfaction, American might reevaluate their internal structure to see if it is pilots who are still causing delayed and cancelled flights or if it is mechanical issues. If it were mechanical issues that are causing the increase in delayed and cancelled flights, it might be because of American’s aging fleet. American Airlines must fix their internal problems with their pilots first. The internal changes will affect the external issues of customer satisfaction. American needs to reassure their customers and the public that the management is bringing the airline into a successful future by being open and upfront about the company’s problems, plans, and progress. If American rebuilds a strong and mutually beneficial relationship with their pilots and their customers, the airline will be able to decrease the number of delayed and cancelled flights and increase customer satisfaction by the following year.
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Appendixes Appendix 1 List of APA’s Demands (Ahles, 2012) • • • • • • • • • • • •
Eliminate Group II pay band and move the A-319 into Group III, with a weighted industry average before year three Pay rates that align us with our network-carrier peers at Delta and United Codeshare restrictions in line with those in the US Airways conditional labor agreement Contract duration that is shorter than the six-year duration in management’s “last, best, final offer” Hard furlough protection that reflects date of signing for the junior pilo An industry-standard pension An equity claim that can be monetized and has an established “hard floor” protection A non-punitive sick policy, with APA control of sick vendor for verification of usage No-cost items such as deadhead priority Contract language governing layover hotel selection Industry-standard per diem Scope limits that include a hard cap or percentage limits on the 50- to 760 seat jets
Appendix 2 American Customer Satisfaction Index
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References Ahles, A. (2012, Oct 19). American pilots union wants shorter contract, codeshare restrictions and pay rates like Delta and United. Star-Telegram. Retrieved from http://blogs.star-telegram.com/sky_talk/2012/10/american-pilots-union-wantsshorter-contract-codeshare-restrictions-and-pay-rates-like-delta-and-uni.html American Airlines. (2011, Nov). American airlines. Retrieved from http://www.aa.com/i18n/amrcorp/corporateInformation/facts/history.jsp American Airlines. (2012, February). American airlines reorganization update [PDF document]. Retrieved from http://www.restructuringamr.com/documents/FINALFEB1_BusinessPlanPublicPr esentation.pdf American Airlines. (2012, Nov). Double miles. double thanks. American Airlines. Retrieved from http://www.aa.com/i18n/utility/double-miles-thank-you.jsp American customer satisfaction index - airlines. (2012). Retrieved from http://www.theacsi.org/?option=com_content&view=article&id=147&catid=&Ite mid=212&i=Airlines Barnett, J., & Hetter, K. (2012, Oct 2). Who wants to fly American airlines? Cable News Network. Retrieved from http://www.cnn.com/2012/10/01/travel/americanairlines-customers-complaining/index.html Bowen, B., & Headley, D. (2012, 04). Airline quality rating 2012. Retrieved from http://www.airlinequalityrating.com/reports/2012aqr.pdf Daily, M., & Peterson, K. (2011). American airlines files for bankruptcy. Reuters, Retrieved from http://www.reuters.com/article/2011/11/29/us-americanairlinesidUSTRE7AS0T220111129 Hetter, K. (2012, Oct 5). How would you save American airlines? Cable News Network. Retrieved from http://www.cnn.com/2012/10/05/travel/american-airlinesturnaround-ideas/index.html?iref=allsearch Hugo, M. (2012, September 21). American airlines cancels hundreds of flights through october. Los Angeles Times. Retrieved from http://articles.atimes.com/2012/sep/21/business/la-fi-american-airlines-20120921 Jean, S. (2012, Oct 16). Survey: passengers are frustrated with American airlines, but not enough to make them shift to another carrier. Dallas News. Retrieved from http://aviationblog.dallasnews.com/2012/10/survey-passengers-are-frustratedwith-american-airlines-but-not-enough-to-make-them-shift-to-another-
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carrier.html/ Koenig, D., & Mayerowitz, S. (2012). American airlines stumbles on path to recovery. ABC News. Retrieved from http://abcnews.go.com/m/story?id=17454997&sid=81 Lynn, D. (2012, August 8). Letter from denise lynn, svp – people, to employees [PDF document]. Retrieved from http://www.restructuringamr.com/documents/AATWUAPAResults080812.pdf Lynn, D. (2012, September 12). Letter from denise lynn, svp – people, to employees [PDF document]. Retrieved from http://www.restructuringamr.com/documents/AATWUAPAResults080812.pdf Miller, J. (2012, October 4). Could bankruptcy, bad pr and angry pilots ground American airlines. Fox news, Retrieved from http://www.foxnews.com/us/2012/10/04/rashbad-publicity-could-ground-american-airlines-permanently-expertsays/?test=latestnews Pearson, M., & Smith-Spark, L. (2012). Really? American blames loose seats on spilled beverages. CNN, Retrieved from http://www.cnn.com/2012/10/05/travel/american-airlines-problem/index.html Saporito, B. (2012). American airlines vs. the pilots union: The flying public loses. Time Business. Retrieved from http://business.time.com/2012/09/24/american-airlines-vs-the-pilots-union-theflying-public-loses/
