Incoming American Airlines CEO To Employees: Cut Costs, Don't "Spend A Dollar More Than We Need To

At the ‘State Of The Airline’ employee forum last month current American Airlines President and incoming CEO Robert Isom laid out his vision for the airline. It was mostly about operating reliably as the priority that matters most. One line, though, struck me at the time. I didn’t write about it. Instead it’s been tossing around in my head ever since.

The last piece here is be efficient and accountable. This is for everybody. We can’t spend a dollar more than we need to. And we shouldn’t. We have to be on the lookout for opportunities to save while we provide a great product and while we put all of our fantastic investments to work.

I thought Isom's remark was a simple platitude. You should not spend money that is unnecessary and wasteful. What is the message that he is sending to managers, and what does this mean in practice?

Looking for places to cut costs, and avoiding expenses, aren't priorities that are consistent with delivering a top notch product that drives a revenue premium, and given American's high costs and high debt load, they need to be driving.

• If an airline needs to buy seats, is it really necessary to spend a dollar more than needed buying them in order to get the latest or most comfortable product?
• If you need to provide meals to premium customers, how much do you invest? Steak or short rib (‘mystery meat’)? How much should you put into your wine program?
• Do we spend a little more on the catering company that delivers a great product and always stocks flights properly and on time, or accept a bit lower quality meal and occasional miscatered flights? One provides a consistent great product for customers, the other risks criticism for spending “a dollar more than we need to.”
• When there’s life left in a product, do you replace it because it’s not the best experience? Is that dollar of spending necessary, especially when you believe it’s operational reliability that’s what actually matters?

Isom chooses his words carefully. He is less of a public figure than Doug Parker. He is careful with his money. There is a difference between being a good steward of shareholder resources and not spending a dollar more than you need to. The mindset of avoiding an extra dollar of spending whenever and wherever possible repeats itself over and over throughout daily choices managers must make, that leads to a different product than where the motto is to produce the sort of premium product customers will pay more for.

US Airways delayed investing in internet because they thought it would never make more money than it cost to install. They didn't want to spend too much money. They admitted they were wrong when they realized they had been losing business to customers who weren't willing to book tickets on an airline without internet.

I have said many times that you can take management out of a city but you can't take it out of management. Going forward, Northwest Airlines may hold equal prominence.

Northwest was a terrible airline. The elites of the Worldperks program were given a lot of money because they had to do something to keep customers. They didn't like spending money and didn't think customers cared.

The World Club at Washington National airport begged and begged for permission to paint the walls. The club closed after the airline was acquired by Delta.

I have assumptions about people in the airline industry. I am always looking to be proven wrong. I think so.

• if someone came up under Bill Franke (America West, Spirit, Frontier, Wizz Air, Volaris among others) that they believe in cutting costs everywhere and always and de-emphasizing customer experience.
• if they spent much of their career at Northwest, quality product and friendly service aren’t focal for them. They may think that those things are but it doesn’t run in their blood.

Bill Franke had a friend, Robert Isom, who was at America West from 1995 to 2000. He was the Vice President of Finance and the Senior Vice President of Ground Operations at Northwest. Several American Airlines executives have come from the Northwest days, and they are still present at American today.

Here is how to make American Airlines great. Making American President Robert Isom CEO doesn't get you there. Wall Street doesn't get you there if you hire a new CEO to appease financial analysts. The humility of the man is what makes him pull this off. He has not shown the depth of vision.

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