CAPA Live: American's Doug Parker - alliances "incredibly important"


American Airlines CEO Doug Parker, speaking at CAPA Live on 14-Oct-2020, said alliances and JVs are incredibly important in times of restrained demand ,as they allow carriers to work together to decide which can be the most efficient until demand comes back.

Hub and spoke network carriers may hurt a little more than point-to-point domestic, but when the return to global air travel takes place the airlines that serve both large and small markets will thrive.

Business travel is down, but there is no reason to believe it won’t come back as video conferencing will never replace the need to travel and meet people. Quarantines are creating circumstances under which people just cannot travel.

American Airlines CEO Doug Parker

American Airlines CEO Doug Parker, speaking at CAPA Live on 14-Oct-2020, stated that alliances will be "incredibly important" in the current environment of "more restrained demand". He noted that alliances, such as JVs, will allow airlines to "work together and decide whose capacity might be the most efficient to be added, until the demand comes back".

Mr Parker stated that there is "nothing" that leads him to believe the airline's hub and spoke model will not work in the future, observing that American Airlines will become more efficient in future but will not change its whole model.

He acknowledged that the model had caused the airline to "hurt more than those that are flying point to point domestic only", but noted, "there will be a return of global air travel", with airlines that serve both small and large markets able to "attract passengers that those point to point airlines cannot".

Mr Parker believed that there was "enormous pent up demand" for global travel, with passengers unable to travel due to constraints between countries.

American Airlines CEO Doug Parker, speaking at CAPA Live on 14-Oct-2020

He stated: "While there are some [people] that are simply not flying because they're afraid to fly, it's much more there is no reason for them to fly... The biggest thing we need to do is give people reasons to travel", adding that a widespread vaccine should "significantly" accelerate the return of people to work and air travel".

Mr Parker noted that he was "reasonably bullish" about demand for business travel returning "over time", saying he believes the "largest reason" why business passengers have ceased to travel is due to preclusions against visiting other people and also because of required quarantine periods, under which circumstances business "can't operate".

Mr Parker stated: “Decades ago, I heard Bob Crandall being asked about the internet and the ability to do video conferencing. His response was: ‘Anything that makes the world a smaller place leads to more global travel’. And he’s been right. Every innovation that has happened since the late 1980s has resulted in not less business travel but more business travel.”

Mr Parker stated that the airline was "working to convince" the US Government to lift international restrictions "sooner rather than later", or otherwise focus on COVID-19 pre-testing protocols that would allow for the lifting of restrictions.

He stated: "We're not going to get the demand started until we start flying, so we're very, very much interested in resuming service internationally, and we're trying to do everything we can to encourage our government and others to allow that to happen". 

Mr Parker stated that airlines were "flying less than half of what we were flying a year ago in terms of networks", with "no anticipation at American Airlines that air travel demand will return to 2019 levels anytime in 2021, and probably for a year or two after that".

Mr Parker noted that the airline’s revenues were down 85% in 2Q2020, but that figure rose to 75% in 3Q2020 and 65% in 4Q2020. He observed that leisure travellers were the primary travellers across the US at the moment, adding that the airline's hub and spoke network "gives us advantages because we serve a lot of markets that others don't".

Mr Parker stated that the industry was in "good condition for riding out the crisis", adding that American Airlines and its competitors were "positioned to withstand a situation as bad as the one we're in now for well over a year or more, which I think no one anticipates".

He noted that while airlines did need support early in the crisis, for which the US Government provided funding under the CARES Act, "we've raised more than enough liquidity to withstand a continuation of this". Mr Parker also commented that the US was witnessing "gradual demand increases", reiterating: "As long as that continues, our industry is in good shape for riding out the crisis".

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