By Rajesh Kumar Singh
NEW YORK, Dec 17 (Reuters) – American Airlines is betting big on luxury to regain altitude. From lie-flat seats and Bollinger champagne to Lavazza coffee and ultra-fast Wi-Fi, the carrier is rolling out a premium makeover to claw back ground lost to Delta Air Lines and United Airlines.
The break from years of cost-cutting and volume-driven strategy has been dubbed a “customer reimagination” plan by executives. It will focus on high-end products and loyalty perks, including privacy suites on long-haul jets, refreshed regional cabins, and richer credit card benefits.
The urgency is clear: American trails rivals in profitability and customer satisfaction. Tensions with labor unions are rising.
Investors have turned bearish, sending American’s stock price down 11% this year, while Delta shares have risen 18% and United’s are up 14%. Short interest in American’s shares is notably higher than its peers.
In the third quarter — typically the industry’s most lucrative — American posted a loss while Delta and United reported strong profits. Through the first nine months, American earned just $12 million, compared with Delta’s $3.8 billion and United’s $2.3 billion.
With premium travelers driving industry margins, upgrading cabins and services is no longer optional; it’s a strategic imperative.
“We think investing in customer experience will help us grow the top line,” said Nat Piper, American’s newly appointed Chief Commercial Officer, in an interview with Reuters.
PREMIUM PUSH
American’s plan counts on new Boeing 787-9 and Airbus A321XLR aircraft to open new routes and capture higher-yield revenue. The 787-9, with 51 lie-flat seats and privacy doors, is now American’s most profitable widebody. It is flying competitive transatlantic routes such as Chicago–London, where United is strong.
On Thursday, American will debut its A321XLR on the New York–Los Angeles route, one of the nation’s most competitive corridors and a market where Delta holds a strong position. The narrowbody, unveiled last week at John F. Kennedy International Airport in New York, features lie-flat suites and marks American’s first three-class configuration on a single-aisle aircraft. Later, it will serve secondary transatlantic routes like Edinburgh, leveraging fuel efficiency to make thinner markets viable.
Chief Strategy Officer Steve Johnson called the overhaul the most dramatic in decades, predicting significant revenue improvement starting in 2026. “As these changes that we’re making are introduced and have some time to gel, you’re going to see them deliver value to us,” Johnson told Reuters.
CHALLENGES AHEAD
Analysts cautioned American’s turnaround will be slow and costly. Supply-chain bottlenecks have delayed deliveries of aircraft including the A321XLR, originally expected in 2023. Plans to retrofit older Boeing 777s with new premium cabins are behind schedule due to shortages of seats and interior components.
The first 777-300 has only now entered conversion in Hong Kong, Brian Znotins, American’s senior vice president of network planning, told Reuters. To speed progress, American is using an already-certified seat design rather than introducing new modifications, he said.
Operational reliability remains a weak spot. American still trails Delta and United in punctuality and was ranked near the bottom in the latest J.D. Power satisfaction survey.
Analysts expect its EBITDA margin to rise to about 9% in 2026 from 7.3% this year — still well below Delta’s estimated 15% and United’s 14%, according to LSEG data.
“American Airlines is not going to turn itself around on a dime,” said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group.
Executives, including CEO Robert Isom, blame higher costs from new labor agreements and overexposure to a sluggish U.S. domestic market for American’s underperformance. Johnson cited other setbacks that slowed the airline’s post-pandemic recovery, including delayed widebody deliveries, a blocked New York expansion, and a pilot shortage.
Analysts point to deeper missteps such as alienating travel agencies, neglecting premium products to chase low-cost carriers, and poorly timed fleet retirements that left American short of widebodies. Heavy stock buybacks under former CEO Doug Parker added debt, while pulling back from hubs like New York and Los Angeles weakened its network.
“American’s problems are American’s creation,” Harteveldt said.
COURSE CORRECTION
To reset its course, American has reinstated competitive fares for agencies, launched outreach to win back corporate clients and invested in technology to reduce disruptions. A new Chief Customer Officer and an advisory board of hospitality veterans are steering the overhaul.
An exclusive credit card partnership with Citi, set to begin next year, is expected to deliver a steady stream of high-margin revenue from loyalty mile sales. Capital spending on new aircraft, cabin retrofits, and lounges will rise next year.
Employees are losing patience, piling pressure on Isom and his team. American’s unions have formed a coalition, accusing management of poor leadership and eroding morale. “It is time for accountability at the highest levels,” they told members after the company’s third-quarter results.
Frustration has intensified as weak financial performance has hit profit-sharing payouts. American pilots are projected to receive just 0.6% this year, compared with 10% at Delta and 7.6% at United, according to a union memo.
During an October town hall, Isom acknowledged the stakes, saying American must deliver for its employees, customers and shareholders, according to an audio recording reviewed by Reuters.
“If we don’t make money doing it, it’s not going to be a pursuit that I get to do very long, or any of you do either,” he said.
(Reporting by Rajesh Kumar Singh; Editing by David Gregorio)
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