American’s President Goes to United and Both Airlines May Benefit

I know I said I was going to do the first half of my 9 Airports, 1 Day trip report today, but, well, it’s not every day that the President of American moves into the same role at United. I had to write about this.

American’s President, Scott Kirby, is out at American and COO Robert Isom is taking his place. According to the airline, “the Company concluded it would not be able to retain its existing executive team in their current roles for an extended period. As a result, the Board chose to act proactively to establish a team and structure that will best serve American for the longer-term future.” Got that? Yet the same day, United announced Scott would take over as President there.

United Scott Kirby

It seems clear that this didn’t happen overnight. In the end, it’s a seismic shift at both airlines, and strangely enough, I think it could be good for both. Let’s start with United.

United Gets the Revenue Muscle It Needs
United has been the whipping boy of the industry for several years now thanks to operational and financial under-performance. New CEO Oscar Munoz has made some strides in fixing the airline’s culture, but he’s not an airline guy and he’s not the guy to fix the nuts and bolts. When he brought in Julia Haywood last week to be the Chief Commercial Officer, I could only scratch my head. She’s a young consultant who didn’t seem to have the chops for a role like this. But now that the other shoe has dropped and Scott is on board, this all makes sense.

Scott is a revenue mastermind, and he has been working his magic in the industry for years. I worked on his team at America West when I was there 15 years ago, and I feel lucky to have learned in that environment. United will benefit greatly from someone at the top who really understands how the industry works from a revenue perspective. Assuming he’s given free reign, he’s going to have a big impact.

It’s hard to imagine that he won’t have the latitude to do what’s necessary. Remember when PAR Capital and Altimeter Capital made a move to try to build a more functional board at United? Well you know that Scott Kirby’s name was in the mix from day one. PAR Capital has a long history with Scott’s companies. It was heavily invested in America West and it partially funded the US Airways merger. Scott had to have been their dream candidate. Whether Oscar had much of a say in this or not is something I don’t know. But if Oscar focuses on the people side of things, as Doug Parker has done at American, then that relationship could work well.

This gets Scott closer to the CEO job at an airline. Doug wasn’t going anywhere at American, but who knows how long Oscar will want to do this job?

United has already been improving, but this is a big piece of the puzzle that was missing. Oscar now has a formidable team to really fix that place.

American Gets a Fresh Start
If this is good news for United, how can it also be good for American? Every airline has different needs.

To be clear, this is a huge change at American. The core of the management team (Doug, Scott, Robert, CFO Derek Kerr, EVP People and Comm Elise Eberwein, and EVP Corporate Affairs Steve Johnson) has been together since the America West days. Frankly, it’s remarkable that such a successful management team has been able to stick together for so long.

While Scott brings badly-needed revenue sensibility to United, American is in a different place. It has strong revenue management and network teams that are going to be just fine. Its operation, however, has slipped as of late.

Yes, I know that Robert has been overseeing the operation as COO, but sometimes (as was the case in LA), the commercial team’s decisions are what hurt the operation. Robert may bring more balance between the operational and commercial needs now that he’s in charge of both.

Then there is a giant weakness that has bugged me since the merger went through. That’s sales and marketing.

US Airways under Scott Kirby was an airline focused on selling convenience and reliability. It didn’t find much value in investing in sales and marketing functions. But a full service airline like American needs something more robust, and it still hasn’t even built a structure to acknowledge that. Just look at how sales is set up today. The airline’s highest sales job is a VP role, and it’s been empty since Derek DeCross left at the beginning of the year. (Rumor has it that a replacement is coming in the next month, but maybe that changes with a new President.) But that sales job today reports to Andrew Nocella, SVP and CMO. Andrew then reports up to the President, now Robert Isom.

Contrast that with Delta, which has Steve Sear as the Executive VP of Global Sales (not to mention, President of International). United has Dave Hilfman as its Senior Vice President of Worldwide Sales. Both airlines consider those people to be on the leadership team. But at American, that’s not the case.

Scott Kirby is a numbers guy, and Robert Isom is an ops guy. But Robert is also a people person, and he understands the value of relationships. I know that first-hand since I also worked on his team when he took over revenue management at America West. One of my coworkers and I used to go into his office and drool over all the models and plaques he had. One in particular that stood out was from IAE, the Pratt & Whitney/Rolls Royce joint venture that built all the America West Airbus engines. He took note of that and was so appreciative of the work we did to help his transition that he used his ops contacts to get us a behind-the-scenes tour at the engine facility in Hartford. I’ve never forgotten that gesture.

If Robert’s understanding of the importance of relationships extends from employees to customers, then that could mean good things for the sales and marketing organization… and for travelers.

There are still plenty of unanswered questions about how this will unfold, but the potential is there for this to be great for both United and American, two airlines that need different things right now.

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