The core customer in the sky has long tended to be a business traveler making their way to a conference or a big meeting, not the occasional vacationer. And at its investor day Monday, American Airlines made clear it was not deviating from its tried-and-true formula (pdf) of catering to these customers.
The carrier noted that 80% of its revenue comes from customers who are either members of its frequent-flyer program, AAdvantage (which it pegged at more than one in four U.S. air passengers), or purchasing “premium content.” That doesn’t mean they’re coughing up a few extra bucks for a nicer safety video — they’re upgrading for better seats in business or first class.
It makes sense. Business customers, often “premium” customers, are more likely to buy flights with little notice and will pay much higher fares in the process without blinking.
Taking AAdvantage
While other airlines like Spirit Airlines and Ryanair try to book passengers who are purely looking for a deal, that’s not where American’s focus is. During an earnings call this January, chief commercial officer Vasu Raja explained it like this: “For us, Basic Economy is not about a competitive product,” he said. “It’s our entry-level product that gets customers in the door and signed up for AAdvantage.” American is moving a lot of things around to accommodate those flyers and get them hooked.
The company also announced Monday that it would be doing a neat trick as it acquires 260 new aircraft. With the old aircraft, American plans to rip out coach seats to make room for more business and first-class travelers on its aging A320 and A319 single-aisle planes.
“The retrofit will refresh the interior with power at every seat, larger overhead bins and new seats with updated trim and finish,” the company said. By the time it’s done in 2026, American is looking to have 20% more “premium” seats.