Our American Airlines Story

At the moment I am flying aboard American Airlines Flight 137 somewhere over the Atlantic, returning from a dream trip to Europe with my family—a trip whose conclusion was altered due to an emergency surgery on my thirteen-year old daughter, Daphne.  As I fly on this beautiful new plane—equipped with an impressive entertainment center for each passenger, including the “groundlings” in the economy section like myself—I continue to think of what might be the best case study on what is wrong with American Airlines. 

As the co-founder a web-based company that offers a commoditized product—mortgages—I am constantly looking to learn from good and bad examples of customer service to differentiate my company from competitors who sell that same commodity.  American operates in an analogous space; air travel has become very much a commodity.  The story I am about to tell will show how American failed when given the opportunity to differentiate itself.

My story begins in the Amsterdam.

For three days my daughter had suffered from what we thought was a lingering case of the flu.  However, the constant stomach pain that failed to improve finally convinced us that she was afflicted by something more than the flu.  Thus, we sought the help of the hotel doctor at the Marriott in Amsterdam, who, after a quick diagnosis, swiftly admitted her to a hospital.  Daphne had appendicitis, and underwent surgery within hours.

While Daphne was in surgery, and before we knew of its outcome, I called American Airlines to see how I could get Daphne and our family home in the safest and easiest manner.  At that point, we didn’t know what to expect: if her appendix had ruptured, we could be in a for a long haul of antibiotics and attentive care; if it hadn’t ruptured then her hospital stay would be minimal, and she could likely fly within 5 to 6 days, according to our Dutch doctor.   Regardless, I had one primary objective:  get Daphne home in the least-taxing, safest and most convenient way. 

Our itinerary had called for Prague to be our next stop.  However, travelling miles eastward to a country whose medical care was likely not on par with the care she might receive elsewhere—should there be any residual affects following her surgery—was not an option. It was the 25^th of July and we were supposed to fly on the 28^th to Prague where we would stay for three days and then fly home to Salt Lake City (SLC) through London Heathrow and LAX. I called American hoping to avoid Prague altogether.

A few minutes into my conversation with American, I quickly learned that being rerouted out of Amsterdam—the most convenient and least intrusive for a person recovering from surgery—was out of the question. That would require a “change fee” of $275 plus the “difference in fare” that would amount to $2,800 per ticket.  For my family of seven, that $20,000 bill didn’t make sense (particularly, because I was still wondering what surgery in Amsterdam was going to cost me).

While I was disappointed about that, I couldn’t necessarily be angry about the cost of flying out of Amsterdam.  I was not naïve enough to expect American to care enough to give me seven seats on a flight from Amsterdam that they might be able sell to someone willing to pay much more than what I had paid when I booked my flight eight months earlier.   For reasons that I won’t bother criticizing in this forum, all airlines practice a similar business model: the closer the flight, the more they charge you. I suspect they do that because it works; there are corporate travelers or desperate people who are willing to pay the high price of last-minute travel.  If the market bears that, then so be it. 

Thus, without argument, I tried a different route.  And herein is where American failed.

I essentially told them what I just told you:  we weren’t sure of the outcome of this surgery nor of any of its residual affects, and the idea of flying to Prague to catch the first leg of our itinerary seemed taxing, and potentially risky.  Thus, my proposal:  can we find our own way to London, and board our existing and reserved flight there?

I could hear the American agent tapping her keyboard as I talked, undoubtedly trying to learn what she needed to charge me for my new proposal.  After having to reboot her machine due to a system failure (note the ironey), she quoted me the cost of doing the what I had suggested:  “That would cost $3,100.”

“For all seven tickets?” I asked.

“No, for each ticket.”

I quickly did the math in my head.  They wanted to charge me $21,700 to let me travel 2/3rds of my existing reservation.  “Really?” I asked in disbelief. “What happens if I try to check in at Heathrow?”

“If you don’t get on that plane in Prague, then your ticket will automatically be cancelled.”

“Got it,” I countered, “which is exactly why I would need you to re-ticket me with Heathrow becoming the first leg of my flight.”

“I’m sorry, sir,” the American agent responded. “I can’t do that.  My system won’t let me.  I would have to issue a whole new ticket. I can’t just change an existing reservation.”

I countered in a calm way, never raising my voice, or hurling insults: 

“Is there a human being in your company that can help me accomplish the following:  I've had a medical emergency that will likely cost me no less than 10,000 as it is.  I am trying to find a way to get my daughter, who is at this moment undergoing surgery, home in the easiest way. If I have to fly to Prague, I’ll have to leave Amsterdam a day earlier to be able to make my 8:30 a.m flight on Wednesday.  That will involve the whole rigmarole of going through security, customs, airport shuttles, lugging baggage to and from a hotel in Prague, etc.  If I can fly here—at my own expense—out of Amsterdam, I can simplify that for her and take less risks along the way.”

“I understand that your systems work in a certain way, and that the routing and pricing of flights is a complex matter.  I get that you've developed a business model that is terribly complicated.  But I am asking for a human being to cut through all that complexity and look at this is a very simple way.  My itinerary includes three flights:  the first with British Airways, your partner.  Based on what you just told me, you've already paid British Airways for the flight from Prague to London (I probably don't need to remind you that you paid them with the money that I paid you eight months ago when I booked).  If I don't step on that flight in Prague, you and British Airways, are still whole. You and they have been paid for the mileage I was supposed to travel on their plane. On top of that, perhaps you can sell my seven tickets from Prague to London and come out smelling like roses.

“My second flight leaves from Heathrow.   That is a different flight with a different gate and probably a different terminal.  The only connection between that flight from Prague and my next flight from Heathrow to LAX is the intangible electronic ticket that binds them.”

“If I show up at Heathrow, having gotten my family there from Amsterdam at my own expense, and board that flight to LAX, American or British Airways will not be out any real money--other than the cost for a human to override the system."  I didn't add that the 55 minutes I spent on the phone with them was likely going to cost them more in human wages than having someone override the system to re-ticket me.  I just need some human being to override the system.”

The agent refused:  “What you don’t understand, Sir, is that we just can’t change your ticket.  If we did, then we’d have to absorb the fare difference.”

They would have to absorb the difference? Absorb what? I was already on the flight I was asking to be re-ticketed on.   Eventually, I requested to be transferred to the agent’s manager.  I went through the same conversation with her. 

She seemed empathic and genuinely interested in helping me, putting me on hold for about 10 minutes while she visited with various people at American, trying to see what she could do.  Ultimately, however, she came back with the same response:  “I’m sorry but there’s nothing I can do.  We can’t just remove the Prague portion of your ticket without losing your entire ticket.”

I repeated myself, “I understand that once you do that, your system is going to require that a new fare be paid. I’m just asking for someone to understand that I am not asking for American to incur any new or real costs or lose any potential revenue by making this change for me:  my family and I already booked on this itinerary.”

Perhaps because I kept repeating myself, the manager repeated what she and her agent had told me no less than 10 times—something that I refused to accept:  “If we change that ticket, we’ll have to absorb that fare difference.”

The tenth time I heard that phrase—we’ll have to absorb the difference—I finally realized what their core problem is: they have become slaves to their own policy, systems and technology, which has made them incapable of understanding how to solve their customer needs.  If their customer has a problem that cannot be solved by their existing policy, systems, and technology, they are incapable of solving that problem.  Indeed, they are incapable of even recognizing a reality beyond those systems.

I had a need (that had arisen from a medical emergency) that I had expressed succinctly and clearly. I had proposed a way to meet my need in a way that would not—in real dollars—cost American any money. They had a chance to meet that need but were blinded by policy, systems, and technology.

I will be the first to admit that an emergency on the part of the customer does not necessarily constitute one on the part of the company.  The customer cannot expect companies to lose money because of independent events that arise in their life. 

Take, for example, my industry: mortgage lending.  The greatest risk we incur each month is not potential borrower default:  it’s interest rate risk.  Whenever a customer choses to lock an interest rate for a specified amount of time, we in turn lock (or hedge) that rate with the market.  We then have X amount of days—based on the lock expiration period chosen by our customer—in which to fund and then deliver that loan to the secondary mortgage market.  If we do not do so, we face dramatic penalties. The cost of a given interest rate can and often does change dramatically from day to day, and if an interest rate lock expires before we have funded the loan, then we can potentially lose thousands of dollars—far more than the per-loan profit we can earn on a single loan.

We have funded loans in the past whose interest rate locks had expired and where we charged the customer $1,500 in fees but had to pay the market nearly $25,000 to deliver that loan at the customer’s chosen interest rate. Essentially, we ended up paying—not earning—$23,500 for the privilege of lending money to that client. Those are real costs and we absorbed them because we screwed up at some point in the process, which kept us from funding on time to meet the lock expiration.

However, when a failure of not meeting an interest-rate lock is not our fault, but is rather the result of an emergency that arises in our customers’ lives that prevents us from funding their loan on time, we typically cannot always absorb the cost of not meeting their lock.  We try, and we grovel with our investors on their behalf.  But with our low margins, we cannot absorb the very real cost of not funding by the expiration of an interest-rate lock.

Again, this is partly why I was not upset about American’s refusal to reroute us from Amsterdam.  That could have potentially cost them money in lost revenue.

However, the difference between my company’s inability to absorb the loss on an interest rate and American Airlines’ inability to make Heathrow my first leg was this:  the expenses associated with missing an interest-rate lock represents tangible and real-dollar losses that must be paid to the independent market while American’s loss to meet my needs would represent a paper-expense that yielded no true or real net loss in actual dollars to American. And debits and credits on accounting ledger do not necessarily represent real revenue or expenses.

I tried explaining an abbreviated form of that to the manager at American (without the complicated comparison to interest-rate risk).  She didn’t concede an inch.  Let me rephrase that: she didn’t concede a millimeter.  I suspect that’s because she truly could not understand what I was saying.  American Airlines’ culture has stifled any ability for her to create and solve a need when that need conflicts with policy, systems, and technology.  Sadly, I can’t chalk this response up to the inability of one or two people to think clearly, for the manager told me that she spoke with “several” people on this issue, all of whom agreed that they simply could not absorb this fictitious expense.

American Airlines has a problem. I suspect it is part of the reason it went bankrupt a few years back. Despite the fancy new planes it just purchased to entertain its customers, American may very well go broke again unless it figures out how to remove the shackles of its systems from its people.  Soon everyone will have fancy planes—if they don’t already—and the only thing that will save this company that is selling a commodity will be its ability to see what its customer sees.