Stabilise, shift gears and accelerate
In December 2013 Jim Butler was appointed President of American Airlines Cargo and was one of the six persons named to the core integration leadership team responsible for the integration of American Airlines and US Airways. Ten months later, in October 2014, the merger achieved a significant milestone as the cargo divisions were combined under a single air way bill. The new entity brings in more than $800 million each year and moves more than one billion pounds of freight and mail annually. Butler talks to Reji John about what went through in the integration process and what is his current assessment of American Airlines Cargo (AA Cargo) that is steadily accelerating towards to record a billion dollar in annual revenues. Edited excerpts:
What has been your experience of leading the merger of cargo operations of two airlines? The integration was the first and the biggest challenge I had. I had no cargo experience. So, I think, actually that ended up being a benefit. I have an incredibly capable team. I am biased. But I think I have the best team in the industry. I think they did an outstanding job for putting the two airlines together. There is a very big difference in the size of the cargo businesses of American Airlines and US Airways. American had twice as much passenger revenue as that of US Airways. On the cargo side, American was four and half times as much cargo revenue as US Airways. That is because US Airways was more focused on domestic narrow bodies. Really what we had was an engaged team that was excited to building a $900million cargo business. On the passenger side you actually have the benefit of a lot of different ways how you can bring value to the customer: you have code sharing, frequent flier. You can’t do that on the cargo side as there is no such version. What we had to focus on through integration was to integrate it quickly. We did that through a number of ways. We employed what we called “adapt and go”, which meant unless there is a really compelling reason use the systems and processes of the larger carrier, which in this case was American Airlines. So we were able to get though it by late October 2014.
What is your current assessment of the merged entity? First thing is to stabilize. Then you shift gears. You have now two different carriers working as one. You want to make sure that you get the standards across the entire network to the American Airlines’ standards. We went through an incredible amount of training, analysed processes and optimised resources. Taking advantage of everything we learnt through that integration and applying it across the entire network regardless of whether it was American Airlines or US Airways. Shifting gears lately, we are asking how we set American Airlines’ cargo up for future. How are we going to take advantage of all the growth that is coming through our new aircrafts? We are challenging the team to question how we do business every day. See if there is a better way in which customers want to interact with us; having better visibility across our network. There is a larger goal and a very important shift that you make from the tactical aspects of the integration to strategic aspects of how you are going to move forward.
Has the moment of acceleration begun for American Airlines Cargo? I never wanted anyone to say that the integration is through. Part of the reason for that is the passenger side keeps integrating. Changes are happening with our colleagues on the ramp and how they do business. So we want to make sure that we are a big part of that. We are making sure that we are in tune with all the changes that are happening in the company. For most part, our customers now have one network for American Airlines Cargo, and we have shifted to strategically working with them and working on what next generation of cargo is going to be like. We are thinking different strategic ways of how we engage with customers. We are diversifying our customer base because we have a larger network making sure that we are relevant to all of the new places that AA is doing business. So the acceleration is happening with different challenges in the post integration versus during integration. The one thing that I recognized since I got into cargo is that there is a lot of momentum around change right now. Thinking about the industry differently; working together to modernize the business and to accelerate the transparency to shippers; partnering with our customers so that they can provide a better solution to shippers. There is a lot of acceleration. We are ready for it and we are part of it. But there is a different mindset and a very different set of challenges from what we went through during integration.
What were some of the biggest challenges in the integration process? Everything challenged us. You can tactically put two airlines together. But there are a couple of key things. You want to make sure that you are not just adding two airlines together, but you are providing a seamless product, service, and processes across the board. There was a massive training effort; training not only for folks in the cargo division but for those out there on the ramp. Training was a very big component. We did not have many challenges from the systems side because both airlines had similar systems. One of the things that we really spend a lot of time focusing on was to make sure that we capture the best of the both worlds. It is fair to say that pharmaceutical is the best example where we took the American Airlines’ processes and expertise and extended it to the US Airways network and equal example on the US Airways side was that there was a very big focus on human remain business and we want to make sure that we extend it that across the entire airlines’ network. There are several such examples. When you go through such a process, it is not just a question of tactically bringing airlines together but it is making sure that you are getting the value out of the merger and transferring that value to the customers.