American Rearranges the Deck Chairs

Sorry for the delayed post, but this news was under embargo until now, and I thought it worth waiting instead of posting next week. Rumors about changes in American’s management have reached a fever pitch recently, and now a change is officially being made. The problem is… it’s more of a rearranging of the deck chairs than a fundamental change. I don’t expect this is going to be received positively.

Many have fixated on CEO Doug Parker needing to go, but I take a broader view. As I said last week:

I would be very surprised if we don’t see management changes at or near the top soon thanks to this turn of events. In fact, I’d say some kind of shake-up is necessary here. The board can’t be happy, and Wall Street is going to keep ramping up pressure. We already know employees aren’t happy. The only way to get things moving in the right direction is to make big changes, and they need to happen very soon.

People like to make Doug out to be the source of all problems, but I find that view lazy and over-simplified. This isn’t to defend management on the whole. I see an airline that is stagnating and in need of change. It needs new blood to shake things up. That can be at the CEO level, but it doesn’t have to be, especially since there isn’t anyone obvious to step into those shoes at the moment.

When an American spokesperson contacted me to talk about big changes, I got excited that we’d see something that was, well, big. That excitement faded fairly quickly once I learned the details.

Instead of a management-driven focus on effecting big change, this actually appears to be a reactive change based on a retirement. Kerry Philipovitch, SVP of Customer Experience, has decided to leave. And as I understand it, Kerry is actually retiring from the airline to go do something different and not “going to spend time with her family,” if you know what I mean.

What they’re doing in this reorg is effectively taking Kerry’s team and splitting them up under two different areas. There are other moving pieces, so let me explain.

Musical Chairs

Here’s is how the structure is today. Note that this isn’t the entire company’s structure but rather just the roles that are being impacted by the change:

And now here is the new order of things:

As you can see, there is a consolidation of operational functions under David Seymour, now called SVP of Operations. He’ll get airport operations and cargo added to his empire when Jim Butler begins reporting to him instead of Kerry. Devon May will be another new direct report when he stops reporting to President Robert Isom. He moves from network strategy to take over American Eagle and ops planning, and will move it under David’s organization.

In other words, David Seymour gets closer to being a Chief Operating Officer, but he still isn’t one for some unknown reason. American hasn’t had a dedicated COO since Robert became President.

With Devon moving over to ops, Vasu Raja steps up into Devon’s shoes and becomes an SVP reporting directly to Robert. Joe Mohan, VP of Alliances and Partnerships, will report to Vasu.

The rest of Kerry’s team handles less ops-focused roles and they will move over to report to Kurt Stache. Kurt has been the SVP of Marketing, Loyalty, and Sales, but he’ll now take on Kerry’s title as the SVP of Customer Experience. He keeps Alice Curry and Jill Surdek (who is being promoted to SVP) from Kerry’s old team. Oddly, Julie Rath who has “customer experience” in her title doesn’t report to him.

Despite the title change, Kurt will keep his marketing and loyalty teams under him, but he loses sales. Allison Taylor, SVP of Global Sales, will now strangely report to Don Casey, SVP of Revenue Management. There is often quite the butting of heads between revenue management and sales, so this could be problematic.

What This Means

There is a lot of shifting around to “better align” and all that. This may very well be a better structure than what was there before. In fact, I’d assume that it is. But there are real problems here. First and foremost, there is no new blood.

Oh sure, seeing Vasu’s rise to report directly to Robert is a very welcome move. If you’ve seen interviews with Vasu, you know he doesn’t pull punches and doesn’t even know the meaning of “corporate speak.” He can add some energy and direction that has been sorely lacking at higher levels. But his fiefdom is still fairly narrow, and without some new people from the outside at or near the top, it’s going to be very hard to turn this ship.

While the structure itself may make more sense, this really shines a spotlight on how near-the-top-heavy the company is. You have a silly number of SVPs here, some of whom report to other SVPs. David Seymour is the SVP of Integrated Ops. He has Devon May, SVP of American Eagle and Ops Planning along with Jim Butler SVP Airport Ops and Cargo reporting to him. You also have SVP Jill Surdek reporting to SVP Kurt Stache and SVP Allison Taylor reporting to SVP Don Casey. At the same time, you have a vacuum at the very top. There is still no Chief Operating Officer and no Chief Marketing Officer or Chief Commercial Officer. This is very confusing.

In a normal world, this kind of reshuffling probably wouldn’t get much attention at all. But we are in a world where nearly everyone is looking for and expecting big change at American. This kind of shift makes it look like American feels fully confident that it has all the right people, just not in the right places. I think many people outside the company would disagree with that assessment.

While it’s possible more change is coming, this does make it seem like bigger change has been — at the very least — deferred. If true, that is a head-scratcher.

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37 Responses to American Rearranges the Deck Chairs

  1. Miss Informed says:

    I’ve always felt management reorganizations are the same as stirring a litterbox with a stick. The end result is still going to smell pretty much the same. It’s only when you scrape out the contents and replace them with fresh litter that you get any meaningful change.

    • Jon Snow says:

      +1

      And to extend the metaphor, the employee and customer cats aren’t fooled, they know that the poop is still there!

  2. Jon says:

    So AA thinks titles and reporting structure is at the core of their issues…

    Oh…

    Okay…

    ???

    Well good luck with that!

  3. Cathy Bossi says:

    You can remove Jon Carlo, Jill Surdeck, and Vasu Raja as well. They have created all the mess in this airline. But yet again, It is Parkers and Isom’s fault that they were hired in the first place. Ask any employee what they think about these three.  I personally liked Hector Adler but he got caught up in the uniform debacle. 

    Cathy

    • CF says:

      Cathy – Say what? Jill and Vasu both came over from pre-merger American.
      Doug and Robert did not hire them. Yet the person you like, Hector, actually was hired by them at US Airways.

      • Skygirl Cathy says:

        He was also Pan Am and I believe Northwest where he worked his way up from a crewmember, Some flight attendants were quick to note that, unlike Adler, Surdek does not come from the ranks of flight attendants. Rather, during her 18-year career at AA, she has worked in sales, marketing, revenue management and most recently customer planning.
        I would rather have post-LUS come to AA than OLD AA that had nothing but strife with their employees. LUS actually got along with the management team (meaning middle management) and REAL Exec’s like Edwin Colodny, and Thomas Davis

      • Skygirl Cathy says:

        One more thing… the people I mentioned may have been KEPT OVER from AA but is the problem. AA was REALLY a mess. PARKER wanted to get back to AA more than anything. They had to chose to keep them or hire new ones. Hector was a good man and a good leader but he got caught up in the toxic uniforms. I am sure it was not his decision to send them to a place with quality control issues. I assume he got over-ruled by the CEO and President.

        • CF says:

          Cathy – I agree on Hector. Here’s his full bio, if you’re curious about the particulars (http://bit.ly/2B2TG3S). It certainly is a problem that US management let AA culture and process just take over completely. This was easier with the US/HP merger since they had homecourt advantage keeping headquarters in PHX. Moving to DFW was going to make it much harder to prevent the old AA culture from taking over, and they failed. It’s a real shame.

  4. Jon Snow says:

    This takes me back the the annual UA SVP cullings every December in 2012, 2013 and 2014. Many SVPs of customer experience went behind the retirement woodshed, never to return.

    Every commentator was calling for Smisek’s head and thought this year would be the year he goes, thoroughly underestimating how he had the board under his thumb (he was the chairman!).

    I was worried that AA would get fresh leadership and be spared the suffocating malaise that comes with a cowardly, aimless C suite and board. This “realignment” gives me great hope that AA’s slide will continue.

    Bon voyage, AA. Enjoy the Fresh Poo.

    • Jon Snow says:

      Like, this carrier has real problems that it needs real leadership to solve! 129K employees when DL and UA have only 90K. Attrition was supposed to solve this, yet headcount is UP 7K in the last two years.

    • Andy says:

      Agreed. This trainwreck is so much fun to watch, I don’t want it to end just yet.

  5. danwriter1 says:

    Interesting — and telling — that the term “loyalty” disappears under the new management configuration. But I guess it simply reflects reality.

  6. Realist says:

    So Brett, if it’s not your buddy Parker’s job to right the ship, whose job is it? I know admitting that he has done / is doing a terrible job would mean you were absolutely wrong when you were so strongly singing his (and Kirby’s) praises, and shilling for them to takeover during the bankruptcy. It also might hinder your chances of meeting any more of your childhood heroes (a la Magic Johnson), but you also your integrity is also at stake here. Why do you keep supporting this guy who quite honestly seems bored and uninterested in running this airline?

    • Allan Franklin says:

      As regular readers of this blog know, Brett’s opinions are often colored by his personal likes and dislikes. I read the blog for interesting stories, but have 0 faith in any of Brett’s opinions.

      • Oliver says:

        Aren’t everyone else’s opinions always colored by personal likes and dislikes? Isn’t that what shapes opinions?

  7. DesertGhost says:

    I’m pretty sure this isn’t the politically correct thing to write here, but I’m writing it anyway. I truly believe (based on friends who work at the airline and my own experiences with it) that American’s board could hire Ed Bastian and Delta’s entire executive team and it wouldn’t make one bit of difference.

    American’s problem isn’t management. It’s labor. Holding a grudge over something that happened years ago, even if the gripe is legitimate, is not an excuse for failing to do one’s job in a professional manner in the here and now.

    American’s labor issues have held the airline back for decades. Its labor force has hated Bob Crandall, Dan Carty, Gerard Arpey, Tom Horton, Doug Parker, and would, in time, hate Ed Bastian.

    There are a number of highly motivated and very professional people working at American, but too many in its workforce feel it’s their duty to whine and moan about how bad the airline is instead of doing their jobs. Instead of blaming the CEO for everything, it might be a good idea for some of them to look in a mirror. On the other hand, and to be fair about it, management really does need to need to listen to the legitimate concerns its workforce has. It’s a two-way street.

    I can usually tell when there’s a legacy America West crew on my flight (living in the Phoenix area, I get a number of them). They don’t treat me like a leper.

    Blaming the CEO for an airline’s problems is like blaming an NFL football coach when the players don’t do their jobs. But, as with football teams, it’s usually easier to fire the coach than it is to fire the players.

    • Cathy Bossi says:

      Obviously you are anti-labor. Spend a day in our shoes. like 14-18 hour days, broken aircraft missed catering, etc. Just so you know most of our whining and moaning is for customer expectations and what they are not receiving and making our jobs harder to make sure it is a pleasurable experience for those that chose to fly us.  Employees can only do so much with company policy and procedures. DesertGhost, USAirways never treated you like a leper either.  As far as the NFL analogy, we can’t do our jobs without the tools either Respectfully,

      Cathy

      • DesertGhost says:

        Cathy,

        I’m not anti-labor at all. I’m pro fairness. The broken aircraft and missing catering aren’t the CEO’s fault. Some of these things just happen, while others are the fault of others who haven’t done their jobs. The same problems exist at Delta, Southwest, United and every other airline, not only at American.

        In checking recently, I found that Delta has about the same number of seats on its A321s as American (the difference between them is ONE seat), yet I hear from American’s flight attendants that ONLY American is cramming people in like sardines. All airline coach seats are uncomfortable and cramped. And it’s getting worse across the board. Most of the blame for that rests with us, the flying public, who want cheap fares and are willing to sacrifice some amenities to get them. That’s also part of why Spirit, Frontier, and Allegiant tend to have higher profit margins than Delta, United, and American overall.

        I dealt with the public during most of my professional life. I know we can be a pain in the ass.

        There must be something good about your job – or else you’d find another one. I spent many 14 to 18 hour days when I was in business and didn’t get paid a dime for my efforts. But that was the nature of my business.

        • Sunny leveson-jones says:

          Look if management has not fired shitty employees then yes the buck stops with them, they choose to schedule this operationally poorly airline incredibly tightly. By the way when you compare DL to AA 321, realize that delta managed to add space to theirs by removing the back door so that they have more net space for passengers. Also compare the RPASM and CPASM of the mainline vs budget players, because while the ULCC have higher profit margins its mostly because they make about the same amount of money per flight while bringing in less money per flight.

        • Skygirl Cathy says:

          I have been in my Job 37 years and I treat my customers as if they are guests in my own home. Though in my job, I can’t just run to 7-11 if catering gets things wrong. I can’t hire a repairman on the spot to fix broken seats, lights, videos and audio. God help us that wireless is not working and that is not AA’s fault. I can’t change the weather. I have asked God before to change the weather to get home on time for an event but he does not always comply. Please remember I do not ever intened to be a PIA for anyone in the customer service industry. It is my job to take care of them. We do however need the tools and when they are not there and our 14 hour days turn into 18 until we are physically exhausted than maybe people including employees may get cranky. So whose fault is this? I complain because I want you to enjoy your time with us. Yes, I do smile and say hello and if you are in first or business I not only call you by name but tell you mine and I thank you for your business. I simply can’t do that in coach because we are understaffed overworked, and are trying to figure out what we do not have to make your flight right.

        • Tim Dunn says:

          Ghost,
          do you really think that DL pulls from a different, and superior, or at least more docile group of employees compared to AA? When you have 80k plus employees, I suspect the personality types and everything else is pretty similar from the standpoint of what the company has to work with.

          The only difference between any two large workgroups is the environment in which they work and the leadership under which they work; that is controlled by management, not the employees.

          If you truly believe AA has more complaining employees, then you have to ask why. you also have to ask why AA mgmt. hasn’t managed to deal w/ the employees that bring down the culture if that is the problem.

          Maybe DL being non-union for all large workgroups except their pilots allows them to cull the bad apples better than AAL – but LUV is also heavily unionized and that isn’t an issue for them.

          I think you are far too quick to give management a pass when entire workgroups and company performance are significantly different between two airlines. Either the employees at their core are totally different between DAL and AAL as well as between AAL and LUV or the management has managed over many decades to create a different culture at AA.

          As for the overall AA problems, fundamentally, AA will not recover to levels of industry acceptable profitabililty until it gets its headcount on par with its most direct peers. DAL and UAL both generate about the same amount of revenue with far less employees; DAL actually generates more revenue than AAL with about 25k less employees (although DAL has admitted today that it has to hire more people than it has been running the airline on- but I doubt it will be a 30% increase).

          Finally, besides labor costs, AAL’s problem is revenue generation, esp. in international markets. DAL and UAL have effectively displaced AA as the prime movers across both the Atlantic and Pacific. AA underperforms both DL and UA in market after market; AA really gets average revenue to DL and UA just in Tokyo and London but trail in many other markets. China continues to be a black hole. Continental Europe is AA’s Achille heel just as it always has been. DL’s deal w/ Latam gives AA a competitor in the one global region where AA had no competition from the largest gateway.
          Vasu has run AA’s network dept. for years and has done absolutely nothing to turn around AA’s sliding network competitiveness.
          Do you realize that DL’s revenue is growing faster in AA hubs than AA on a percentage basis?
          AA walked away from even more routes from NYC because of runway construction and yet B6, DL and UA all kept growing. AA will never recover yet another round of market share losses.
          Frontline employees didn’t make those decisions.
          AA/US merged to compete with DL and UA in markets around the world. I still have press releases touting the competitiveness that AA would bring to global markets. That. Simply. Has. Not. Happened.

          It is management’s job to decide where to fly its planes and how to price its product – and what its products should be. If the costs are too high and revenue is not where it needs to be, it is no surprise that every person in the company plus the customer feels the pressure – and that pressure is not of their making.

    • txjim says:

      Who says Labor is not acting professional? I’ve been on AA metal quite a bit lately (including last-night’s DFW diversion to SAT) and have seen nothing but professional customer-facing staff. If anything, it’s an improvement over lax attitudes I’ve noticed in prior years.

  8. rich says:

    Not sure if she was a problem but the customer experience has been very poor for a while now so hopefully something will improve there. A SVP of customer experience has to take the blame unless she was being over ruled by the CEO.

  9. dynomonkey says:

    So you don’t think Parker needs to go? Who decision was the stock buyback program? Who has let the labor group flounder for the past years? Who made the decision to not to provide TRUE profit-sharing allowing employees to be invested in the company? Who allows middle management to not implement pilot contract provisions. Yes, I’m a stockholder.

    • CF says:

      Dyno – I think there’s a real problem here in that if Doug goes, then who do you hire? All of the obvious candidates either aren’t interested or can’t make the move for one reason or another. If you go outside the industry, then you need to make sure you have a strong enough bench to actually run the airline (similar to the Oscar/Scott dynamic at United). I don’t think that’s there today in the way it needs to exist. So yes, there needs to be big change. That certainly could involve replacing Doug, but it could also involve replacing Robert. Or it could involve bringing people in at other C level jobs to re-build the bench and then have Doug/Robert stay until the team is ready. There are a lot of ways to approach this to make sure that American has a stable transition, and that’s important. American needs new blood at the top, but it’s not as simple as just saying that and snapping fingers.

      • Jon Snow says:

        Very fair point about the dearth of candidates. Kirby says he’s unavailable (Greg Hart could be though!), who knows if anyone from WN or DL would jump ship for a big challenge at AA.

        But there are other names out there. Marty St. George, Ben Baldanza (teaching econ and running a one-man consultancy)…

        Can’t be that hard!

        • CF says:

          Jon – Marty would be a great addition to American, but not as a CEO. At least, not yet. But he would be an excellent way to show that change is happening.

      • Tim Dunn says:

        So Doug should keep his job because the internet can’t find a substitute? wow. just wow.

        Great CEOs – of which there are plenty in the US – don’t have to know every detail of an industry in order to succeed at a company in that industry.

        CEOs understand the big picture problems, create solutions within the resources available to it, and guide their direct reports to implement plans for their areas of responsibility.

        AA doesn’t need an industry expert. It needs a board and a CEO that is tired of continually declining metrics of all types relative to its peers.

        AA execs have made one excuse after another, used one failed strategy after another, and have created a culture of failure.

        That ALL has to end if AA is going to be salvaged. Otherwise, the industry and its competitors will continue to pick off AA’s best customers.

        btw, ghost, regarding the A321, check out seatguru to see the differences in how AA and DL’s 321s are configured. DL has less space at door 2 of the exit row (and, IIRC, that one set of exits is going to be blocked in future versions of the 321neo as it isn’t needed – just as one 737-900 door set is blocked for most US carrier configurations) and DL also uses the Airbus spaceflex lav system. Both of those add space to the cabin.

      • Oliver says:

        There are plenty of armchair CEOs available on Flyertalk… and some even here. Really not that hard to find candidates ;)

        • Tim Dunn says:

          …which should certainly help a non-airline CEO figure out the issues involved.
          Thankfully, there are plenty of CEOs in the US that not only have real-world experience but great track records.

          For all the fawning over Scott Kirby, the armchair CEOs have yet to figure out that his obsession with tightly banked hubs which he or his followers have implemented at both AA and UA come with the predictable cost of a less reliable operation. It is no surprise that UA’s on-time has fallen since it rebanked its hubs. Unlike the excuse laid at AA’s feet of the mechanics, UA has no such problem.

          Doing banked hubs at AA”s massive hub at DFW doesn’t work solely based on airport geography and the size of the operation and it doesn’t work at MIA because of the stress on customs/ immigration facilities that creates havoc for the customer experience.

          TIght hubs do work in some places.

          A real CEO would look at real data and figure out what works and what doesn’t; maybe the economics argue for improved finances but the customer service experience has to have some weight. Given that AA’s finances are still bottom of the industry along w/ many of its customer service metrics, a good CEO would put a big question mark over the banked hub non-sense in at least a few hubs.

          There are people that have the skillset to ask the tough questions and do the right thing without having been in the airline industry. There are also lots of CEOs of successful multi-national companies that have very good customer service and HR skills that could do wonders for AA.

          Sadly, though, Parker has likely bamboozled the AAL board back to sleep for a couple more years which should be enough time for competitors to take even more ground from AA.

          • Tim Dunn says:

            (Reuters)
            Air New Zealand Ltd (AIR.NZ) named Walmart U.S. boss Greg Foran as its new chief executive on Friday, bringing him back home at a time the airline is trying to control costs in a lower-growth environment.

  10. Fake Bob Crandall says:

    This team are the ones who put this airline in this predicament. So they should get the blame, just like when the airline has happy customers and labor, they should get credit for that as well. But to keep the same skillsets but put them in different areas makes no sense. Bring in people from the hospitality industry or even from Asia-based carriers. I don’t see a tremendous difference.

    In reference to Ms. Bossi’s comments, while I concur with her points I believe that one important point is missing: there is no agility to solve problems at the customer connection points. Why would you continue to handcuff the people who are representing your airline? Put trust and faith into them and see how things get better quickly.

  11. OrbitalDynamics says:

    The fundamental problem with American is that the America West executives running the place have brought their discount airline mentality to American with predictably bad results.

    American posts 7-8% margins and the America West executives are doing the happy dance, it’s better than anything they’d ever seen at America West. Compared with United and Delta it is atrocious.

    They’ve run away from the New York market, somehow thinking people want to connect *backwards* from PHL.

    900 flights crammed into DFW? Sure,what could go wrong?

    Legacy American managers have basically been purged as have been most of the Legacy American polices and procedures, especially in aircraft maintenance.

    A lot of the maintenance issues have their origins in the maintenance procedures from America West that have been superimposed on AA.

    Parker and his “Oasis” idea seems to be designed to drive passengers away.

    American is rudderless and the drifting towards the rocks.

  12. Matthew S Pouy says:

    I don’t see a slot for “SVP of Being On Goddamn Time” in that organizational chart. Scrap it all and start again.

  13. Yoyoma says:

    Brett-

    You were at US & HP. You know that the innovative thinking walked out the door with Kirby & Nocella. In 2019, financial strategy/ops expertise does not qualify you to lead an airline. You need to use technology to make service innovations & extract better revenue production. This team is hopeless on that front. There is no out of the box thinker here. They need to demonstrate that to investors.

    The only saving grace is that the airline business is a copycat business and AA can be a solid follower. But that is not a good image to have.

  14. iahphx says:

    Has no one else noticed that American’s profits are forecast to be UP 25% this quarter, year over year? Next quarter looks much the same. These are not bad numbers for a management team that is supposed to be incompetent.

    • Tim Dunn says:

      Let’s see what they actually report but it is virtually impossible to not make money as an airline in the US right now. Consolidation and a strong US economy do wonders for the airline industry.
      Still, AA’s profits are at the bottom of the industry and that isn’t expected to change.

      With DAL and UAL now having reported 2nd quarter numbers, it is clear that cost growth is increasing even as revenue growth is slowing.

      The biggest driver for increased profits so far this year is lower fuel costs.

      That is not a terribly stable place to hang your hat esp. given the instability in the Middle East.

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