Skift Take

Robert Isom believes the worst is behind American Airlines, and the airline's operations are running as smoothly as they can be. In this interview, the CEO reveals the bigger things on his mind as he maps out American's longer term future.

The inaugural Skift Aviation Forum welcomed Robert Isom, the CEO of American Airlines, as its first speaker at the Statler Hotel in downtown Dallas. During the interview he shared how the world’s biggest airline was prepared for the upcoming Thanksgiving vacation, and already looking ahead to the future with a focus on recruiting and training pilots, and staffing the carrier back up.

On stage, he also commented on Twitter’s turmoil in relation to the airline’s customers, and why Dallas Fort Worth Airport “will be the cornerstone on which American will grow.” 

Watch Isom’s full on-stage interview with Airline Weekly editor Edward Russell, as well as read a transcript of it, below.

Full Transcript

Edward Russell: Well, good morning everybody. As Rafat said, welcome to the first inaugural Skift Aviation Forum here in Dallas. I’m Edward Russell, the editor of Airline Weekly, and my guest today needs almost no introduction. Robert Isom leads American Airlines, the largest airline in the world. He has been CEO since March after six years as president and chief operations officer at American and US Airways before that. So welcome, Robert.

Robert Isom: Yeah, it is good to be here. Thank you.

Russell: Excellent. Well, we are an aviation conference, so I want to kick things off. Says you’re a big AV geek in your bio, so I got to ask, what’s your favorite plane?

Isom: A favorite plane right now is planes that deliver on time. Look, we have all flavors. So I think we’re the world’s largest operator of Embraer aircraft, the world’s largest operator of the old Bombardier aircraft. We’re one of the biggest operators of Boeing and Airbus. So you’re asking me to choose among all the children? No way, buddy. Not going to happen. They’re all really great. I like the ones that deliver on time. I like the planes that arrive on time. So that’s my favorite flight.

Russell: Right? A very diplomatic answer for sure. The best flights are always the ones that, yes, arrive on time and you don’t remember a day after. But of course, speaking of operations, we’re here a week before Thanksgiving. So operations have been in the news a lot this summer, this spring, there were issues, things have gotten better. Is American ready for the holidays?

Isom: Well, first off, I just like to say thanks for holding a conference in DFW, Dallas. Okay? That is a big deal to us. Anytime you want to come, I’m happy to come and talk to anybody. Bringing people in on my aircraft, that’s a great deal. So are we ready? Look, we’ve had three hurricanes in the last few months. We’ve had all sorts of issues that come our way. Yet the last month, October, was one of the best months in our company’s history in terms of on time performance and in terms of completion factors. So I believe we’re ready.

Now, as we get into the holidays, one of the things that in the past has always been asked is, you have a lot of peaking to your schedule. And also the way people travel. It’s all on one day and not on another. One of the things that we’re seeing though, is that demand is more spread out. It’s just really high, and at least from an airline perspective, we don’t have the ability to actually peak and valley as much as we’ve had in the past. So I look at the holidays as a really busy period of time, something we have to get ready for, making sure all the right resources are in the right place. But it’s something I know that we have more pilots on hand than we’ve ever had for the type of flying that we’re doing, more flight attendants, and then also our team members. So we’re ready.

Russell: Good. That’s really good to hear. And I think every traveler out there I can say is looking forward to an uneventful and smooth holiday travel season.

Isom: But again, the thing that I think most people experience, and I don’t know how your travels were coming into this conference, but you’re on pretty full planes, right? So we’re operating a really robust schedule today. American’s operating the largest schedule, and we’ve been doing that for some time now. So I have great confidence that what we see coming forward over the Thanksgiving holidays, and then as we get to the year end, we’ll be in good shape.

Edward Russell: Excellent. So it’s interesting, you mentioned that people are spreading out their travel and everything. I spoke to Nick Calio at Airlines for America a few days ago, and he talked about a week of Thanksgiving, like people pushing out. Are you seeing that? That it’s no longer the Wednesday before and the Sunday after, and everyone’s on the road, that it’s more of a spread out holiday period, or? …

Isom: It’s interesting. I’m glad that you’re talking to Nick. He’s a good guy. So Nick heads up A4A and advocates on behalf of the airlines, which is something we need these days. But yeah, travel, as it’s come back, and as all of you know, we’re doing things differently. So as much as you’d like to say that you got to get all your work done Monday through Friday, people are spreading out. Not just 9:00 to 5:00, but going throughout the day, but then also the week as well. And I think as well, it’s just you don’t need to have your holiday on a Saturday and Sunday. People are much more willing to do that at different times and also mix purposes of travel. So I see it all over the place, and I think that that bodes well because it ultimately means that for our airports, for our planes, we’re not all beholden to the same structures as we were in the past. We can become much more efficient because demand is regularly high at all periods.

Russell: I mean, you’re talking about full flights and strong demand, and that’s absolutely something that we keep seeing. You said during the third quarter earnings call about a month ago, that you see no slow down in demand despite the potential macroeconomic pressures. Is that still holding true? Are you still … things still look good?

Isom: Oh, I think so, Ned. Well, it’s really amazing to think of where we started this year. Right? So American in the first quarter lost $1.9 billion, right? And the industry as a whole was still wondering what’s going to happen with the pandemic. Since that time, we’ve had a profitable second quarter, we’ve had a profitable third quarter, we’re projecting a profitable fourth quarter, and we’re looking to a really nice 2023. So something has definitely changed. And what I think is happening is people have gotten through the pandemic and gotten more comfortable with getting out and returning to life as usual.

What we’re seeing is that the economy has grown for the last three years, probably a three, four, five percent clip every year. The airline business compared to where we were in 2019 is still almost 10 percent smaller just with all airlines’ capacity. So it’s not pent up demand, it’s demand that’s coming back at a level that is where we were in 2019 and then progressing just based on people wanting to get out. So I view that where we’re at right now, recession or no recession, demand is strong and demand is at a level where airlines are still trying to get the capacity out there to serve it all.

Russell: So then it sounds like you would agree with your competitor, Delta CEO, Ed Bastian, called travel countercyclical in his own third quarter earnings call. I mean, do you agree with that assessment?
Robert Isom: Well, I don’t know if I’d call it countercyclical because, again, I think what we’re dealing with is a situation where capacity isn’t yet sized to where demand is. There will always be some variability in terms of travel patterns. We know that. But over time, as we are able to meet that demand, we’ll see where things go. But for now, I do think that we’re in a period that no matter how the economy gyrates, that we’re at a level where demand is certainly sufficient enough to support the capacity that’s out there today.

Russell: Excellent. And so you mentioned the constraints and capacity. And that’s something that I’ve been writing about in Airline Weekly. Airbus and Boeing are not meeting their delivery targets. There’s a pilot shortage in the US. A captain shortage as one of your affiliates, Piedmont Airlines just offered bonuses the other day. $100,000 bonuses to get captains. I mean, how are these constraints weighing on American? What does that mean for American?

Isom: Well, we should probably talk about why we’re in this position and that is that 30 years ago, all the major airlines hired a lot of pilots. Okay? 30, 40 years ago. We hired a lot of pilots. But what happens is at age 65, your pilots have to retire. That’s the federal rules. So we’re seeing massive numbers of retirements. More retirements than we’ve ever seen as an industry. And American, as being the largest airline in the business, we have the most retirements going on that we’ve ever had. So would’ve already been hiring at a record clip just to replace those retirements. But during the pandemic, nobody came into the business. People that were training, stopped training. What’s going to go on. We all pulled our schedules down. It was really a tough time for the business. So we’ve had then a deficit of new pilots, new aviators coming into the business.

And what we’re left with is we’ve got to make up for what has been lost. On top of that, we have to make up for the holes that are in the pipeline. And so I do believe, though, that the pilot profession is one that is unique and that it is attractive. It’s something that can build generational wealth. You can start out making 80, 90, $100,000. You can build up to making a half a million dollars a year. It’s something that will ultimately attract people. It’s just that we have to get caught up. And so on that front, we’re working just about everywhere we can think to find ways to support. To the financing of pilots coming into the business and then accelerate people as they train through. At American, from a mainline perspective, we’re going to have plenty of supply of pilots.

It’s just a factor of training them right now. And we have the resources to do it, and we expect to be able to get back to where we want to be over the course of the next year. The regional is a little bit different business because we’re pulling so quickly from the regional airlines. They don’t have enough time to actually build the hours to become captains. And that is going to take some time. And I think that that will probably take a few years to work its way through. But we’ll be able to do it. No doubt. It’s a great profession. It’s something that I really encourage folks that want to go spend the time and investment in getting a private pilot’s license and then a commercial rating. It’s something that will bode well for the future.

Russell: Yeah. I know American has a cadet academy to get people coming into its regionals and you talk about the need to build generational wealth and diversity. The pilot career path has definitely been … It’s not been the most diverse in the past. I mean, what is American doing to make sure that it’s bringing in a diversity of candidates into its staff?

Isom: I don’t think American’s any different than the rest of the industry. And I’ll get my numbers wrong a little bit, but fewer than 5% of our aviators are women, first off. And then second, and I don’t know the exact number, but it’s even less than that, that are actually African American. And those are just startling statistics. But one of the issue is not just a … It’s awareness that hey, this is a profession that you can go and run out and pursue, but it’s also access. And so some of the things that we’re doing right now are, first off, our cadet academy and basically funding and financing, not just the cost of building hours and training, but also the living expenses that go along with that.

But then we’re also then reaching out to areas that haven’t typically produced the large pools of pilots. And on that front, we’re making tremendous success, both with women and then also with our Black aviators. We’ve increased numbers significantly. And I’m really looking forward to the future because the pipeline that we’re building through the cadet academy is not predominantly, but we now have a majority of those that have been underrepresented in that cadet academy. So as they come through, it is going to have an impact not only on the regional airlines, but on the mainlines as well.

Russell: I mean, that’s great. Because you mentioned the need for that funding and for those that aren’t familiar, I mean, becoming a pilot, just the certification, the training could cost $100,000. Not to mention you still have living expenses. Most people, you still need to feed yourself, live somewhere. So it’s really important.

Isom: But Ned, I’ll tell you this though, so it does sound like a daunting number, right? But think about … We’re talking, I know you have a young child.

Russell: Yes.

Isom: And I hope you’re saving up for college education.

Russell: Oh, yes.

Isom: Which is a good idea. Start now. It all pays for itself down the road. But if you think about the cost of a college education, which can be couple of $100,000 for sure, and in many cases, no guarantees for what comes next. You don’t have to have a college education to become a commercial airline pilot. You don’t have to have a college degree to come and work for American Airlines. You can go and fund that $100,000 to build the hours and ultimately get a job that you can finance that education over, no different than a college education. So I think it’s still a compelling financial argument. We just have to make people aware and then find ways to give access.

Russell: Absolutely. Access is so key. So while we’re on the topic of … We talked about pilots. You mentioned flight attendants earlier. How are relations with your unions at the moment? We had flight attendants picketed the other day, flight pilots have picketed as well. I mean, what’s the status of those relations and the talks with pilots currently on contract?

Isom: Well, look, aviation has not been an easy business over the last few years. Right? We all know that, right? There’s been significant gyrations and companies have had to go out and do extraordinary things in terms of downsizing and upsizing. And we’ve asked our people to do things that they’ve never thought about in the past. When did we think that we were going to have to mask and then have our flight attendants be enforcers? They don’t want to enforce, they want to serve. I mean, that’s why they came into the profession. So I really feel for those that are in the profession, because we’ve asked them to do extraordinary things. And so as we come out of the pandemic, they’re not immune to the economy, the effects of economy, inflation. And they’re asking, “Hey, when are we going to get back to something that is reasonable in terms of work life and also compensation?”

And on that front, I’m pleased to say that we’ve set American up to be able to take care of that. So whether it’s our regional pilots where we’ve talked about significantly increasing wages to attract more pilots into the business, or for any number of our other work groups. We’re negotiations with our mainline pilots right now. We reached an agreement that went to their board of directors that would’ve given over the course of the next two years, pay increases at 20 percent. We’re in negotiations with our flight attendants as well right now. I know that because of the kind of things we’re talking about, these are things that the unions and the company want to deliver. We know it’s important. Can’t wait to get it done as soon as possible. And ultimately, I do think that there’s benefit. The way that you can actually run the airline you want to is have people that are really engaged and feel well taken care of. And we’re trying to do that.

Russell: No, absolutely. It’s the pilot agreement. I know they rejected those pay increases. So it seems like there’s still some talks there that you have to do, but hopefully you will reach those soon.

Isom: Yeah.

Russell: Excellent. We’ve got a poll question here.

Isom: Uh-oh.

Russell: We’d asked this. So business travel has been a big thing, big recovery here at Skift. We’ve written about the great merging profits essay on that sort of blended travel. So we’ve got this poll result. Will global corporate travel come back to pre-Covid levels? It looks like 75 percent of you say yes, but still several years. Robert, do you agree with that or are you more in the yes, very soon camp?

Isom: Oh, I’m in the yes, very soon camp. But this goes back, Ned, to what we were talking about in terms of travel coming back differently. It is. Right now, I think … I don’t have the exact numbers, but we’ve seen such an increase in direct bookings at aa.com and through other direct channels. That’s not all leisure travel. Okay? What has happened during the pandemic is business has changed. We all know that small businesses, small, medium size businesses have far outpaced what the business travel of what we had called the larger corporates. But there’s something else going on as well.

I do think that there’s a lot of travel that’s going on that is falling outside of the old corporate travel policies. And so identifying what is really the old corporate contract versus people that are just saying, “Hey, look, I want to travel and the companies are going to reimburse me because travel is something that is important to my quality of life and is not something that it needs to be managed to the end degree in terms of cost.” I think that this is a change and that as we take a look at travel going forward, especially corporate travel, I think people are going to look at it equally as much as a benefit as opposed to just an expense that has to be managed. And that’s what I see right now.

So when we talk about a poll that says, “Hey, it may be years,” I think we’re seeing … Look, I know revenues are back prior to what they were and exceeding where they were in 2019. And my guess is that a good chunk of that are people that are doing corporate work that are out there traveling. And I think as people do get back to the office, the pandemic wanes even further, I think it bodes very well for the business. It’s upside.

Russell: Absolutely. I mean, you get to an interesting point. And Vasu Raja, your chief commercial officer, spoke to this. Spoke about the Skift Global Forum is, I mean, how do you measure that? I have to say, I mean, not giving away, but Skift, we book our own travel, which is business travel, but we don’t-

Isom: You do?

Russell: Yeah. We book it on aa.com or whatever website. But how do you measure that? How do you know that I’m taking a business trip? Yeah.

Isom: Well, the good news is we have a lot of data, right? And in the past you could really tell what a business trip was. Right? Somebody that’s flying from Chicago to LaGuardia on a same day trip, pretty obvious that you’re not going to visit grandma and …

Russell: Not checking out the MoMa for the latest exhibit, yeah.

Isom: Exactly. So you’re not doing that. So there were ways to define it. And the other thing that we found were that there were easy ways to define it just based on a day of the week that people traveled as well. Very easy to categorize. That’s all something that we’ve got to re-look at. But there’s obvious ways to take a look at that. And one of the things that I know that Vasu will talk to you about as well is that we see people, just their spending behavior, as something where it’s different than in the past. People are much more likely to take a look at potentially buying up and finding some conveniences for their leisure or business travel.

Russell: Yeah, I mean, you’re absolutely right. You mentioned I have a almost four year old son, and while I’m not about to book him into a business class seat, I’m definitely willing to buy up the premium economy for a little extra comfort when we fly. So it’s …

Isom: Well, you don’t care that much about your child to book him in? What? Ned, we’re going to have to talk later.

Russell: I don’t think he would fully appreciate the … the ice cream he would definitely enjoy. I can promise you that.

Isom: I get it. Well, you know what? I can tell you this. Once we get him in that seat, okay, he’s hooked. He’s not going to go back.

Russell: He’s already hooked on travel, so.

Isom: All right. That’s a good thing.

Russell: So I want to talk about, we’re here at DFW in Dallas, and of course DFW is your big hub and everything. I wrote a lot about in 2019, DFW 900, which is getting your Dallas Fort Worth hub to 900 departures a day. And there was a big push, you met it, yay. And then the pandemic happened and you pulled back you. What’s the plan for DFW? Are you going to go back to 900? Has the growth plan changed? Tell us a little bit.

Isom: Well, it’s really a great time to be in DFW and whether you’re on the Dallas side or Fort Worth side, and I always have to give that shout out to the Fort Worth side, that’s where our headquarters is. Mayor Parker would kill me if I didn’t say, “Hey, look, that’s our home as well.” But we are in such a vibrant economy here in North Texas. You couldn’t pick a better place to have a hub. You couldn’t pick a better place to have a corporate headquarters. Whether it’s talent that’s coming in, whether it’s conferences like this, growth here is different than other parts of the country. And it’s going to continue.

And part of that is facilitated by the city mothers and fathers of both Dallas and Fort Worth years and years ago by combining to create DFW as an airport now that we know is, I think, the second busiest hub in the world. American has a good chunk of the traffic out of DFW. There’s a lot of connecting traffic there, but it’s a geographically ideal place to do that kind of connecting traffic. So as we look to the future, DFW is going to be that cornerstone on which American grows. And so we couldn’t be more happy. And I know you have Sean Donohue here.

Russell: Yeah. I was going to say, Sean, he’s just said cornerstone. You’re good. Yeah.

Isom: Yeah. So I know you’re going to talk to Sean and there’s growth coming. I know Sean’s going to talk to you about the desire to even expand DFW further. So we have sufficient runways. I’m concerned always about the airspace. Sean can talk to you about that as well. We definitely need to make sure that we expand that as time goes on. But for American’s plans, yeah, the pandemic probably sidelined some plans. We’ve taken departures down to about 750 or so. By next summer, I think we’ll grow that back probably by 75, maybe almost 100 flights, which is good.

And then as we take a look at two or three years and beyond, I’m confident that we’re going to be back up to 900. And as Sean can tell you, the plans that we have and that we’re in discussions with him are about going beyond 1,000. And that’s all fantastic. That’ll be a number of years out into the future. But what we’ve got to make our way through right now are some of these short term constraints. So at American, we have over 100 regional aircraft that are unfortunately not being utilized right now.

Russell: You still have 100 parked?

Isom: Oh yeah. And whether it’s parked or lower utilization, it’s the equivalent thing. And those are going to be put back up into the air over the course of the next two or three years, but it’s going to take some time. Some of that has an impact here in DFW as well. We’ve done a considerable amount of upgaging, so we’ve been able to hold seats at a higher level. But departures are really important too. That is really dependent on making sure that we get our share of mainline pilots back up and trained and ready to go. And then also aircraft deliveries in the longer run back on schedule. So there’s a number of constraints that we have to work through, but I’m very bullish on DFW. Have a great relationship with the airport and the team there, and a tremendous amount of investment that’s going in. Has anybody gone out to see the new high sea gates? Sean will talk to you about that. That I know. And we’re flying to just about every point in the world.

Russell: Except China.

Isom: Except China. Well, China through Korea these days. But the hope is that as Asia opens up as well, we’ll be able to restart those services. We’ve got a fantastic set of partners as well that we’re coordinated with. So between us and our partners, DFW is the place to be.

Russell: That’s excellent. I mean, it really is the epitome of the massive global connectivity hub. I mean, get from anywhere to anywhere via DFW. I want to ask you a question out of the current news cycle. So a bit of a change, we’ve all been probably following the situation at Twitter, Elon Musk takeover and some of the stuff. Airlines use Twitter a lot to interact with customers and everything. Is that changing? Is American changing any of that? It’s interactions, it’s use of Twitter there yet?

Robert Isom: Now here’s what I’d tell you. American goes to where our customers are. That’s the way that we’re always going to approach it. So I guess peeling back a little bit, for the most part, we don’t do a lot of what you’d consider advertising, right? If you want to go fly, you know where to go find a ticket on American Airlines. It’s not like we have to create a tremendous amount of awareness. But there are new projects, new initiatives, whether it’s our new premium seating or new aircraft that are coming on, there’s ways that we like to get out and talk to folks. So that little bit of advertising that we do do, we want to make sure it’s really effective. Twitter hasn’t been something that’s been very large in our budget, but it’s something where we’re going to go to where our customers are.

Russell: Okay. Is that budget for Twitter being cut at this point or being paused at the moment or anything, or?

Isom: It’s something that we’re taking a look at again, in terms of overall demand and where customers want to interact.

Russell: Okay. Yeah, fair enough. So another topic that’s dear to my heart, and actually went a little viral earlier this year was the Americans launched a bus service at Philadelphia Airport.

Isom: Yeah. Right.

Russell: That’s been operating for oh four or five months now, maybe a little longer. How’s that doing?

Robert Isom: So it’s doing really well. And we’re not the only airline that has done that. So I can’t take credit for the idea. But look, in an environment where there are constraints, in an environment where people want convenient service and really want to leave the hassle at home, short distances in some bus routes actually make sense. What we’re trying to do, though, is to make it even more efficient. So look, if you’re trying to make it in from Lancaster to Philadelphia, if you could do that by actually clearing security at home and then making your way all the way to the airport without having to also reclear security, it’s going to be really efficient. And not only that, you don’t have to park, you don’t have to have the issues with traffic, and it’s a really … I haven’t been on it, but it is, from what I can see in the pictures I’ve seen, it’s a really comfortable coach ride.

It’s not going to be something that expands greatly. But for cities that either we can’t support with service right now because of our own constraints or those that have limited demand and what the portion of capacity better matches a 25 or 30-person-a-day type route, there’s always going to be some benefit. Now again, when we talk about that, nobody’s out there saying, “Oh, this replaces …” Or is something that is new and different, novel that hasn’t been done before. What we look at this is offering another way of convenience for customers that are in closed in areas. And you know what? It’s working really well.

Russell: That’s really great to hear. Could this eventually be replaced by eVTOLs, electric air taxis, when they start arriving in a couple years? Or is it … Yeah.

Isom: There you go. So fortunately for that bus transportation, the infrastructure’s already set. The roadways are there, high speed lanes are set up, and that kind of infrastructure is set up. With electric aircraft, with aircraft that are of smaller size that … I know that there’s a tremendous buzz and we have an investment in vertical. There’s a sustainability reason for doing that. There’s also a reason for keeping up where the customers want to go and how they want to travel. But I think the same question holds there that we can design an electric aircraft. You can fly them today. We can do it for various ranges, closed in ranges, but do we have the infrastructure set up? And it’s not kind of the out airports that I’m talking about, but do we have the ability to connect in the major hubs? Can we do that? And it’s not just gates and it’s not runways, but it’s airspace.

And from an airspace perspective, I think that that’s something that we actually need to start getting ahead of. So we’re all going to spend the time and we’ll put our bets down in different places on what new aircraft types can come. But if there’s going to be more demand for airspace, that is something that takes a long term investment. We know that we have to deal with issues today, but as we look forward and we say, “Hey, there are drones. On top of that, there are going to be smaller aircraft. There’s more private and corporate demand, and then there’s more commercial aviation. A big airline type travel.” That is going to require investment. And it’s not investment that can be done in a year or two years. It’s investment that has to be well thought out and actually is going to be really sizeable in terms of what we need to do. So big push here for air traffic control modernization. We’ve got to look to it. It’s something on the horizon for all of us, especially as we take a look at some of these new potential entrants.

Russell: Absolutely, and I mean, we didn’t get a chance to talk about it, but air traffic control is another constraint to operations right now facing some of the similar staffing issues as pilots. But unfortunately we are out of time. Robert, it was a pleasure to have you here at the inaugural in-person Skift Aviation Forum. Thank you so much.

Isom: Thanks, Ned.

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Tags: american airlines, business travel, ceo interviews, corporate travel, hurricanes, pilot shortage, saf2022, skift live, thanksgiving, twitter

Photo credit: American Airlines CEO Robert Isom speaking on stage at Skift Aviation Forum in Dallas, Texas, November 2022. Dylan Pacholek / Skift

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