American Reorganizes Senior Management The Way It Should Have in October

American

It was American’s turn to make big changes to senior leadership last week as it prepares for a smaller future. The airline has cut back on the number of VP/SVP positions, and it has reorganized things in a way that makes more sense. This change is what should have been done back in October when American made only some minor tweaks in response to criticism of senior management.

There are changes throughout the organization, but I’m focusing on President Robert Isom’s team since that’s where the impact was last October. But first, I will say a couple things about the rest of the organization.

Doug’s Direct Reports

The general goal this time around was to prepare an organization to be 30 percent smaller than it has been. Under CEO Doug Parker, his four direct reports outside of Robert appear to have all participated in this exercise. In CFO Derek Kerr’s group, Devon May joins the team as SVP of Finance and American Eagle after being bounced around in the last move. Devon having more power is a good thing. Meanwhile, two VPs — Greg Schwendinger and Peter Warlick — are leaving. And though it’s not mentioned anywhere in the communications, it looks like SVP Finance & Corporate Development Kenji Hashimoto is gone as well since his name is mentioned nowhere and his role has been divvied up.

Under CIO Maya Leibman’s group, one VP, Steven Graves, will depart. Meanwhile, in EVP Stephen Johnson’s corporate affairs group, both SVP Los Angeles Suzanne Boda and Mike Minerva, VP of Government and Airport Affairs, are leaving. Lastly, under EVP Elise Eberwein’s people group, the SVP of People, Patrick O’Keefe, is out.

All of these people are said to be leaving on their own, but I think we all know what that means. In some cases, it may be getting rid of people who underperform. In other cases, it might be the departure of good people in roles that just don’t have a place. That’s what I think is happening to someone like Suzanne Boda, which makes it bittersweet.

Robert’s Direct Reports

The changes in Robert Isom’s organization are bigger than in the others, so this deserves more scrutiny. Before last October, Robert had five direct reports. Today, only one of those people (David Seymour) still reports to him. Last October, the more minor changes resulted in this organizational structure:

At the time, I said this:

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.

Here is the new structure which was just announced:

Well lookie there. Robert now only has three direct reports, and they are all Chiefs. Good.

David Seymour finally gets the COO title to match the job he’s been doing for some time now. Jill Surdek and her Flight Service team move under him. VPs John Beavers and Dec Lee are leaving under him, and there is a great deal of shuffling further down in the group as well.

Meanwhile, Vasu Raja builds his empire to now include loyalty and revenue management. Both previous leaders of those groups (VP Bridget Blaise-Shamai over loyalty and SVP Don Casey over revenue management) are leaving the company, as will VP Chris DeGroot. Vasu is now the Chief Revenue Officer, so it’s his job to now point the entire team toward fixing its revenue deficit.

Lastly, the SVP Customer Experience job is gone, and Kurt Stache is leaving. In his place, Alison Taylor — who was the SVP Global Sales and Distribution — now rises to become the Chief Customer Officer. VPs Alice Curry and John Gustafson are leaving as well.

We can talk about how this is a better structure than the last, but isn’t it all shuffling deck chairs? That all depends on the Chiefs. For the operation, it’s good to have someone actually serving in the COO role since there hasn’t been one since Robert Isom was elevated to President. This is probably the area where I’d expect to see the least change since David was already leading the organization before this.

You now have Network, Revenue, Loyalty, and Alliances all under one leader. That’s a leader who happens to be bold and aggressive. Is that good? I guess we’ll judge from the results, but at least we know there are likely to be changes. In this case, change is good.

Lastly, there’s marketing, reservations, customer experience, and sales all now united under a single leader. To me, this is the biggest wildcard since the group has now been sliced and diced twice in just over six months. Will this be the winning formula? I’ve always believed sales needed a bigger seat at the table, and it now has one. But the leader of sales now being over other groups is a big step. I will reserved judgment for now.

Overall, do I like the new structure? Yes I do. This looks like the kind of structure I talked about back in October when the response was underwhelming. But a structure is only one piece. The other piece is having the right people to do the job. For Vasu, David, and Alison, it’s their time to shine.

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13 comments on “American Reorganizes Senior Management The Way It Should Have in October

  1. One of the complaints I’ve heard about Doug’s management style is the “frat bro” culture in the executive ranks. Allison is a very nice and capable woman (and was highly regarded at Starwood), but this team still seems awfully male-heavy except, interestingly, in Allison’s org.

    1. Curt – Don’t forget that of Doug’s direct reports, 2 of the 5 are women including Elise Eberwein and Maya Leibman.

  2. I know I sound like a broken record (I probably need to change my analogy because many people don’t know what broken records sound like, but I digress…) but I find it quite fascinating how many people are actively rooting for American to be liquidated. There’s a whole thread on Airliners.net about how investors believe American will file for Chapter 11 protection. A number of those who’ve posted are already divvying up American’s hubs.

    As for the changes, some are probably warranted, some probably aren’t. I have no way of knowing which is which. One of the by-products of mergers and acquisitions is redundant staffing, especially in management. Now that the integration of US Airways and American is largely finished, many former staff people simply aren’t needed. The crisis has given management the incentive to do what it needs to do, even if it can be unpleasant. These are human beings after all. The following is strictly speculation, bit It’s quite possible that someone like Suzanne Boda may not have wanted to move, so she decided to opt out. I’m guessing she isn’t going to starve, and probably won’t have difficulty finding a new job – maybe as an airline blogger? Obviously, I have no way of knowing. Those approaching retirement age may find they’re tired of the grind. Sweetened retirement benefits make that choice easier. All of the airlines have been contributing to their respective pension plans, so they have money available to fund extra benefits for early retirees. That money can’t be used for general corporate purposes or to secure loans, but it can be used to sweeten the pot for those who are ready to move on, and save the company money in the long run.

    1. “Don’t change a hair for me / Not if you care for me.” DesertGhost, American needed changes among the structure of its “muckety-mucks,” and they did it. While I still prefer to fly Delta & Southwest over American, I like what I see in this post & I like what I am seeing & hearing about American from frequent flyers. (BTW, my late father LOVED American!)

      OTOH, DesertGhost, there is no need for you to change your analogy. Vinyl recordings are back! As it was in my formative years (the Seventies), a good stereo system with a good turntable, a good needle & a good set of headphones will give your music the full, rich sound that you want, without the digital compression needed for other media. Many people are discovering this for the first time & they will find out what a broken record does. Keep on rockin’ & postin’!

      1. I go back to 78s and 45s. There was a musician named Spike Jones, who used to do parodies on other people’s music, much like Wierd Al Yankovich. Jones did a parody of Bizet’s opera “Carmen.” One of the classic lines was “Carmen hit a note so high, she broke the record *click* the record *click* the record *click*”. That was recorded during the era of 78s and probably wouldn’t be understood by many today who are only familiar with CDs and vinyl 33s. I still have a few vinyl records and one set of 78s – the original Paul Whiteman recording of Ferde Grofe’s Grand Canyon Suite (which is also available on a CD at Amazon).

    2. Why is there a need to drag what happens on a.net onto this site? I would seriously expect – and there is ample evidence – that this site is substantially more realistic and level-headed than a.net.

      There may be wishes by some for AA to disappear but there are real financial measures – financial instruments such as credit default swaps – that measure any company’s risk of default. AAL was just downgraded to the lowest junk credit rating and AAL’s CDSs were recently at the same level as JCPenney – which you probably know recently filed for chapter 11 bankruptcy.

      And the question still has to be asked as to why AAL is just now dealing with fat in its organization – SIX YEARS after the merger. Why should AAL be asking for the Treasury to make loans to the company when they didn’t make these and other changes earlier which certainly were part of AAL’s much lower profit margins? Delta and Southwest both resolved their mergers far sooner than six years after those mergers closed – and both will likely not have to rely on the Treasury to provide loans.

      As for the specifics of the exec reorg, the evidence of success is whether AA can break its years long record of having the worst financial performance among US airlines. If they can’t turn American around financially, the executive team shouldn’t count on US taxpayers to take the risk of supporting the company.

      1. With all due respect, I read your screed “Is American Airlines Worth Saving?” on Seeking Alpha. I didn’t need to go to a.net to see that. It told me all I needed to know. Since neither you nor I are executives with American Airlines, we don’t have access to the data they do. I don’t want to see any airline file for Chapter 11, much less get liquidated.

        1. None of us have access to current data but AAL is a publicly traded company and there is very rich data that all airlines generate.
          Not once have I said I want AAL or any other company to be liquidated. I have repeatedly raised legitimate issues which all stakeholders need to understand given the CARES Act funding.

          You still didn’t answer the question as to why it took 6 years for American to get around to cleaning up and thinning out the management herd.

  3. @DesertGhost – “As for the changes, some are probably warranted, some probably aren’t….One of the by-products of mergers and acquisitions is redundant staffing, especially in management. Now that the integration of US Airways and American is largely finished, many former staff people simply aren’t needed. The crisis has given management the incentive to do what it needs to do, even if it can be unpleasant. These are human beings after all. The following is strictly speculation, bit It’s quite possible that someone like Suzanne Boda may not have wanted to move, so she decided to opt out.

    For me, the situation as you describe it is eerily familiar. The fact that they did not announce a replacement for the position, and that her functions were rolled-up into the purview of a Field V.P. suggests that perhaps LAX is being de-emphasized to some degree. Doesn’t necessarily mean there will be a large scale reduction of the flight schedule, per se’, but perhaps the corporate-strategic vision for the station has been/is being revisited.

    Though this was during the AMR Corporation days, I saw something similar occur with AA’s SFO operation. In the early 90s, AMR upgraded the top airport post to Managing Director level. AMR had various (more planned than realized) initiatives for SFO over the subsequent years. But, as SFO waned in network prominence (think the gamut of an airport operation) the MD position was downgraded to that of Station Manager during the mid 2000s.

  4. Boda was a polarizing figure at NW, but I always liked her no-nonsense style. Making inept managers sweat was her superpower, and I hope she enjoys retirement.

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