"We're trying to create a conversation with our next best customer." That's AA's rationale, which if done well, could be a smart move long term.
As American Airlines emerges from “the dark ages,” it is launching what at first glance may be bit of a head-scratcher: an investment fund for startups and incubators, in an effort to get closer to high-growth, emerging businesses that use AA a lot, as it tries to reinvent itself through and post bankruptcy.
Jason Oshiokpekhai, American’s manager of business development and strategic partnerships, delivered the news about the project, known internally as Blue Ocean, at 2013 CES International on January 10, but it went unnoticed until now.
The panel discussion, with representatives of Microsoft and Dell, on “Corporates & Startups,” didn’t receive much publicity, although a YouTube video of the event was posted January 15.
“Unfortunately, we are in the middle of a bankruptcy so there is a lot of nasty stuff that happens,” Oshiokpekhai concedes. “But I would argue that this is a renaissance like something we’ve never seen before.”
Total value fund
Oshiokpekhai didn’t detail the resources behind the fund, and said it is “a total value fund,” adding that the airline fund is not technically a strategic venture fund, though it may consider it down the line.
In other words, the fund could invest money in entrepreneurs, startups and incubators, but it could also use its resources to fly entrepreneurs to investor meetings, or help them with awarding points, or in other non-monetary in-kind ways.
“Do you want $50,000 or do you want 8 million eyeballs looking at your product?” says Oshiokpekhai, who notes that the fund is resisting the temptation to restrict its interest to travel startups, and would look more broadly.
The airline is indeed “actively looking to invest” in high-growth startups, entrepreneurs and incubators as it tries to change its own culture, Oshiokpekhai says.
Guidelines for pitching American Airlines
Oshiokpekhai offered three guidelines for startups pitching American:
1. Keep it simple and be able to describe your business in 30 seconds or less.
2. Look at American Airlines not just as a travel company, “but as a hub of connection.” In other words, maybe the airline knows someone who knows someone who can help your business, even if the airline can’t.
3. Decide what the value proposition would be in “joining forces,” and whether the startup would look to American as a launch partner or perhaps would team with American to take advantage of American’s marketing muscle.
“We come from the dark ages, let’s be honest,” Oshiokpekhai states, citing the older MD80 and 757 aircraft.
But Oshiokpekhai says he’s very excited about the “new American Airlines,” which is going to take delivery of 460 new planes with TVs in the seatbacks, and will remake its brand for the first time in 30 years.
American Airlines is exploring “how in the world are we using our assets to empower entrepreneurs,” Oshiokpekhai says.
Focusing on small-business growth
Why is the airline embarking on this course?
The largest growth area for American Airlines over the last few years has been in small business using the airlines, to the tune of 18%-37% per year. and it wants to empower high-growth emerging businesses, Oshiokpekhai says.
“We’re trying to create a conversation with our next best customer,” and to create an entrepreneurial impulse within American Airlines, as well, he adds.
Although American Airlines is a $23 billion company, entrepreneurs can play a role in helping the airline solve its problems, Oshiokpekhai adds.
Here are two videos, first one from CES panel and the second one from a talk in Silicon Valley: