Interview With American Airlines CEO Robert Isom

On Valentine’s Day 2013, then US Airways chief operating officer Robert Isom found himself a key figure in an engagement that would astound the industry. In what amounted to a reverse takeover, the US Airways team made a proposal American Airlines shareholders could scarcely refuse: to merge and create the world’s largest airline.

“At the time of the merger, you had American coming out of bankruptcy. US Airways was doing OK but was a niche carrier lacking worldwide scale to serve a really broad customer base. We had to do something different,” Isom, now American’s CEO, recounts in an exclusive interview with ATW given at the company’s Fort Worth Skyview campus in Texas.

The nuptials were finalized on an icy day in December later that year. Now in the 10th anniversary of the “New American Airlines,” Isom admits the honeymoon was short-lived. “You’re putting together two companies. One that had probably 70,000 people; the other one, 35,000 people. Both were mortal enemies for years,” he reveals.

Isom credits his predecessor and long-time boss, former American (and US Airways and America West) CEO Doug Parker, with his dogged vision and pursuit of industry consolidation coupled with his passionate leadership in aligning the teams around a common purpose.

With uncompleted labor contracts and operational procedures held over from the America West/US Airways merger completed five years earlier, Isom says, “In some respects, we were running three airlines from the aspect of people or equipment and even from a station level.

“None of us estimated how difficult it was going to be to bring every different operating system and philosophy together.”

But by 2019, after admittedly “years of falling short,” the airline was in a position operationally and financially to fully deliver on the promises of the merger.

Then came COVID.

“I have been in the airline business through some really tough times like 9/11, lived in Asia during SARS and the great recession, but we’d never seen anything like this,” he said, outlining how the basic supply chain broke down almost overnight. “We suffered some of the worst operating conditions imaginable, running out of plastic cups, pillows and blankets; not having fuelers to put gas on the planes.”

Isom checks off how the company used the pandemic as a catalyst to rapidly accelerate a flurry of bold projects: rationalizing the fleet by jettisoning four aircraft types; launching groundbreaking alliances with JetBlue on the US east coast and with Alaska Airlines on the west; streamlining the network around profitable flying; reimagining the AAdvantage loyalty program; ordering Airbus A321XLRs;  reinvigorating the Atlantic Joint Business agreement with British Airways parent company International Airlines Group; rekindling a partnership with fellow oneworld member Qatar Airways after an icy and public split; harmonizing the economy cabin configurations of its Airbus and Boeing narrowbody fleets; and, in Isom’s words, “buffing out some of the rough edges on a few decisions that maybe weren’t the best from a customer service perspective.”

It’s been a frenetic period of activity, but Isom seems confident that the right foundations have been put in place.

“We’ve come out the other side. I’m really proud of the work our team did. We’ve certainly done better than other parts of the world as a US industry,” he said.

American has been often criticized for inconsistency, particularly on the customer product front compared to its US network peers. Isom roundly rejects that, listing in rapid fire what he terms American’s industry leading investments in the passenger experience: high-speed, reliable satellite Wi-Fi deployed across the entire fleet; the recently announced new business-class product; being first with full lie-flat seat on all transcontinental flights out of New York; and outfitting its entire widebody fleet with premium economy cabins.

“We have 600,000 customers we serve every day from the highest end of the spectrum to those that are the most leisure oriented. We have a product to serve all of them,” Isom notes.

As proof, he says customers are responding with higher net promoter score numbers each quarter.

“I’m incredibly pleased with how we ran the airline over the [2022] fourth quarter and holidays,” he said.

Return To Profitability

Isom, who has been called an operations wonk, eschews the typical flowery mission statement language when asked about his vision. “We’re manically focused on being reliable, efficient and operationally exceptional. That goes hand in hand with driving profitability,” he said.

American has indeed returned to profitability The company posted a 2022 third-quarter net income of $483 million on a record quarterly revenue of $13.5 billion, representing a 13% increase over the same period in 2019, despite flying 9.6% less capacity. The company ended the quarter with $14.3 billion of total available liquidity, more than double that available at year-end 2019. In mid-January, the company said in a securities filing that it expected its fourth-quarter revenue and profit, scheduled to be announced on Jan. 26, to be higher than originally estimated. Its new estimate was for revenue to increase by up to 17% over the same period in 2019, up from a previous forecast of an 11% to 13% increase.

Yet the airline’s operating margins continue to be a laggard in comparison to its US network competitors. Isom sees the PRASM chasm closing as efficiency improves.

“Just about every quarter since the depths of the pandemic, we’ve been able to come out and produce industry-leading unit revenue numbers,” he said.

American is hardly alone in suffering from escalating CASM outpacing the rate of inflation. Supply chain and labor shortages have led to operational disruptions across the industry. American has addressed the problem with bonus holiday compensation for flight crews, massive pay increases for pilots at its wholly owned regional carriers, and proactive pay hikes for labor outside of contracts.

For Isom, it’s the right thing to do.

“Our flight attendants, mechanics, agents, and pilots are going to be in really well-paying positions because they have to be; these are skilled jobs. I am not disheartened by the prospect of paying what it takes to make sure that our team members are well taken care of and that we get the best in the business,” he said.

“I wake up every day excited about coming to work. I have 120,000 team members that will take on any challenge, any day. We do really good things here caring for people on life’s journey.

“We’re going to have to deal with inflationary costs and some built-up debt. But we are going to produce a return for our shareholders and for the communities that we live in, because this is a business that has demand and there is a way to service it that creates a profitable business model.”

Isom plays down these increasing costs against a backdrop of darkening economic clouds on the horizon.

“The demand is there that creates an environment in which you can cover expenses that are inevitably going to increase,” he said.

So what is Isom’s vision for American and his place in the industry?

Isom presides over the nearly 100-year-old airline with a humility devoid of any pretense or need for headline-generating announcements meant to buoy his personal brand. His answer is grounded in practicality: “I’m new; I’m not worried about legacy. I’m worried about getting the job done today, which is to make sure that American has a foundation on which we can grow.”