American Says It is Ready to Fight
Executives dropped the Sunbelt talk on last week's earnings call, and said they're ready to become a nationwide premium airline. But is it too late? And if it isn't, what will set American apart?
Dear readers,
If American Airlines emerges as a real competitor to United and Delta, I think we’ll look to the third quarter 2025 earnings call as the day when Robert Isom finally turned the page. On last Thursday’s call, the legendarily risk-averse CEO dropped his relentless shtick on cost, efficiency and not spending a dollar more than necessary. Instead, he highlighted revenue and relevance — which is what actually matters, and what it actually takes to run a higher-margin airline today.
It’s a good sign (and what I have argued Isom should do for years). But I remain skeptical for a few reasons. First, I’m just not sure Isom has what it takes to lead a premium network airline. Yes, I’ve been waiting for Isom to change his tune, and I am glad that he did. But other than indicating American will move upmarket and compete everywhere in the United States, he didn’t say anything about plans to differentiate American from the competition, or improve upon what they’re doing. This lack of creative or innovative thinking concerns me, because I think the third U.S. airline to go premium needs something to make it stand out from the others.
It made me wistful for the American of 2020 and 2021. In hindsight, we know American made all the wrong bets. It retired aircraft that it would later want for the long-haul boom, it shunned lucrative corporate travel, invested only in the Sunbelt, and turned away from travel agents. On top of those mistakes, American took too long to walk back its error-ridden post-pandemic strategy.
But I have never thought that trying this approach was so stupid. First, it was a bold bet, and I respect it. Had market dynamics gone differently, American might have leap-frogged its competitors. And second, it was based on a simple business premise that a company should compete where it is strong. American clearly looked at its own strengths — namely its domestic network with its strong market share in the Sunbelt — and decided to focus there.
It’s still early, and American deserves time to roll out its full premium strategy. Maybe we will see some boldness from them yet. But the earnings call didn’t give me a lot of confidence that it’s coming. Instead, I’m worried that American’s top executives seem resigned to follow the industry leaders. Is this because it took them so much energy to get to this point that they don’t have anything left? Or are they tired of pesky newsletter authors and annoying investment analysts pointing out how well United and Delta have been doing that they’re just relenting, and agreeing to copy the others?
The strategy Isom outlined is what I’m going to call a United-light approach. In fact, as I listened to Isom on the call, I even wondered if he had just re-written Scott Kirby’s talking points to make them his own. First, Isom told analysts American is going to sell a premium product for premium revenue, something Scott Kirby has been saying for nine years now. Second, Isom sounded a lot like Kirby when he mentioned twice that American has hubs in eight of the top 10 largest U.S. metropolitan areas. And finally, Isom said American would fight for Chicago, promising more than 500 daily departures by 2026. That would be a hefty schedule for a middling hub that American is only now rediscovering.
I hope Isom doesn’t spend so much energy either emulating Kirby — or trying to personally prove Kirby wrong — that he forgets about his company’s strengths. The growing Southern cities are good markets for American, even if we all love to make fun of the El Paso strategy. Yet, according to my transcript of the call, no one said the word “Sunbelt.” And rather than play up the two hubs that other airlines would love to dominate the way American does, Isom simply told analysts “we already have DFW and Charlotte appropriately sized.”
Should we give American the benefit of the doubt?
I think something has changed at American for the better, and to prove it, I offer self-serving evidence. After freezing me out for a while, American’s communications team has begun to re-engage with me by email.1