Title: American Airlines CEO Questions the Value of Free Travel as Employee Compensation
Date: August 6, 2023
During a recent internal question and answer session at American Airlines, CEO Robert Isom expressed his reservations about offering free travel as a form of employee compensation. Isom’s comments are surprising, given that he leads an airline. The discussion came after an employee raised a question about recognition programs that involve giving away free travel, potentially costing the company 80 confirmed tickets per year.
Isom emphasized the importance of utilizing a compensation system that relies on dollars and cents whenever possible. He argued that offering travel as a reward often costs the company more than the actual value employees ascribe to it. Isom provided an example, stating that a non-stop flight to Rome could cost around $2,000, and unless employees feel they are receiving that amount in value, it would be more practical to find alternative ways to compensate and reward them.
While Isom acknowledged that he is not completely against providing free confirmed travel, he mentioned that American Airlines had spent hundreds of millions of dollars on such initiatives in the past. He emphasized that unless the value of the travel matches or exceeds the cost, the company should explore different means of recognition and encouragement.
In 2017, American Airlines was named Air Transport World Airlines of the Year and celebrated by giving each employee two positive space passes for travel worldwide. Isom, who was the airline’s President at the time, expressed that he would not repeat that decision.
Isom also highlighted the role of taxes in influencing compensation decisions. He drew attention to the fact that health insurance is often provided through employment due to its favorable tax treatment, and suggested that this should be considered when evaluating the benefits of offering in-kind items versus monetary compensation.
One alternative proposed by Isom is to award AAdvantage miles, the airline’s loyalty program currency, for trips. This approach would cost the company significantly less than providing free travel and could still hold considerable value for both employees and consumers.
Isom’s perspective aligns with the notion that in-kind items may not always be the most effective form of compensation. He stressed that nothing is truly free and argued that employees are often better off when given the monetary equivalent of perks, as it allows them the freedom to make decisions that best suit their needs and preferences.
While some individuals may appreciate the perceived value of receiving free tickets or other perks, Isom’s stance reflects a more comprehensive understanding of trade-offs and practicality in employee compensation. By reevaluating its recognition and compensation programs, American Airlines may find more cost-effective methods of motivating and rewarding its workforce.
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