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American Airlines

Team 1
Greg Deicke, Kate Hall, Michael McMillin, Nicole Naslund, Cyrus Pirsa, Jackson Polakov
10/17/17
Table of Contents

Executive Summary. Page 2

Introduction . Page 3

Company Narratives ....... Page 3

Key Issue .... Page 4

Stakeholders ... Page 4

Recommendations .. Page 6

Response .... Page 7

Conclusion . Page 9

Appendix ........ Page 10

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Executive Summary
Per your request, the communication intern team has developed three recommendations to start fixing
our key issue, employee dissatisfaction. American is perceived as a company whose employees are
dissatisfied and customers are constantly inconvenienced. The recommendations we propose are an
employee satisfaction survey, customer comment card, and preventative maintenance program. By
tackling these issues, key stakeholders will benefit from the changes these programs provide.

Stakeholders Overview
The three major stakeholders are employees, customers, and investors. Pilots and mechanics are vital
employee groups for generating Americans revenue. However, they lack competitive salaries and
respect from management. Leisure, business, and hybrid customers need a timely departure, an
available seat, and a safe flight. Americans inability to be on time results in unsatisfied customers.
Finally, investors see the repercussions of these failures. Americans stock price drops and dividend
payments get smaller as American loses revenue from potential and repeat customers.

Proposed Recommendations
Our proposed recommendations address our key issue, employee dissatisfaction. To ensure job
satisfaction for our employees, we propose a third party conduct a survey of our employees regarding
their work satisfaction. This will allow us to realize the key issues behind employee dissatisfaction and
find a solution. Second, we will implement customer comment cards. It is difficult to ensure
participation which is why we will include an incentive of a free meal or two free drinks for one
passenger on each flight. Finally, it is crucial to implement a preventative maintenance program for our
aircraft. This will prevent flight delays and provide more hours for our employees. Integrating these
programs will foster better communication between stakeholder groups.

Budget Summary
After enacting the three programs discussed, we project that Americans total expenses will be roughly
273.5 million dollars. By modernizing our fleet, American will reduce the amount of fuel it uses each
year by 10 percent. Through this reduction in fuel costs, American will be able to save over 1.6 billion
dollars per year, allowing us to absorb these expenses.

Conclusion
The recommendations presented in this document will rectify Americans image in the public eye, and
lead to a more profitable future. Effectively listening to our customers and employees will increase
satisfaction among these stakeholder groups. This will indirectly boost our investors confidence in the
company through high stock prices and larger dividends. Actualizing the customer comment card,
employee evaluation survey, and preventative maintenance program will begin the rebuilding process
of our poor public image.

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Introduction
The American Airlines communication intern team has overseen many different facets of the company
over the last few weeks. American Airlines strives to portray themselves as a company that delivers
employee satisfaction, customer comfort, and innovation. However, it has come to our attention that
Americans internal and external narratives do not align. After speaking with various employees, we
believe this narrative misalignment stems from employee dissatisfaction. This high rate of employee
dissatisfaction also has an indirect effect on the companys customers and investors. Therefore, our
team has provided recommendations on how to effectively reach out and communicate with employees
and customers. By targeting these key stakeholder groups, American Airlines will be heading in the
right direction for better alignment of their internal and external narratives, thus increasing profitability.

Company Narratives
American Airlines strives to maintain its position as the largest domestic airline. We have instituted a
variety of programs dedicated to increase employee satisfaction and commitment to the company.
However, many of these programs are ineffective. American has implemented new cost-saving
strategies that replace company mechanics. This is one of the main reasons why the Transit Workers
Union is protesting on their behalf. We believe mechanics deserve higher wages and better job security.
American Airlines is outsourcing mechanics jobs to other countries, such as Brazil. This creates
tension between employees and management. Many employees believe American Airlines is more
concerned with generating profits instead of ensuring job security. Overall, there is a major disconnect
between what management considers employee satisfaction and what the employees desire.

American invests in its internal operations by upgrading their facilities, amenities, and aircraft fleet to
reach maximum profitability. By the end of 2017, American will have introduced nearly 400 new
aircraft to its fleet since its merger with US Airways. This will make Americans fleet the most modern
of the big four airlines. The company also places emphasis on investing in the future of its
employees lives. Since the merger, the company has increased its employee wages by 38 percent,
added 10,000 new employees to their workforce, implemented unilateral profit sharing and built a state
of the art HR facility.

To stand out amongst its competitors, American has developed a new motto, The Worlds Greatest
Flyers Fly American. This message indicates that Americans passengers are airport savvy, and those
who do not fly American are missing out on an experience. American has enhanced this experience by
adding perks and amenities like free inflight entertainment, newly upgraded seats, and an app that
allows customers to receive notifications regarding the status of their flights and luggage. This all
contributes to CEO Doug Parkers belief that every flight taken with American should be something
special.

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Key Issue
The key issue our communication plan will tackle is employee dissatisfaction. We hone in on two
important employee groups, pilots and mechanics. These groups have an integral part in the operations
aspect of the company. Their jobs are skill-based and require years of experience before they can work
on certain highly profitable revenue streams. Employee dissatisfaction is also the lynchpin that drives
customer dissatisfaction and lower earnings. This idea creates a domino effect on Americans key
stakeholders. Customers generally want to conduct business with a company with high employee
satisfaction. When customers dont fly American, the companys revenue and income decreases,
causing less money to be allocated to its investors.

Stakeholders
Customers
American Airlines has three major target markets: those that travel for leisure, business, and customers
who travel for both. Below is a graph detailing the size of each market. These three customer groups all
share central needs. Customers need their flights to be on time, ensure that their luggage is checked on
and off the plane, and have an available seat. Although these markets share central needs, they each
have different desires.

The largest portion of Americans target market is those who travel for leisure, accounting for 69
percent of the market. These customers want low base airfares, efficient travel routes, and quality
service. This group of customers benefit during the off-peak season, between November and March,
because airlines offer low priced tickets to highly-desired destinations in great volume.

Business travelers make-up the second largest portion of the market at 29 percent. These customers
want high quality service and luxurious amenities. A majority of these travelers fly in order to attend
meetings, conferences, or seminars. Companies normally pay for their employees flight, which is why
business travelers do not mind paying more for a premium seat. Some of the luxurious benefits
included with a premium seat are in-flight entertainment, excess legroom, and built-in-wifi. The last

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two percent of the market is made up of customers who travel for both personal and business reasons.
These travelers wants and desires are comprised of both the leisure and business traveler markets. In
short, leisure travelers want low base fares and high quality service.

Overall, American Airlines is struggling to fulfill the wants and needs of its customers. More and more
flights are being delayed, resulting in customers feeling unsatisfied. Customers are unable to get to their
destinations on time, creating potential scheduling or accommodation conflicts.

Employees
The American Airlines employee base currently consists of 107,307 employees. After speaking with
many different American employees, we saw an overall theme of dissatisfaction with management and
their everyday work. We noticed this significant amount of frustration specifically within the mechanic
and pilot groups. Mechanics at American Airlines constantly feel the pressure of their jobs being
outsourced, reduced hours, and the need for immediate repairs on airplanes. Mechanics jobs are being
phased out by the purchase of Airbus and Boeing airplanes, whose manufacturers offer maintenance
services, and the outsourcing of mechanics jobs to hubs, such as Brazil. When mechanical problems
arise within the aircraft, American Airlines turns to external sources to create temporary fixes. This can
cause mechanical failures, which are attributed to over 40 percent of the latest commercial airplane
crashes.

Pilots have uncompetitive wages that are below their peers at other major airlines. It is impossible for a
pilot to move unilaterally within the airline industry because seniority is only gained through the
amount of time a pilot stays with a company. Therefore, seniority plays a major role in why so many
pilots stay with American. Their inability to move within the industry means that the only way for
pilots to get a pay raise is through union negotiations or striking. This creates a hostile environment
between management and pilots especially during a contract year.

Investors
American Airlines investors want to see consistencies in the companys business operations. These
consistencies ensure that the value of their shares are increasing and the company remains profitable.
High employee dissatisfaction within the company can have an indirect negative impact on the
company's investors.

In April of 2017, American announced that it would be increasing its pilots and flight attendants wages
by roughly one billion dollars across the company over the next three years. This wage increase was
made in response to many employees claiming that their wages were not competitive with other
airlines. Investors reacted negatively to this announcement for a number of reasons. Since it is difficult
for American to increase the prices of its tickets and still remain competitive with prices offered by
competing airlines, investors were unsure how the company would significantly increase its revenue in
order to make up for the added, billion-dollar wage expense. This expense could decrease the
companys net income, resulting in less dividends for its investors. Because of this uncertainty,

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Americans share price dropped over 5 percent by the end of the day that this announcement was made
in April. This is one instance in which investors were indirectly affected by dissatisfied employees.

Recommendations
Building an environment where communication is transparent and effective is essential to a businesss
success. It is crucial that American Airlines focuses their attention on the wants, needs, and concerns of
their employees. By creating a positive work environment for their employees, American will see
continuous benefits. To ensure that employees are being heard, we suggest that a job satisfaction survey
be administered by an external provider. A well-conducted survey can reveal important information
regarding employees perception and satisfaction with their job. This will allow for employees to voice
their opinions and for management to recognize areas for improvement.

JD Power and Associates ranked American Airlines third in customer satisfaction out of all domestic
airlines; however, the airline industry has the worst customer satisfaction ratings of all industries. This
negative image is reinforced by these poor ratings. To change this, we have created a promotion that
provides passengers the chance to win two free drinks or a free meal voucher for their next flight by
filling out a customer comment card. At random, flight attendants will choose one winner at the end of
every flight. This promotion incentivises customers to provide feedback, giving the company a chance
to review the information provided and understand the satisfaction levels of their customers. This
information can be used to capitalize on trends in the customer feedback, improving Americans service
overall. Below, is an example of the comment card that customers will receive prior to the final descent
of their flight.

Implementing these different forms of evaluation gives American Airlines a better sense of their
strengths and weaknesses when communicating with their employees and customers. An increase in
employee satisfaction will have a favorable impact on the quality of the customers air travel
experience. This positive experience will increase profits, which will ultimately satisfy our investors.
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Mechanics jobs are being outsourced because American is investing heavily in a Brazilian
maintenance hub. Implementing the preventative maintenance program stateside would create more
hours for current employees. The best way to reach this group is to present this program as an
alternative to being laid off. By negotiating directly with the Transit Workers Union, American can
stop protests being held by mechanics and eliminate the negative publicity it has caused. Also,
American will have the upper hand in negotiations because the extra hours will be a welcome
alternative to the unemployment line for mechanics. Ensuring low wages will be maintained as hours
are increased will limit the impact of the programs expense on Americans bottom line and help turn
bigger profits in the future.

Response
Next Steps
Before implementing our communication plan to the key stakeholders, we need to allocate the funds
and manpower to fulfill the goals highlighted in our plan. To fund our recommendations, we will use a
portion of Americans profits and earnings saved from cost savings measures. Over the past three years,
American has transitioned from older aircraft to more fuel efficient aircraft, saving almost 10 percent
on fuel costs. This money will pay for our programs in the short run, but over time we hope they will
pay for themselves by bringing in more ticket revenue and growing Americans market share in the
domestic air travel industry.

The first initiative we will fund is the preventative maintenance program. After observing Deltas
recent sustained profits and reduction of cancelled flights, we believe there is an opportunity for
American to minimize the amount of delayed and cancelled flights by implementing this initiative. This
program will require investing in maintenance personnel and extending contracts with companies that
provide replacement parts. Next, American Airlines will contract out to a third party to run a survey
about employee satisfaction. This survey will be given out to all American Airlines employees to find
the wants, needs, and concerns for each occupation. Finally, American will allocate the funds to print
out customer comment cards that will be distributed on every flight and fund a voucher program to
incentivize customers to participate. We plan on running this program for a year to collect data on
customer feedback. In conclusion, the data provided by these programs will decrease the amount of
delayed flights and find a solution to improve both customer and employee satisfaction.

Projected Budget
After careful research, we have found that the total cost of integrating these programs into American
Airlines daily operations will be roughly 273 million dollars. Depending on the contract with
manufacturing companies, such as Honeywell or General Electric, prices for maintenance parts vary on
a case by case basis. This is why, in our projected expenses in Figure A1, we were unable to find a
figure for how much these parts will cost. Calculating a reasonable estimate will require the formation
of a buying center to negotiate with the companies listed above. The cost of the employee and customer
survey was discovered by sending out a request for information document to respected data collection
firms based on the size of our workforce and the amount of comment cards we want to distribute to our
customers. The cost of these three programs are relatively low excluding the preventative maintenance
program, but are well within Americans reported profits for the 2016 fiscal year. Based on CEO Doug
Parkers recent statements, American Airlines does not project to incur a deficit in the near future. This
means our programs will continue to be funded by profits the company is projected to make.

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ROI
Cost of increasing employee and customer satisfaction will be offset by new fuel efficient planes.
Investors will be able to see their stocks grow as the company tries to better its relations with
employees, while modernizing its fleet. Eventually, we want our projects to break even and make a
profit. We project the benefits of the preventative maintenance program will reduce flight delays and
cancellations to improve the customers experience as a whole. Also, we project that this will start
changing Americans reputation as a tardy airline. The customer survey is an affordable way to get
primary data about the needs, wants, and issues of the customer; this will improve our service by acting
on the trends the data finds. Finally, the employee survey will give the company a better understanding
of different employee groups and what changes they would like implemented. Find a similar trend
through the entire workforce gives American an effective way to increase employee satisfaction and
profits.

Timeline
The first step American needs to take to fund these programs will be to separate a portion of their
current profits and savings. We estimate that this will take the company roughly a year. Immediately
after funding becomes available, the company will begin the preventative maintenance program and
hire a third party to distribute the survey to employees. Beginning 2019, the customer comment cards
will be made available on all domestic flights every other month for a year to encompass all travelers.
While these changes are being made, American will continue to filter out their old planes and replace
them with more fuel efficient aircraft. This process will be completed at the end of 2021. Overall, this
will reduce fuel costs by 10 percent, which will absorb the expenses of our recommendations. A more
detailed timeline can be found below.

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Conclusion
Employee dissatisfaction drives many of the negatives that are associated with Americans reputation.
Delayed flights, poor customer service, and upset investors can in part be traced back to employee
dissatisfaction. This report serves as a summary of the internal and external narratives surrounding
American Airlines, the key stakeholders of the company, and our recommendation on how to improve
Americans key issue. We hope you take into consideration the recommendations provided. These
programs will expand our profits in the long run, while repairing our reputation and increasing our
market share in the short run. Investing in our employees is key to developing a successful and
profitable company within the competitive air travel industry.

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