In what came as a surprise to many in the airline industry, former AA President Scott Kirby United as its new president. United has now added three key executives in the past several months, shoring up both its management strength and succession planning.
An Embarrassment Of Riches
American had a problem that many airlines would love to have: too much management talent. With so many talented executives at the top, American had to do succession planning, or risk losing them. Apparently, Mr. Isom has won the day, with the former Chief Operating Officer moving up to the President slot.
Losing Mr. Kirby is not easy for American. He is regarded as one of the best revenue managers in the industry and has been with the team since it was America West. He is also a key member of the integration team, particularly on the fare front.
Will Fares Decline?
Mr. Kirby’s revenue strategy centered around the strength of American’s hubs. Whenever a carrier put flights into an AA city, he would bring down the hammer, matching fares, even at levels that may not have been highly profitable. Look at Spirit, who has significantly slowed its growth in Dallas. On the other hand, he also launched “Advantage Fares,” which put inexpensive one-stop flights in markets where competitors had non-stops. These strategies not only led competitors to match but also encouraged them to retaliate with similar structures in AA hubs. The airlines have been accused of collusion and price-fixing but, if that was their intent, they’re pretty bad at it. Fares have only gone down over the past couple of years.
If he brings the same strategy to United, flights out of its hubs could see similar decreases.
The Big Winner? Scott Kirby
Other than United, who has made a habit of picking up scorned managers (New CFO Andrew Levy came from Allegiant, where there was also no path to the top.), the big winner is Scott Kirby himself. He will receive $4 million in severance and be fully vested in over 250,000 shares of AAL, currently valued at slightly over $36 per share. No word on whether he will be granted elite status or have to complete a status match challenge at United.