Skift Take
Airfares in the U.S. are still near historic average lows, and a transatlantic fare war should last for more than a year. But after a delay, American is copying Delta's playbook. It aims to fix its profit margin problem by coaxing business travelers to pay more on routes worldwide by 2018.
Executives at American Airlines, the biggest airline in the world, had two stories to tell to investors on a call today, and both were about catching up to Delta Air Lines, broadly speaking.
American says it is finally achieving operational and revenue performances that are comparable to Delta's. It also says that its plans for competing with low-cost carriers, which somewhat mimic Delta's, are falling into place.
On the carrier’s second quarter earnings call Friday, American chairman and chief executive Doug Parker said, "We're back in consideration for being one of the greatest airlines in the world."
In the next couple of years, American, the largest U.S. airline by traffic, wants to get its margins closer to the high profits reported by Delta, the second-largest U.S. airline by traffic (and the rival most mentioned by American executives on today's call).
Parker said that the gap between American's profit margins and Delta's can be entirely made up by boosting its revenue.
The company plans to steal some market share from rivals and get passengers to pay more for travel by copying some of the moves that have already been proven to work by Delta, such as adding basic economy fares to compete with low-cost carriers on price.
Basic Fare Bonanza
The media hasn't given close attention to one aspect of American's rollout of basic economy seats. The airline is aiming to play a subtle psychological and marketing trick on many of its passengers. By introducing products that, while cheaper, come with many restrictions, it aims to make their full-service products look more valuable and thus enable it to nudge up the prices for them.
CFO Derek Kerr says,
