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You're Gonna Pay for That: American Shifts Some Focus From Low Fares to Service

Posted on: Wednesday, 10 May 2006, 06:00 CDT

By Trebor Banstetter, Fort Worth Star-Telegram, Texas

May 10--In a recent television ad, actor James Gandolfini describes the demanding nature of New Yorkers during a hectic taxi ride through Manhattan, before gratefully sinking into a first-class seat on an American Airlines jet.

As the actor, better known as mobster Tony Soprano, takes an entire bottle of wine from a smiling flight attendant, a voice intones, "We fly more New Yorkers than any other airline. If we can keep them happy ... "

The television spot, which airs in Great Britain, targets first-class customers who might otherwise fly British Airways. It focuses exclusively on American's premium service, with no mention of ticket prices.

It's the latest indication that American and other major airlines are shifting some of their marketing muscle away from fares and back to service, particularly for high-end frequent fliers who routinely travel first class or business class. The swing comes amid a broad increase in airfares during the past year, which has softened the intense drive to attract customers with the cheapest price.

It's a significant change for American, which has worked for several years to convince travelers that it offers fares just as low, or sometimes lower, than discount rivals like Southwest Airlines and AirTran Airways.

It's also a challenging task.

Since 2000, airline service has become a punch line, after most carriers slashed in-flight perks and created masses of irritable, burned-out flight attendants and gate agents with steep salary cuts and layoffs.

Reports of shoddy service inspired Web sites like www.ihateamericanairlines.com, which blasts American employees and executives as "uncaring, unfriendly, snobbish nit-wits."

"Because of all the cost-cutting and restructuring, this idea that the big airlines offered full service just went away," said Robert Mann, an airline industry consultant with R.W. Mann & Co. of Port Washington, N.Y. "In many cases you had airlines like Southwest and JetBlue with better service, better entertainment and a perkier staff."

Dan Garton, American's executive vice president of marketing, said many consumers have forgotten that American has different levels of service, unlike its discount rivals. A passenger willing to pay more can get a bigger seat, meals, drinks and more attention from the flight crew.

"In hotel terms, you have the penthouse suite and you have the regular rooms," Garton said. "We want to remind people that we offer a great experience in those suites."

Focus on price

American has some stiff competition on the service front. Rival United Airlines has also made a priority of attracting first-class passengers, installing larger seats and beefing up amenities.

Both airlines operate hubs in Chicago and vie for the city's well-heeled business travelers.

Flights to Europe are also getting more competitive. In addition to competing with United and Delta for premium-class passengers, American must contend with startup airlines MaxJet and Eos Airlines.

Those carriers, which fly between New York and London, offer all-business-class cabins and amenities such as limousine service to the airport, extensive in-flight entertainment and catered meals.

Service was once considered the leading draw for airline passengers, with United Airlines urging customers to "fly the friendly skies," and American proclaiming that there is "something special in the air."

But the low-fare revolution launched by Southwest and other carriers, coupled with Internet travel sites that made it easy to find and buy the cheapest fare, trained a generation of travelers to buy the cheapest seat.

Marketing efforts shifted to the price front.

"For a long time people assumed that our fares were higher in every case and never bothered to check," Garton of American said. "We've worked hard to get that message out."

American's two-year-old television campaign, which spreads the message, "We know why you fly," does not focus specifically on service or price. Instead, it tries to convey that American is aware of the reasons people fly -- to visit relatives or for important business meetings -- with humorous or heart-tugging ads.

Mann, the airline industry consultant, suggested that campaign has run its course.

"I think it's gone beyond its natural lifetime," he said.

Much of American's advertising still touts its fares, particularly in local markets. The airline, based in Fort Worth, typically matches the prices of discount rivals.

Mann said American has largely succeeded on that front.

"The perception that American has the highest fares has been erased," he said. "So it makes sense to look at other elements of their product, like service."

Garton agrees. He notes that sales on the airline's Web site are up 60 percent this year, an indication that many bargain hunters regularly check American's prices.

"But while that's important, we have to maintain the American Airlines brand and attract the higher-end customers," he said.

Garton said a new TV ad highlighting international and premium service is planned for U.S. markets.

"First class can make a real difference," he said.

In addition to new marketing efforts, American is rolling out a host of initiatives aimed at high-end travelers, including "lie-flat" seats in its business-class cabin on international flights, and new food and entertainment offerings in first class and business class.

It is also shifting capacity to new international destinations, like Shanghai, China, and Delhi, India, which typically draw higher-paying business passengers.

The airline has also embarked on a blitz of frequent-flier promotions this month as its celebrates the 25th anniversary of the AAdvantage program.

"These are all places where we think there is a good return on our investment," Garton said. "It's as simple as that."

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Trebor Banstetter, (817) 390-7064 tbanstetter@star-telegram.com

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Copyright (c) 2006, Fort Worth Star-Telegram, Texas

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Source: Fort Worth Star-Telegram (Fort Worth, Texas)

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