Aviation Leader Interview, American Airlines VP International Operations, Jose Freig

Transcript

Peter Cerda:I have a conversation, more than trying to moderate a conversation, with a good friend, José Freig, who is American Airlines Vice President for International Operations. And although he looks like he's only 32 years old, he's actually been around for quite a while, so.

José A. Freig:Thank you.

Peter Cerda:You may want to ask him what he's doing to keep young, particularly these days. Starting at America West in 1997, so you've been around. So you've seen it all within America West, American, the family changes, the industry requiring you to change. So let's just kick it off very quickly because we don't have that much time.

José A. Freig:Yeah.

Peter Cerda:During your career at— between America West, American, The transformations that have been taking place within the airline. What's been probably the most significant change that you've seen over that period and course of time?

José A. Freig:Yeah, great question. And good morning, and thank you to CAPA for the invitation. And certainly it's always a pleasure to have a casual conversation with Peter on stage. Look, as Peter mentioned, you know, I started my career back in '96 at America West. You know, as you look at the family of American, right, and as we continue to build on the multiple mergers, and I would say that the heritage that the airline has in the multiple carriers, obviously, you know, America West then of course merged with US Airways, and eventually of course US Airways became part of the American family. And, you know, as I think about just going back to those particular days, those are days where fuel prices were, as you may all recall, in the '90s, were extremely high. We got, of course, a couple of wars in the Middle East that were driving, of course, some of these fuel prices and some concerns in the industry. Bankruptcy was a concern for many airlines, including some of the heritage airlines that I mentioned earlier. You know, you still had, you know, certainly the Continentals of the world before they merged, of course, Northwest, and the list goes on of many carriers that existed back in the day. And as I think about the transformation and as we think about in today's environment, It really is a very interesting way of how not only our customer demand has changed, especially post-COVID, because I think that's another really pivotal point of the transformation process, but there's 2 very pivotal points there. Aside from the industry and consolidation, which of course was something that was something needed in the industry, you had what I would describe 2 really pivotal peaks and points in time. One, of course, was the unfortunate events of 9/11. And of course the unfortunate events of COVID which has been discussed many times before, right? That has morphed into a very different, you know, customer demand, customer thinking about, you know, where they wanna travel differently, the experiences they want. We see it not only in our industry, we even see it, you know, you could go out and look at, you know, livestream social media and you think of individuals and the concerts and you think of all these events that people want to now that we all want to be part of.

Peter Cerda:Right.

José A. Freig:Because of the fact that we perhaps for many years after COVID were not necessarily privileged to that. So a lot of transformation, Peter, to your point. I think certainly at the state that, as I see, you know, just American and think of our particular brand and our heritage, of course we're very proud of that heritage and the entire history that you sort of described, but also of course where we're going in the future.

Peter Cerda:What are the trends that you're seeing at American Airlines with regards to passenger needs, market expectations, growth? Do you continue to operate in a market? Do you depart the market? What are you seeing from your perspective in a very challenging environment that we're living in?

José A. Freig:Yeah, look, it's a really good question. And what I would say is, as we think about the customer demand, right, I mentioned earlier the experiences, some of the trends that we see, and we see it of course in our particular growth, is unique destinations, right? Especially this, this really, you know, fares well with some of the smaller markets. And we think about some of our growth this year, and, you know, this year is— we've— we're going to open 10 new international dots, which is record for us at American, and we're all really proud of it. And part of that growth comes from some of the smaller markets, right? Like the Ocho Rios, you know, Jamaica growth, and certainly Tortola growth, and some of these markets that our customers Perhaps they're now looking for a unique experience and not necessarily, you know, as I think about the other side of the pond, you know, the Naples, the Nice's, you know, the Copenhagen's of the world that we opened this year. You know, I think as we think of our customer demand, we heard our customers say, look, Rome in July and August is busting at the seams and I want something different. And, you know, something that we see in the Caribbean as well. And obviously to that end, Our focus is obviously to be looking out of what our customer demands may be and where they want to fly. I got to tell you, back to the Caribbean specifically, in these new particular routes, including places like Tijuana, Mexico, and Ocho Rios and others that I mentioned, these are routes that have been very successful so far and some of which that our customers really wanted and they really saw the value in. And I think it's exciting. So as we think about those opportunities that you just mentioned, as we think about that from an international perspective, we'll continue to look at those opportunities going forward.

Peter Cerda:And how do you keep that balance? Because you are a hub operator. The hubs are critical to your success. And how do you keep that balance between flying your traditional routes to the big cities from those hubs, but also looking at these niche markets where there's huge potential and opportunities? What's the balance there and how do you go about doing that?

José A. Freig:Yeah, it's a great question. And look, a big shout out to our network planning teams and, and frankly entire network planning teams for the industry. Um, I, I sort of joke around with them sometimes that they, they play Tetris every day with airplanes and, um, as they figure out where these airplanes go. And, and for us, I gotta say that, you know, one of the bigger challenges we all face, and it was just mentioned by, of course, uh, Laurie and, as talking through some of the challenges that we have as an industry is delivery of aircraft, right? To your end, I would amplify your question not only to think about how do we work through how we resource these aircraft from these hubs depending on the time of year, but also how do we work through the challenges of not necessarily receiving an airplane on time? And one of the things that we're very proud of this year is we actually didn't go, you know, our network planning team does it— did an amazing job that we didn't necessarily have to go out and perhaps either cancel or not inaugurate any new flights. We committed to our customers that we would do that. But of course, the network planning team then, you know, worked on this, what I would call this Tetris approach, that in some cases we had to, you know, stop a route a little bit sooner or end it a little bit later, and we found ways to reaccommodate our customers. But the fact is, is as we look at that particular opportunity, there you look at it under multiple scopes, right? So you look at it from an American perspective and certainly our fleet and our hubs, but also our partners, and which frankly is another big trend as we talk about. And I know that's been mentioned this morning as well, the importance of alliances and joint businesses. And for us, as I think about our joint businesses specifically globally, that's where we work very closely, of course, with our partners at British Airways and Japan Airlines and, and so on. And of course for the region, that's where we see the value and goal in JetSmart when we're taking our customers to destinations that perhaps our particular fleet, either because of our hub's location or just simply the utilization of the aircraft, that it makes more sense for a customer to be flying through a partner. And to that end, one of the big changes that I see at American in that particular front is also allowing our customers to join you know, AAdvantage and be able to leverage that with our partners, right? So Fiji Airways is one of the new airlines that came online and they're going to be adopting AAdvantage just like JetSmart, which is great for our customer, right? From a customer perspective, they join, you know, a huge program and their opportunities to earn miles are endless.

Peter Cerda:How important has it become on the joint business and on the alliances from American's perspective? perspective in terms of growing in places that you may not be able to grow as quickly, particularly with all the challenges that we're facing as an industry. Has that evolved? Are you seeing, well, we may have gotten to the very top, that may phase out over the future? Or is this what we're going to see in the future, more partnership, more relationships?

José A. Freig:Yeah, look, for us at American, we see it as it's, it's the future, right? It's the future in the sense that we still have you know, untapped, you know, markets. We have untapped customers that are— we have the opportunity to reach. And as we think about how big the globe is and we think about the opportunities that we have, we rely on those partnerships. And frankly, as we go forward, that's some of which that we need to continue to work very closely with. I mean, of course, for, for those that are joint businesses and, you know, over the Atlantic or the Pacific, certainly you have the opportunity, of course, to work a little closer, especially thinking about Fleet utilization and flights and the sorts. And then of course for others that are part of Oneworld, you have the opportunity to be very strategic with codeshares and others. But I think partners and partnerships and alliances are definitely part of the future, and one of which that we invest a lot of time in on all aspects. And many of us spend a lot of time with our partners for that same reason.

Peter Cerda:We heard, Laura, you mentioned in terms of the manufacturers, you know, the suppliers are important partners to the industry, to the airline's success. You talked about your growth, new connectivity, new destinations, but how much has the issue about supplier meeting their— meeting your expectations, meeting deadlines been a challenge for American? You talk about your network folks, probably they'll be getting a pretty good bonus this year in terms of having to innovate and adapt to, you know, change situations that you weren't expecting. You were supposed to get New airplanes, airplanes are on the ground because of engine issues. How much has it been of an impact to AA?

José A. Freig:Yeah, look, again, for us, we've been very fortunate. We don't have any aircraft grounded because of the engine issues. Frankly, the deliveries have impacted us in many aspects. There were certainly routes that we would have thought that we wanted to add either late this year, early next year that weren't announced routes. so it wasn't again an inconvenience to our customer. Everything that we announced, we're flying. But is it an impact? Absolutely, right? As you think about, you know, our new routes that I think about, you know, Dallas to Brisbane, right, which is something that we're starting in October and we're really proud of connecting Brisbane with Dallas and our largest hub. You know, the opportunities for us there is we're, you know, starting to course with our new retrofitted aircraft and our new, you know, suites on the 787-9. And unfortunately, that just won't happen for the first couple weeks just because of deliveries, right? So we'll be using our current 787-900. So those are examples of where unfortunately there is an impact. I think that our network planning team, again, to give them some kudos, is they've been very proactive to looking far out and actually being able to start thinking about— we're already starting to think about the deliveries that we're seeing in 2024. And I think that's a great point. Supposed to get next summer and trying to create a buffer to ensure that if there is further delays, that we have a way that we could actually move the network around, the fleet around. But look, you know, not just the delivery of aircraft, to your point, the supplier piece when it comes to parts and it comes to, you know, as I think about, you know, radomes and many things that unfortunately tend to break with bird strikes and things of that nature. I mean, these are machines that we're operating In some cases, many hours a day. It is still a challenge, and one of which that really worries us as an industry, and it certainly worries us at American.

Peter Cerda:Let's talk about government partnership. We heard the minister before talk about the sweet spots. They're open for business. As we have new governments coming into our region, we've had— it's a year of political elections throughout the world, particularly in our region. You hear governments, we want more connectivity, we want more tourism, we want You know, we want more. You are giving more, but what do we need as an industry? What does America need as an industry to give these governments what they want in terms of connectivity?

José A. Freig:That's actually a question for you, I think.

Peter Cerda:No, I'm the moderator today, so don't worry, someone else will ask me later.

José A. Freig:Now look, all joking aside, look, I think One, and in all seriousness, obviously I know José Ricardo is here from Malta, Peter from IATA. You guys are great supporters of the work that we do in this space, and it's one of which that we couldn't do it without the body of work that you guys do with your small staff. But for us, what's important as we work with governments is transparency. It's like any other business deals that we try to do, is the fact that we want to be transparent with our airport authorities. We want to be transparent with the tourism boards and others in the sense to be able to say what we can and we can't do, but also what our needs are. And to that end, sometimes I— and I've said this before publicly too— is that we all have a commitment to think through our infrastructures and some of our challenges that we have. And let's face it, back to my original comment of our customers drive where we fly and the times time that we fly. But for those of you that are in the audience that have airport authorities or have responsibilities in the Caribbean, you have the toughest job in the room because that all means that we all want to fly between 11 and 4. And then you all come to us and say, well, what about a 9 AM departure? And we say, yeah, that doesn't work. What about a 6 PM departure? Yeah, that doesn't work. So, um, so that's the piece that I think, to your point, I think that's a two-way street. It's one of which that we at We, of course, have to work very collaborative with governments and find solutions to make it a seamless process, but also ensuring, of course, that we're working through and understanding the challenges and the positions that we put some of our airports in. Because the fact is, what I just mentioned from an operational perspective, that's on a blue sky day. If you have a terminal that has thunderstorms that afternoon, everything I just said, all bets are off. of a sudden everything's coming in late and now we have a bigger problem, right? So, um, so, so look, as we all continue to work through it, I think those are just opportunities for us to continue to talk, um, keep the communication, you know, the communication flow going, because, um, we're— we can't solve it alone. It will take a village, and one of which that all of us in this room and many outside of this room need to help us get there.

Peter Cerda:Your scope of responsibility is global, not only the Americas, so you're able to see very different perspectives, you're able to speak to different governments in different manners. We had the ministers this morning, and if you had a one-on-one with them, what would be some of your recommendations to any of our governments in the region in terms of what's being done in other regions, in other countries that— if we did this in the Americas, we could be so much better off. What are things that you're seeing in other parts of the world that we could try to bring bring in into the Americas to be more efficient, to bring that connectivity more competitive than this?

José A. Freig:Yeah, good question. Look, I would say first and foremost, let's just reevaluate the process. Sometimes we all collectively, and this is just inherently what we try to do, is we try to go, using the sports analogy, we try to go hit a grand slam, but we forget that if we go out and we get a couple of hits and we get a couple runs that way, that it's fine. What I mean by that is paper. As I think about how complex having a paper form to fill out for arrival for immigration versus an e-card, that in itself, I got to tell you that aside from the customer perspective of having to fill this out, for those of us that operate hubs, we understand that the moment that you have a plane departing out of Miami at D48 or at Dallas at A22, and we had to swap because of maintenance reasons, and you're now at the D terminal and you have no paper forms for that document for that aircraft— having a paper form for every single departure and every single gate in a hub that has 110 or 160 gates is an impossible task. Not just to mean how horrible it is to— for, for sustainability reasons. So So it just operationally, not just from a customer perspective, that's just one easy takeaway. I think I said this at another conference before too, is, and by the way, this is not unique to the Americas. This is actually unique to other parts of the world, is I found myself flying out of a European country recently and the immigration officer took a good 5 minutes trying to look for my stamp when I entered the EU. A stamp on a passport? I mean, look, all the data that we're giving someone, you know, from passport data ahead of time to APIS to what the Department of Homeland Security has to— I mean, Interpol has— I mean, this list of— use the data. Let's use the data and make sure that we streamline the process for our customers coming in. The challenge of coming into different locations internationally is not a manpower issue. You know, back in the day, we used to say customs and immigration needs to add more officers. That's not the answer. The answer is we need automation. We need to streamline the process and need to be seamless, and that's what we need to be thinking about.

Peter Cerda:And I think that's probably one of the biggest challenges that we do have as a region is bringing technology that's already in place. And I think many times as governments, even industry, we're still considering many of these aspects That's technology of the future, and it's actually pretty much technology today.

José A. Freig:Today.

Peter Cerda:Let's do a little bit of deep dive into the region. Let's start south-north. Argentina, one of those interesting, call it problem child countries, opportunity countries. Now we have a dynamic president. He has opened skies into the, opened his skies to the rest of the world. How do you see these type of markets, and particularly in Argentina where you have a strong footprint, when a government takes that approach? How does that change your dynamics from one day to another where it's very rigid, very bilateral, to now airlines, you're open, come into my market, be competitive? How do you see that?

José A. Freig:Look, great question. And as we think about places like Argentina, like for us at American, we always think competition is healthy, right? And it's a good thing for us to revisit, and we welcome, you know, situations like where Argentina is doing what they're doing so long as we work through it together, right? Again, this is the communication piece that in cases like, you know, in your particular roles and others, that they're working collaboratively with you and ALTA and others to understand what the needs of the industry are. All we I think if we were to poll every single airline in this room and outside this room, all we want is a level playing field. Nobody's asking for a leg up, right? All we're simply saying is, give us a level playing field, and then we'll go compete however we need to go compete. But the fact is, is when we get into these particular situations of big changes, sometimes we, again, want to go reinvent the wheel or re-engineer something that might not need re-engineering, that then causes more issues for all of us customers. Collectively. So what I would say for us in Argentina is, of course, we're very proud of what we, we have there and what we've built, and we'll continue, of course, to be competitive. We just need to make sure that the governments are working collaboratively to ensure that whatever that sweet spot is that we talk about is a sweet spot that's a level playing field for domestic and international carriers.

Peter Cerda:The Caribbean— you've invested, you're opening new destinations. How do you see the Caribbean over the next couple of years? You've always had a strong commitment to the Caribbean. Strong relationship for many, many years. How will that continue to evolve?

José A. Freig:Great question. So look, we're obviously very proud of some of the new openings, Governor's Harbour, and, you know, next year we got, of course, South Caicos that's opening in February. You mentioned, you know, of course, Ocho Rios and Tortola and many others that we've opened. And to your point of the Caribbean, this winter we're going to grow almost 5% when it comes to seats, 6% on departures. We, again, you know, it was talked about earlier, the demand for the Caribbean is still there, right? The demand is, it's certainly something that the customer still wants an experience. They want to come to the Caribbean. They want to be an exclusive, you know, island outside. And again, to my point earlier, some of these smaller markets and why they've become so important to the region. And now that, you know, some of the, some of the countries in the Caribbean and the islands are actually investing and some of these runways that are allowing us to land in some places that before we couldn't. So look, we'll continue to be super committed to the Caribbean, and we'll look at opportunities to grow as much as we can and as possible. And we continue to work with many fine men and women around the table here today in the room that give us the opportunity to grow.

Peter Cerda:And from your standpoint here in Port of Spain, it's not only about connectivity, it's also about contribution to jobs. You have a big customer service center here, which many people may not even know that you're, you're providing service probably to parts of the world.

José A. Freig:Yeah, great question, um, and great point, Peter. So as I think about our international strategy, it's yes, there's a commercial strategy there. Yes, it's about volume of flights and where our customers want to fly, but it's also a grassroots campaign, which is about giving back in the communities that we serve and I, you know, the reality is there is no bigger ambassador of the iconic American brand than our own team members, and we're very, very proud. Of course, to your point about here in Port Spain, we have over 440 American Airlines employees about 20 minutes away from here in an office that is serving the globe, and frankly, they're taking calls from all parts of the world. We follow the sun when it comes to reservations and contact centers, and just recently they took on a big role which is also some work on customer relations for international work, which is, is a very important role for our customers, of course, as you think about our priorities and you think about how we respond to the customer, and they're doing a fantastic job. And, and the last thing I'll say, which, you know, definitely needs a shout out as well, just, you know, 2 blocks from here we have a Citi ticket office of, you know, our team members there. Again, American Airlines team members that do a fantastic job taking care of our customers in country. We're proud to be the only US airline to have a ticket office here as well.

Peter Cerda:Yeah, you don't hear ticket offices very often anymore, do you? Um, sustainability, we don't have too much. Um, again, with your global role, we know the challenges that we have as an industry. We probably do not do such a good job communicating. We're seeing some of the turmoil in, in Europe in terms of pushback on tourism in places like Spain, France, They've implemented where, you know, you take the train, you don't fly within a radius. What is American Airlines doing from your standpoint in terms of sustainability, your responsibility? What do you need to do even more?

José A. Freig:Yeah, it's a— it was talked about earlier, right? This is a big elephant, and this is one of which that we all collectively need to rally around it. So it's a couple of things that I would say. First, I'll start with American and then certainly talk about where we need to go and what, you know, what I would describe as a call of action for all of us. But one, at American, one is we're very proud that last year we got named, of course, the Dow Sustainability Global Index. Only 2 carriers are in there, right, recognized for sustainability efforts. We have, of course, our sustainability plan for 2050 and certainly some, you know, ambitious goals for 2030. But what we're doing today is just You know, just recently as of, you know, 3 months ago, we went ahead and, you know, if you think about our flagship service and some of our long-haul flying on business and first-class seats, you know, before our customers used to get on board and as you think about our blankets and you think about our pillows and, you know, again, some, you know, as you think about an off-COVID, you know, certainly response, it was single-use plastic, right? You just open this plastic and get your pillow. and your blanket out. And we just installed these beautiful kits that our customers love, but they're sustainability kits, right? They look great, but also, of course, you're not using that plastic. So we removed tons of plastic off the airplane, which is something that's fantastic. We, of course, we continue to invest in SAF and many others. But look, I think the reality is there's not enough SAF to go around, right? As you think about the necessity for all of us So we think about that 2030 timeline and eventually 2050, we need to work very collaboratively with, you know, private industry, with governments, with others. And you mentioned, of course, some countries in the EU and others that, that we obviously fly and certainly have this opportunity to have what I would say a more mature conversation just based on what some of the regulations and some of the things that are implemented. But even in those parts of the world, We're far behind, which of course is even a bigger challenge for those of us in these regions. So what I would say is we just really need to start thinking that very hard and fast of what are, you know, our options as we think about the future because we just don't have enough staff to go around.

Peter Cerda:Would that be probably the number one ask from an American Airlines standpoint, industry standpoint, in terms of our governments in the regions where we need governments to start investing in SAF development?

José A. Freig:I think it's definitely a priority. I mean, look, as we think about the future and we think of where we need to go, we definitely have to have it top and center. It really is something that we have to think through. We have other challenges, as you well know, in other parts of this region, but it's definitely in that top 3 priority for sure.

Peter Cerda:We only have a few more minutes. Mexico's another big market, very committed, very invested, significant footprint. How's that growth, particularly now that it's back Category 1, strong business ties with the US? How do you see that market continue to expand?

José A. Freig:Yeah, Mexico, 28 destinations that we serve. We're very proud of, of course, our growth in Mexico this year, of course, opening Tijuana, being the only US airline down there, and then of course course, Veracruz, which is a reopening for us. We had flown down there in the past. Look, as we think about Mexico, and it was mentioned earlier, I think from one of the panelists, is that there is a bit of overcapacity, right, in certain parts of Mexico. And I think we're seeing that. I think we're seeing some particular softness in some particular markets. But it's also the time of year for Mexico, right? As we think about, you know, it's interesting as we think about, you know, summer, so to speak, core summer for the, the US, core US. For some of our markets, like I'll pick on Cancún, for example, Riviera Maya, Cozumel, Tulum, etc., the real peak is actually between November and March. And as I think about, for example, some of our adjustments from a network perspective, it's, it's based on demand. And as you think about November, we're gonna be back up to the same volume that we had last November. a place like Cancún, and of course with the volume of Tulum. So, um, so it just— it's seasonalities, I would say. But as we think about Mexico collectively, I think we're, we're certainly sitting in a really good spot. We like what we see in Mexico.

Peter Cerda:In a place with Mexico, you have Tulum, new airport just came online. Does that, with the proximity to Cancún, but in a very saturated Cancún already, does Tulum provide opportunity, or is it somewhat of a bit of a headache challenge because you're so close to Cancún, you've been committed to Cancún, but now you have this other airport with other opportunities. What's the balance, particularly for your network folks that have to kind of balance everything?

José A. Freig:Yeah, no, a great question. It definitely complements Cancún. Look, if you haven't spent time in that area, obviously, especially the farther south you go and places like Bacalar and others, I mean, they're beautiful, right? And they're again back to the the experience piece, that's sort of the untapped experience that people want, right? That people are looking for, that perhaps not the really super busy Cancun downtown, and they're looking for a unique experience. And Tulum offers that. And I think what we've seen so far in the demand perspective is it just complements Tulum and Cozumel as well, right? Because Cozumel is obviously important to us in that region. It's just a 20-minute ferry over to, to Playa del Carmen. So I think it's— they're all— all 3 of them complement each other really well.

Peter Cerda:1 minute left. 4 months till the end of the year, 4 or 5 months. What are you hoping will occur for it to be a good year for AA?

José A. Freig:Look, I mentioned earlier, right, a level playing field across the globe is really important. But for us, look, as we think about where we fly and our purpose and our mission, of course, is to take customers where they want to fly. As I just think about the rest of the year, so to speak, just being sure that as we think about capacity discipline as the industry, I think that's always very important as we all look at those particular numbers. But I think what's important for us is to really focus on our customer, focus on running a really strong operation. And to that end, a shout out to certainly IIT groups and our operations You know, post-CrowdStrike, you know, we had the best recovery of any airline. As a matter of fact, Saturday we operated at 99% completion factor. So as I just think of the rest of the year, it all starts with our operation and we just need to run a really good operation to make sure that our customers are getting from point A to point B as safely and quickly as possible.

Peter Cerda:And José, we have 46, so we had an on-time arrival, I guess.

José A. Freig:I love it. I love it.

Peter Cerda:Thank you very much.

José A. Freig:Thanks for the opportunity. Thank you, guys.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.