American Airlines has shaken up its executive ranks and, contrary to public speculation, it did not involve CEO Doug Parker. It will, however, involve expanded roles for some long-time American veterans, including a few who are almost universally well-liked and admired by both the industry and passengers alike. It all represents a dramatic reorganization of the Commercial and Operations teams reporting to American president Robert Isom.
Here’s who is leaving
Kerry Philipovitch, Senior Vice President of Customer Experience, is retiring at the end of 2019. Per American, this move wasn’t forced but rather “part of a long-planned personal desire to move into a new phase of her life”, for which American had prepared.
Here are the expanded roles
Isom has organized his Operations and Commercial teams around four pillars: Operations, Network, Revenue, and Customer. Correspondingly he’s appointed the following executives to lead each pillar, reporting to him:
- David Seymour, Senior Vice President of Operations
- Vasu Raja, Senior Vice President of Network Strategy
- Don Casey, Senior Vice President of Revenue
- Kurt Stache, Senior Vice President of Customer Experience
David’s team will no doubt be hard at work picking up the pieces from a difficult summer for American. Devon May, who will report to David, will continue to oversee regional operations (which have been very good) and will also lead operations planning teams now, which bodes well for both mainline and regional operations in the future.
Vasu Raja is an all-around good guy (I’ve spoken with him more than a few times) and is widely acknowledged as an industry leader when it comes to network planning (American’s recent successes in eastern Europe as an example). Vasu will continue to head up network planning but now will also oversee alliances and partnerships. Delta’s sudden investment in LATAM and the resulting departure of LATAM from the Oneworld alliance will be an early and critical test.
Don Casey’s role is a challenging one: overseeing both revenue management and sales. Revenue management at an airline is carefully designed with all manner of algorithms and tools to exact the most revenue out of every seat possible, while the sales team is out there looking for lucrative corporate contracts, which can only be won with competitive pricing. It will be interesting to see the results of this new department, as American has lagged its peers in the critical RASM metric over the past few quarters.
The appointment that will likely mean the most for customers is an expanded role for Kurt Stache, the new SVP of Customer Experience. What exactly does Customer Experience entail? Stache will oversee almost every customer-facing part of your experience with American, including reservation agents, Flight Services (flight attendants), Digital (American app), AAdvantage, and Marketing.
My interview with Kurt Stache
I had the chance to catch up with Kurt Stache yesterday to ask him a few questions about his new role and get his thoughts on what could be done to improve and enhance the customer experience.
We started off by reminiscing about the MD-80 Farewell Celebration in Roswell, which we both attended. Stache told me that day will forever be a “Top 10” day at American for him, as it brought back great memories and helped him reconnect with people he hadn’t seen in a long time. We both agreed it showed just how much humanity exists in an industry based on big metal tubes taking off from and landing on concrete runways. Then it was time for me to try and act all official and ask some super-journalist questions, which will surely be eclipsed by the more professional stories about this initiative which will be posted alongside this one.
Andy: So tell me about this new role
“It’s definitely exciting. It is what I would call a new organization but it’s building off of something we already established. Today my organization includes digital customer experience, AAdvantage, and marketing. We’re bringing Flight Services and the reservations team into that organization, the idea being to bring most of the customer-facing aspects of the journey into one organization. It will allow us to prioritize resources and focus on things which will move the customer experience forward. We’ve done a lot of things since the merger but there’s a lot more that we want to do and can do. With Kerry’s retirement this is a good opportunity to further align our groups in a way to make us more focused on what we want to achieve.”
Andy: So, logical follow-up question, what are you hoping to achieve for the customer experience?
“We’ve done a lot of great things and have invested significantly in the customer experience…the first thing I want to do is get the entire team together to create a more specific plan and a timeline associated with that. When you think about the customer experience at a high level, you think about ease of doing business, creating as frictionless of a journey as possible, and building off the enhancements we’ve made in our digital experience. We want to create greater personalization so we’re investing in technology which will give us a 360-degree view of the customer, which we can leverage to ensure you’re getting the right message at the right time, which will hopefully get you to engage further with us as an airline. When it comes to customer service delivery, like with our flight attendants, we’ve got more things we can do on that front.
High-level though, I think we need to build off what we’ve done but also to truly align and prioritize what we think matters. What’s going to guide us in all of this is Likelihood to Recommend [Andy: this is a metric American tracks from their customer surveys, basically how strongly an American customer would recommend the airline]. It’s all about the greatest impact to the customer experience and analyzing where you get your greatest return on investments and that will be used as a guiding path for us to continue to enhance the experience. In the past 4-5 years we’ve spent billions of dollars on a new fleet, new business class seats, premium economy, satellite WiFi, but there’s a lot more we can do with the digital experience and customer service delivery standpoints to more personally connect with our customers.”
Andy: So, along those lines, do you feel like American connects well with their customers today, moreso focusing on the frequent flyers and AAdvantage members?
“We’ve had the AAdvantage program for 38 years now and feel like we have a strong connections with our frequent flyers. I personally see it and hear it all the time how passionate and sometimes emotional our customers are about their experience with us. Of course there’s always more work to do, this customer journey improvement is continuous, it’s about how we continue to evolve, and we’re talking about improving things today which didn’t even exist 10 years ago. Technology is a big part of that: how we deliver things faster, how do we deliver a more relevant experience. There’s a lot of effort and initiatives on that front but I do think we’re very much engaged with our customers and vice versa. At the same time we have a broad customer base that flies us once a year. Customer segmentation is an important piece of this because what the flyer who flies us once a year wants is very different from someone who flies us once a week, so it’s important to understand the needs of all of our customers as well as our frequent flyers.”
Andy: ok so this is me being interested in Big Data, is that’s what is driving a lot of this? Do you feel like American has more opportunities with segmentation because of the amount of data it’s able to efficiently use that they may not have been able to use in the past?
“In many ways, other industries are envious of our position because of the frequent flyer programs that we created 38 years ago. We’ve always had a big database of information that is really helpful to us. That said, you always have to be very cautious and respectful of the data, we absolutely abide by privacy rules etc., but what that allows us to do is if customers opt-in with us to receive marketing messages and not just operational messages, that’s where there’s an opportunity to do more and benefit them. From a data scientist perspective, I think the past few years have seen things like AI and Machine Learning, which I know are buzzwords right now, but the reality is they do allow us to further refine customer segmentation and put customers into smaller populations and let us be more relevant to those populations. It’s not like we’re starting stuff like that today, we’ve been working on it for a long time but we’re at a spot where we will be able to do a lot more in the next 12-24 months.”
Stache brought up the new Wallet feature, which allows American to customize benefits and give AAdvantage members options to choose the benefit they value the most, as an example of that customization. Stache indicated feedback has been very positive about the new feature, specifically the ease of use of it.
Andy: You’ve spoken a lot about digitizing the experience, is that the ultimate goal here, to digitize the pre-airport customer experience as much as possible? You’ll now be in charge of reservation agents, is the goal to reduce the frequency they’re actually necessary?
“Digitizing across the entire customer journey is a high priority for all industries, not just ours, but if you think about our mobile app, we continue to develop and evolve it, and something like two-thirds of our customers check-in through the mobile app and an increasing amount of revenue bookings are coming from the mobile app. Through technology, customers can get a lot of information via the app before they need to reach out to a customer reservations agent. Technology is playing a role, even at the airport, the front end of the airport, like the check-in area, is being utilized less and less, since customers come in ready to go and don’t need to utilize it except for dropping a bag off to be checked. So customers really like to decide, on their terms, when to connect with us and when to use a digital device to “self-help”, so to speak.”
I asked Stache his opinion about where American stands from a customer experience perspective compared to their peers in the industry. The question was turned around to me for my opinion and I gave my honest opinion: that American was lagging in the amount of information it provided about things like upgrades, and the service delivery was very “at”, like a typical flight attendant on American served drinks at customers instead of to them, which I know just sounds like semantics but if you’ve flown Delta recently you probably know what I mean.
“When it comes to technology about upgrade information, that’s one of those things in the pipeline for our customers. Other airlines merged earlier than we did and have been able to spend the last 4-5 years working on technology like this while we’ve been busy completing the integration. Over the past year, though, we’ve been able to dedicate more resources to things like this now that we’re integrated. The boarding process, for example, is one of the most important and most difficult parts of the journey, so how you ease that process is really valuable to both our team members and the customer. Those are the types of things, when talking about what we’re going to do, that we’re prioritizing, because we know that’s where the biggest challenges are today.”
We then chatted about Stache being a bit of a polyglot, speaking Spanish and German in addition to English, which was useful during his stint living and working for American in London. We traded some sentences in Spanish (his were much better than mine) as we started to wrap things up, but I had one last question for him: I asked him what was the most impactful customer service moment he had personally encountered?
He told me about a specific fast-food chain that never failed to deliver great customer service, which continues to impress him because it’s such a fast customer encounter and they have to train their team members very well for the service to be that precise. The customer service that meant the most to him, though, was an experience with a safari guide in Africa. Due to an illness in the family, Stache called the safari guide and needed to cancel only a week or two before the trip. He said he was prepared to not get any sort of refund, because it was well-past the cancellation period, but the guide refunded him in total and said that they hoped they would see him another time. To quote Stache, “they took a risk on me as a customer and I’ve been back to see them twice since then.”
Overall I’ve always appreciated Kurt Stache and have always admired the joy and professionalism with which he interacts with his team members and American customers when I’ve seen him out and about at lounge openings and MD-80 retirement ceremonies.
Summing everything up
Will this be enough to right the American ship and get the stock price back up? Time will tell. From a corporate perspective, I think any time you can simplify an organization it’s generally a good thing and promotes accountability, so I think this is a good move for American.
This summer was a nightmare for American, between the contentious negotiations with their mechanics to bad weather at their hubs and the 737 MAX grounding. Moves like this will hopefully help to turn the worm and put the focus back where it belongs: predictable, profitable, reliable operations and a focus on the customer.