It's been a tough road at American Airlines. But the company had cause for optimism after a pretty impressive third quarter this year--in fact, the best third quarter in American Airlines history, by one metric, with more than $11.5 billion in revenue.

But even in that report, there's an area where American Airlines says it's just not doing well enough, according to a recent call with analysts.

They have plenty of passengers, but they aren't getting those passengers to pay enough.

Far not, they have a plan, American CEO Doug Parker said in the earnings call. But they're going to need American Airlines passengers like you and me to do our part for it to work.

Segmentation strategies.

Brian Sumers summarized the call and the plan at Skyft:

"The airline plans to add a big chunk of revenue by improving its segmentation strategies, selling customers different products, including business class, premium economy, and extra-legroom seats, depending on what they value. It's already selling the various cabins, but Parker said American will become more sophisticated about how it markets its premium seats and makes offers by next year." 

In other words, they're not selling just transportation. They're selling experiences, good and bad, big and small. And they'll need you to buy more of them.

The hope is this extra push will translate into an extra $1 billion in revenues, while cutting costs another $300 million.

Do you really want skimpy?

This isn't limited to just basic economy, but it sure is reminiscent of what American said a few months ago it was hoping to do for economy-minded passengers.

You'll recall that airlines like American don't really judge themselves by how many basic economy tickets they sell. They'd rather be judged by how many they don't sell.

Or more to the point, how many passengers come close to buying basic economy, but at the last second upgrade their purchases for more expensive seats, once they're presented with just how little service they get with a basic economy ticket.

No advanced seat assignment, $30 (at least) to check your first bag, no standby or same-day changes, and no chance of an upgrade.

It starts to feel a little skimpy.

The art of the upsell.

So you upgrade, maybe. That's the spirit.

It's what at least half of would-be basic economy passengers did in 2017, according to  the airline's president

The upsell rate went up last year, too.

In August, when American was trying to justify why it was going to let people carry on a bag for free with basic economy, the argument was largely that it didn't matter, because 60 percent of passengers were upgrading anyway. 

But it seems maybe that's still not good enough.

All about the UX.

If's not as if American came up with this upselling idea on its own. It's a highly profitable strategy for its competitors, for better or worse.

That's why analysts and investors want to know the reasons American isn't pursuing it better already. And Parker acknowledged that other airlines "are doing a better job than we can today of making sure this sell-up activity is available to the customers."

So, the answer is largely technological, he said. User experience. They need to find the right mix of times and ways to bombard customers with offers to upgrade their purchases. 

And, of course, they also need better upgrades to offer, such as more premium economy seats.

Rest assured, American is on the case. They'll be adding upsell opportunities and making sure you know about them. 

And then the rest, my fellow American Airlines passengers, will be up to us.

Published on: Nov 4, 2018
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