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MarketScreener Homepage  >  Equities  >  Nasdaq  >  American Airlines Group Inc.    AAL

AMERICAN AIRLINES GROUP INC.

(AAL)
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Support for MAX brand wavers as Boeing jet nears green light

11/17/2020 | 11:41am EST
FILE PHOTO: An American Airlines Boeing 737 MAX 8 comes in for landing at LaGuardia Airport in New York

SEATTLE/CHICAGO (Reuters) - Boeing Co is set to win approval for its grounded 737 MAX this week, but chinks are appearing in the brand as the most traumatic chapter in the jetmaker's history overshadows the planes' original billing of superlative performance.

When it returns to the skies next month as expected after a nearly two-year safety review, the "MAX" name will still be officially in place. Some airlines, however, have begun to soft-pedal references to the aircraft following two fatal crashes that killed 346 people.

Industry sources familiar with the branding say the name will likely be phased out over time as a strategy unfolds among airlines to de-emphasize the "MAX" label in favor of the formal names assigned to each variant, like "737-7" or "737-8."

"You will see the MAX name used less frequently," one of the sources told Reuters. Another person involved in discussions over the marketing predicted the MAX name would gradually fade in coming years.

Boeing declined to comment.

The wavering support for the brand could be a setback for the company, which had unusually advertised a name as well as a model number, and urged airlines to "Think MAX." It also shows a potential sore point with airlines, who had invested promotional dollars in a name now seen as tarnished.

Brand Finance last year estimated the MAX's problems had wiped $7.5 billion off the value of Boeing's corporate image.

Anticipating this week's approval, American Airlines Group Inc plans to relaunch commercial MAX flights on Dec. 29 from Miami to New York City.

While passengers will see the MAX name on booking systems, they will not see it on safety cards in seat pockets, people familiar with the change told Reuters.

American said the change is not intended to hide the MAX brand and corresponds to a plan to standardize safety cards across its 737 fleet that began even before it took delivery of its first Boeing 737 MAX aircraft in 2017.

"This approach is consistent with other fleet types where we do not have different safety cards for sub-fleets," a spokeswoman said, noting a similar move with its A321 fleet.

American has vowed to be transparent with customers about the MAX and will offer other travel options if they don't want to fly the aircraft.

Originally conceived in 2011, the word "MAX" was only ever a marketing title for the latest 737. Removing it from the cards has no impact on safety. But the cabin is where airlines define their brand, planning every visual cue, and virtually nothing there happens by chance, airline marketing experts say.

Doubts over the name surfaced in August when a news release on a MAX order from Poland's Enter Air referred to it as the "737-8."

Last week, Air Canada used the same designation in a news release on quarterly earnings, with "MAX" appearing only in footnotes - a change from the year-ago format. An Air Canada spokeswoman said the airline uses the term "interchangeably."

While it is keeping the name, Boeing allows airlines to decide how they want to market the MAX. Even before the crashes, Ireland's Ryanair Holdings PLC had decided to refer to its specially designed version as the "Gamechanger" rather than "MAX".

"If Boeing's customers want it dropped, it will be dropped," a third source said, adding that some key "customers are saying the name MAX is tainted."

HIGH VISIBILITY

Pressures on the once-unstoppable brand name for Boeing's fastest-selling jet highlight a delicate problem for airlines.

In the near-term, they must restore public trust in the aircraft, which calls for transparency about which plane is being used, something U.S. operators have pledged to enforce.

But the name has also drawn high-profile scepticism.

In April 2019, U.S. President Donald Trump tweeted, "I would FIX the Boeing 737 MAX, add some additional great features, & REBRAND the plane with a new name."

In January 2020, the chairman of Air Lease Corp, an influential buyer, said the "damaged" brand should be dropped.

Changing the name of a tarnished brand has been a well-proven strategy for companies seeking to move past crises.

"Some people will remember and give you grief in the short term, but you've broken the connection," said Paul Argenti, a professor at Dartmouth's Tuck School of Business. "Someone getting on the plane four years from now won't remember 'MAX.'"

JET NICKNAMES

The MAX's branding woes are all the more tricky for Boeing, as naming civilian jets is the exception rather than the rule.

While official nicknames are common for military jets like the F/A-18 "Super Hornet," Boeing only gave its first nickname to a civilian jet with its 787 "Dreamliner" about a decade ago.

But for the MAX, it needed to pack a bigger punch in an all-out battle for market share against European rival Airbus SE.

In 2011, Boeing abandoned plans for an all-new jet and launched a quicker 737 MAX upgrade after being blindsided by a huge Airbus sale to American Airlines, the company now reopening MAX flights.

Boeing marketers came up with a name that "ticked numerous boxes: max performance, max capacity, max range," said a person familiar with the discussions.

A promotional Boeing video using camera angles to give the impression of a vertical take-off - tagged "Flown by Boeing test pilots. Do not attempt" - underscored the superlative claims.

"It was short and effective," the person familiar with the discussions said of the name. "The problem," he added, "is that in a negative context it has been very effective too."

(Reporting by Eric M. Johnson in Seattle, Tim Hepher in Paris, and Tracy Rucinski in Chicago; additional reporting by Allison Lampert in Montreal; editing by Matthew Lewis and Edward Tobin)

By Eric M. Johnson and Tracy Rucinski


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AIR CANADA -3.76% 22.03 Delayed Quote.1.23%
AIR LEASE CORPORATION -3.34% 43.17 Delayed Quote.0.54%
AIRBUS SE -3.30% 89.36 Real-time Quote.2.93%
AMERICAN AIRLINES GROUP INC. -2.10% 15.83 Delayed Quote.2.54%
ENTER AIR SP. Z O.O. -2.05% 38.2 End-of-day quote.-2.05%
RYANAIR HOLDINGS PLC -2.25% 15.205 Real-time Quote.-4.31%
THE BOEING COMPANY -1.91% 207.41 Delayed Quote.-1.57%
UNITED CONTINENTAL HOLDINGS, INC. -5.73% 42.59 Delayed Quote.4.46%
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Financials (USD)
Sales 2020 17 178 M - -
Net income 2020 -9 421 M - -
Net Debt 2020 32 875 M - -
P/E ratio 2020 -0,82x
Yield 2020 0,56%
Capitalization 9 669 M 9 669 M -
EV / Sales 2020 2,48x
EV / Sales 2021 1,67x
Nbr of Employees 110 500
Free-Float 99,1%
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American Airlines Group Inc. Technical Analysis Chart | AAL | US02376R1023 | MarketScreener
Technical analysis trends AMERICAN AIRLINES GROUP INC.
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TrendsNeutralBullishNeutral
Income Statement Evolution
Consensus
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Mean consensus UNDERPERFORM
Number of Analysts 21
Average target price 12,08 $
Last Close Price 15,83 $
Spread / Highest target 70,6%
Spread / Average Target -23,7%
Spread / Lowest Target -93,7%
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Managers and Directors
NameTitle
William Douglas Parker Chairman & Chief Executive Officer
Robert D. Isom President
David G. Seymour Senior Vice President-Operations
Derek J. Kerr Chief Financial & Accounting Officer, Executive VP
Maya Leibman Chief Information Officer & Executive VP