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Shanghai China Start-up Presentation


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Presentation from Kurt Hodgin for the Manager of China Position at American Airlines

Presentation from Kurt Hodgin for the Manager of China Position at American Airlines

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  • 1. July 7, 2005 Manager of China Overview from Kurt Hodgin
  • 2. Managing AA’s Business In China
    • Package will give an overview of the planning areas that I believe need to be discussed in order to meet the job description and requirements for the “Manager - China” position
    • The package has four broad areas -
      • Managing the Airport Operation (PVG - Pudong)
      • Managing the Relationships with Governmental and Administrative Agencies
      • Managing the Sales and Marketing Functions in China
      • Overview of how Kurt makes this possible
    • Material included in this package come from my discussions that I’ve had with International Planning, International Regulatory Affairs, Customer Services, Passenger Sales, Cargo, SSE (Safety, Security, & Environmental), SOC, Flight, Crew Schedules, and Operations Analysis and my own experience regarding the start-up of the Shanghai (China) services
  • 3. Managing AA’s Business In China
    • Managing the Airport Operation (PVG - Pudong)
      • Airport Staffing
        • Decision point needs to be made whether to staff with AA Passenger Service agents or use ground handlers at PVG
          • Either SIA or MU
        • If AA elects to hire own passenger service agents, then I would propose annual employment contracts similar to AA’s other on-line stations.
          • Determine staffing requirements - 5 hour shifts for ATO/Gate agents; load factor (188 PB’s per dept) and operations (gates separate from ATO’s) equates to an approximate staffing of 14 agents, plus one ISC (GM also ISC), plus one to two full time Cargo agents that also act as sales reps for Cargo. Est. cost at $800/turn
          • DOR, SK, and the three holiday periods (week of 1 May, week of 1 Oct, and New Years) would need to be addressed in employment contracts
        • Training - direct hire or Third Party Handler (TPH) agents will require Sabre training. I would prefer AA agents come to FSU for 4 weeks of training followed by two weeks of OJT at ORD working flights (NRT). TPH agents can be trained in PVG assuming that ITS has Sabre wired at PVG airport. Either set of training should commence mid-February to early March 2006. One issue is how to contractually control the level of customer service provided to AA customers. One way to do that is to require the same agents, by name, designated to AA on a daily basis such that they would learn AA’s customers and AA’s customer contact skills
      • Aircraft Handling
        • Ramp handling will be outsourced to either SIA or MU. AA will pay per-turn cost based on negotiated contracts with either SIA or MU. Deicing should be priced on a per-event basis. Might be able to have slight cost leverage with regards to A/C Mtc and Cargo handling by choosing one provider over the other. SIA may confer other airport operational advantages by choosing them initially
        • Into-plane fueling will be handled by SIA
        • Aircraft Maintenance done on per call-out basis. PVG airport is 777 maintenance qualified
        • Cargo handling done by either SIA or MU. SIA subordinate department at PVG is AAS
        • Aircraft catering provided by JV of GateGourmet and SIA
  • 4. Managing AA’s Business In China
    • Managing the Airport Operation (PVG - Pudong)
      • Airport Operations
        • Securing PVG airport office space with SIA - ATO space, Gate counters, back office space
          • Office space for sales functions in Shanghai - possibly sublease GSA space initially
        • ITS set-up needs to commence immediately before KIX and DEL inauguration. Sabre lines, SITA phone lines, and PC equipment (Quantum?) will be in place in advance of any training. FIDS and EGR’s need to be addressed as well
        • Crew Hotels - develop negotiated rates including roundtrip transportation with at least two properties and obtain approval from Security, Flight, and Flight Service
        • Include security costs either through airport rent or landing fees. Must include both passenger and cargo security
        • Develop banking relationships for deposits of locally collected revenue
          • Invite Corporate Audit and Corporate Banking to participate
        • Banking relationships will also be needed for TPH ground handling contracts, local accounts payable, and any AA direct labor expenses - again, coordinate with Corporate Banking and Corporate Audit
        • Develop environmental and safety contacts within SIA for disposal of cargo/passenger generated HAZMAT
          • Acquire approvals for disposal outside of Shanghai province - try to use Jiangsu or Zhejiang provinces for speed and effectiveness
        • Premium Services
          • Pay per head fee to use existing premium passenger lounge in PVG, or work with SIA to develop a One world segregated lounge in which extra operating costs would apply
          • Use lead agents as premium service reps for “high-value” or “special services” type passengers
        • Cargo facility and any bonded storage/HAZMAT requirements
          • Develop plan with AAS that will meet AA’s requirements from both corporate and customer perspective
          • Known shipper and PPS requirements for PVG
  • 5. Managing AA’s Business In China
    • Managing the Relationships with Governmental and Administrative Agencies
      • File and receive AA’s license to conduct business in PRC (completed)
      • File and receive AA’s operating authority license from CAAC
        • CCAR 129 in process of being completed in order to finish CAAC operating authority request
        • ATC and Radio operation licenses (US equivalent FAR 121)
      • File and receive AA’s slot authority for PVG
        • File with CAAC and Shanghai regional office of CAAC AA’s intent for the slots to be used in 2006
        • File immediately after operating authority is received
        • Slot authority will probably be granted in November for Summer ‘06 season, but AA needs to file as soon as possible
      • Liquor license requirement
      • HAZMAT disposal certificate requirement
        • Disposal probably should not be in Shanghai province
      • Work with SIA Security department to obtain any administrative permits
      • Work with PRC Immigration/Customs to develop relationships to facilitate passenger arrivals
        • Customs requirements for in-bound freight
      • AOA badging for AA employees
      • Banking licenses required for repatriation of funds
        • Use HKG as transshipment point?
      • Cargo carriage requirements beyond CCAC129 filing
      • Develop relationships with local officials
        • SIA senior staff and departmental operating staff
        • CAAC and CAAC Regional Staff
        • Shanghai mayor and staff - The Honorable Han Zheng
        • China Eastern senior staff
  • 6. Managing AA’s Business In China
    • Managing the Sales and Marketing Functions in China
      • Start-up market advertising and sales functions
        • Programs to move PVG O&D market share - Leisure
        • Focus on large BSP travel agencies in PVG that can move market share to AA from UA/NW
      • Identify major US customers with PVG as their destination or intracountry connection
        • ARC data
        • Foreign joint venture owners - H-P (Shenzen/Guangzhou), others
        • Leisure markets (Consolidators and VFR’s - Visiting Friends and Relatives)
          • Gateway Travel - $50M/yr to AA; 7-8K segments per month transpac
          • CNH Travel - LAX based, with tour subsidiary
          • Tour consolidators (PVG origination; and MU to PEK for origin/destination there)
          • Beijing 2008 Olympics and Shanghai 2010 Expo - position AA to take advantage of marketing tie-ins / customer travel
          • Work with Capacity Planning to secure Flight Nbr’s - AA888/889
        • Decision needs to be made near term with regards to AA’s relationship with GSA in PVG (Hung & Kit)
          • In locations where AA staffs a Passenger Sales group, we do not have a GSA (TYO, KIX, NGO)
      • Shift market share to AA using the CCBS toolbox
        • Convenience of one-stop to anywhere in U.S. versus NW/UA’s multi-stop (NRT)
        • Target Siemens, General Motors, Citicorp, BoA, and others in order to move market share from NW and UA
          • Top tier customers, corporate travel account reps, corporate agencies of record
          • Complimentary Admiral’s Club passes (US point of departure, eg DTW+ORD for US departing GM employees) for day-of-flight for high-value corporate passengers with Full-YC tickets; possible upgrades to BC for targeted corporations
          • Matching AADV premium status
        • Promote ORD-PVG nonstop to North American customers (needs to start November 2005)
          • YYZ / YUL and East Coast U.S. traffic to flow through ORD - “one-stop” to Shanghai marketing campaign for NYC/BOS/YUL/YYZ markets
          • Use local Asian trade/daily publications for marketing efforts - YUL, NYC, BOS
          • Participate in China Tourism and Tradeshow organizations
          • Host possible FAM trips to PVG, underwritten by local hotel groups and/or American Trade Development groups
          • Coordinate KIX/NGO marketing in the U.S. with PVG to give the breadth of AA’s Asian schedule
          • Work with ORD on TWOV for selling those passengers who want to go “through” to Europe/ South America
        • Codeshare possibilities with China Eastern (MU) and Cathay Pacific (CX) out of or into PVG
          • Work with MU and/or Oneworld partners to develop Premium Passenger amenities in PVG
  • 7. Managing AA’s Business In China
    • Managing the Sales and Marketing Functions in China
      • Differentiate AA’s on-board product versus U.S. and Chinese carriers
        • Powerports, Seat-back entertainment, lie-flat premium seating, culturally sensitive dining options
      • Cargo Marketing and Sales
        • Develop Known Shipper network in both Shanghai region as well as regions to the south (Guangzhou)
        • Institute procedures for converting current freight forwarders to Known Shippers
        • Develop and make known AA’s network coverage for shipping and align our products with the customers requirements E
          • Emphasize AA’s ability to go directly to the U.S. versus trans-shipment point in NRT
        • Develop direct shipment customers outside of freight forwarder networks
  • 8. Managing AA’s Business In China
    • Kurt makes doing business easy - Day One Impact
      • Hired in SSE October 1, 2000, prepared budget and presentation packages for review with the Chairman in late November 2000
      • Vast experience with the operating departments and delivering the data and information in a timely and accurate fashion
      • Integrated SSE’s business plans with budget process. Merged entity provides springboard for Performance Management system (assuming HR still does that in 2005)
      • Innovative in arriving at solutions not addressed in “operating manuals”
    • Understands and knows the HDQ departments in order to progress China’s business agenda
      • Understands that good ideas may take time to implement because of the leg-work you have to do with HDQ’s departments
      • Has met with or discussed Shanghai start-up with: International Planning, International Affairs, Customer Service, Cargo, SSE (Safety, Security, Environmental), SOC, Flight, Crew Schedules, and Operations Analysis regarding their specific plans on the start-up. Have also discussed DEL with a number of these departments
    • Understands how Non-U.S. Payroll issues aren’t accounted for in U.S.decision making groups
      • Managed the Perfect Attendance program systemwide for nearly 5 years
    • Not constrained by “that’s not the way we have always done it” preconceptions
      • Realistic enough to understand what will work in the field
    • Supportive of VP’s business plans and assisting in turning those plans into reality