The CEO Of American Airlines Doesn’t Like Giving Free Travel To Employees (And He’s Right)

During the internal “State Of The Airline” question and answer session following the American Airlines second quarter earnings call (a recording of which was reviewed by View From The Wing) an employee asked about recognition programs about adding in free travel in a way that might cost the company ’80 confirmed tickets per year’. For context, American Airlines flies over half a million passengers per day.

And CEO Robert Isom laid out the reason he doesn’t like offering free travel as a form of compensation for employees – which might be surprising since he leads an airline.

I think it’s also important for us that when we talk about recognition and compensation, you know at the end of the day I’d just love to do everything in dollars and cents to the extent possible. When we use travel in some circumstances to say this is a prize for doing something, you have to realize that it costs the company money – and quite often more than the value that you would ascribe to it.

Let’s face it… If I wanted to buy a flight to Rome non-stop tomorrow, what’s the going rate right now? Probably about $2,000. Unless you feel you’re getting $2,000 I’d rather just go sell the ticket and figure out a different way to compensate and reward and encourage.

So I’m not saying we’d never do free confirmed space travel again, but I do have to tell ya that when we did it for the Air Transport World recognition in 2017 we weren’t talking about a tens of millions of dollars type overhand for the company, we were talking about something that cost hundreds of millions of dollars. So unless we value it that way, we probably ought to figure out a different way.

I don’t want to pour cold water on something, but it’s something I feel strongly about. That travel that we provide to our customers, we charge them a lot. They pay us accordingly. We just have to treat it as though it’s the same thing as money.

In 2017 American Airlines was named Air Transport World Airlines Of The Year and in recognition gave each employee two positive space passes for travel anywhere in the world. Isom, who was the airline’s President when that decision was made (Doug Parker was Chairman and CEO), wouldn’t do that again.

  • When someone values the in-kind item more than it costs, provide the in-kind item
  • When someone values the cash more than the in-kind item, provide the cash

Taxes sometimes influence this. For instance, we don’t just provide health insurance through employment in a majority of cases in the U.S. (economical to purchase as a group, adverse selection helps explain why Obamacare needs provider subsidies) but also because it’s not taxed the way payroll is.

If the airline wants to provide travel in a way that costs them less than the value consumers and employees ascribe to it, they should consider awarding AAdvantage miles for trips. The miles cost the airline perhaps 72 basis points but can be worth twice that to a traveler (or more).

Years ago I had an employee ask me to consider paying for gym memberships for all staff. I reframed the ask, suggesting to him he wanted:

  • Everyone to get an across-the-board raise
  • And tell them there was only one way they’d be allowed to spend that raise?

People like stuff for free, but nothing is actually free, and are probably better off most of the time with the monetary equivalent. In other words Robert Isom is right. Of course some people don’t actually want their freedom in practice, or to think about tradeoffs and decisions. So gym memberships and free tickets are better, because they’d like to think that those things are free.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I worked as a FSC from 1991 to 2022. I was there for the best years when Crandall was the King of AA, loved and respected. Flying Non Rev is no longer a perk when you can’t even get a seat. The operation at DFW is a joke. I know this because my family works for AA. Broken equipment, broken fans in this heat, CSM’s treating the ground crew like slaves. Isom needs a reality check. Only reason he’s fine with taking that way is for more million dollar bonuses for him and his useless flunkies.
    We at AA for the most part have zero respect for Isom.

  2. He’s not right. What does it matter that it cost you anything when it cost you everything. People matter and you will get more gain from what you’ve given to them than lose because the people will work harder. Sure you will have those that just don’t but the majority will do the work.

  3. The same sort of analysis and logic could be used regarding his annual compensation. Airline CEOs overseeing airline strategies and contract negotiations, managing resources and operations, are all things that could easily be done with AI programmed with the airline objectives and contracts. American Airlines is failing under his leadership. It is absurd that he makes $50,000.00 an hour to do so poorly.

  4. He uses the term “team” as if he believes this will help make an employee feel a part of….. Empooyees mean zilch to that man. He’s proven it time and time again. Unapologetically, mind you. Flight benefits are nonexistent at AA. Just the way Isom likes it. Cheers

  5. My question to the CEO: does he pay for his own flights out of his multi million dollar salary? Does he work outside loading and unloading his planes, rain or shine? Does he work in bellow zero or above 90F temperatures? Most of us work for the benefits, not for the meager salary. Take that away and we are gone.

  6. Acft maintenance at dfw is a joke. This ceo has no clue… no parts, jets are flown till broken, equipment is garbage and ancient, management threats 24-7. Morale what’s that. Non rev that’s a joke. Team member??? Who thought of that…benefits are everything lose employees to sw all the time…isom only there for 1 reason!!!!

  7. I used to work for airlines co. I totally agree with the employees. Take away the benefits, and flight benefit is one of them, then co. Get nothing to pay for the employees’ hard work. This show the greedily and unappreciated. Screw them.

  8. Sounds like you should have gotten gym memberships for all your employees. It says something when a company invests in the health of its employees.

  9. Coming from someone that gets positive space travel for himself and his family that’s rich.

  10. Have not used a pass in some time! We can purchase a ticket!!! My husband is Delta and they are great to the employee. Run by seniority too! We also buy advantage miles!!! We have no passes, When I commuted I purchased $39 seats on my own carrier! The days of passes gone. Use miles when u shop!

  11. American Airlines has a history of being known for knowing the cost of everything…

    ….And the value of nothing.

    So this comes as no surprise.

  12. As many Dhds as crews are on each and every day. How much is that costing? I’m sure that has an associated cost.

  13. This was why I quit AA working as a CSA. It’s very clear the company couldn’t care less about us. The flight benefits were the only thing keeping me there, and when it became clear the company was doing its darndest to make sure their flights would have no empty seats for its standby employees, I was gone. Within less than two years I’m making more money than I was there, I work from home, and have a completely flexible schedule with weekends and holidays off. Quitting was the best thing I ever did. With this attitude continuing this job will continue being a revolving door. Such a shame. Take care of your employees or you will keep losing them!

  14. It’s easy for him to say there’s not much value in it when he and several layers of management below him get free positive space business class. when i worked for AA, Doug Parker said in a town hall that the free positive space travel is part of the compensation package for executives.

    this article doesn’t mention the fact that many airlines (AA included) pay employees below market salaries and tell employees it’s because they have standby travel as a benefit.

    i’m happy i now work for an airline that not only pays market rate salaries, but also actively uses positive spade tickets for recognition, contest prizes, and even door prizes at company events.

  15. Take a lesson from Richard Branson. Your staff are your greatest asset
    “ If you look after your staff well, they will look after your Business “. ..a very simple but effective ethic…and it WORKS! Take heed AA and you will see smiling CSA faces c at the airport followed by happier customers……..f

  16. As an employee this is very disheartening. I work res and last year I racced in half a million in revenue for sales. I had superb customer service and service time but my attendance probably could have used some improvement, I received no such reward which is understandable. But if someone who earned it for excelling in what I would do I would totally agree and more than likely stride to do better as I did not receive anything for my stats which I bear no ill will in that regard. But it is hard to travel non revenue(standby) and to see something like this it is clear that they are only for the benefit of their poccets than the benefit of its passengers and employees. It’s a business and I understand that but this type of attitude is clearly why we have fallen from 68 to 82 on top 100 airlines in the world.

  17. Think about this Mr. Isom you are an employee of AA. You feel that way but yet your perk and your predecessors is life time First or Businey class tickets. Yours are free and the employees very rarely get First or Business class. Does that mean you and your predecessors should feel the same way. Mr. Isom that was not a smart comment. At least Crandall cared about the customers. You and Mr Parker took away any way for the customers to be compensated for their problems if they are not elite status. Truthfully, you have your emails go through customer relations so you do not have to deal with the complaints.

  18. Like he pays for his airfare !!!! He doesn’t recognize his employees in any way, shape or form. We’re nothing to him !!!

  19. @Will, you sound like a bitter person who has zero clue as to what he is saying. Let me guess divorced from a flight attendant and/or didn’t get hired as a pilot?

  20. Do as I say not as I do has been an Isom mantra for years.
    Doug Parker wasn’t very well liked either but in hindsight he was positively adored if it’s viewed as a comparison to Isom.
    He has made it very clear he has no regard for his employees (non executive of course) OR his paying passengers. It’s no secret that if you are an employee nearing retirement age it would be preferable if you drop dead then take an iota of benefit from AA, either monetary or flight privileges.
    Especially at DFW – AA strokes DFW Airport Executives and they in turn reciprocate.
    Both are still replicant of the ‘good old boy network’ and an underbelly of seedy, corrupt, pocket lining Companies using toxic smoke and mirrors to project the image that they give a ‘flying f@!&’ about their employees.
    Respect garners respect – Isom has none from his employees and even that is more than he dishes out.

  21. Worked in the industry for 20 years, in a business where “Customer Service” is your product, a happy employee is an asset. But if you are a wealthy selfish CEO you can’t even fathom this.

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