American's planes are getting a makeover in a bid to drive revenue higher

Key Points
  • American Airlines is working to standardize its planes.
  • The retrofitting strips out 40 main cabin economy seats and replaces them with 24 premium economy seats.
  • Premium economy seats are wider and have more leg room.
American Airlines retrofitting cabins for bottom line gain

The American Airlines 777-200 pulled into the hanger in Everett, Washington, and within minutes, workers from Aviation Technical Services started tearing out seats.

"It lands, we check the existing systems and then we start tearing the airplane apart," said Troy Sokolowski, senior manager for vendor management at American Airlines.

Retrofitting an American Airlines 777-200 means stripping out 40 main cabin economy seats and replacing them with 24 premium economy seats, which are wider and feature more legroom.

Workers from Aviation Technical Services retrofitting an American 777 aircraft.
Meghan Reeder | CNBC

The new premium economy seats sell at a higher fare than the main economy seats, which allows the airline to offer customers a higher level of service.

"There are certain products that some of our customers are willing to pay for and certain that they aren't," American Airlines Chairman and CEO Doug Parker told CNBC last September.

"For example basic economy today is a product that allows us to match the fares that are on the ultra-low cost carriers like the Spirits of the world, but it doesn't have all the same amenities like the ability to change your seat or the ability to bring on a bag that can't fit under the seat."

Parker and his team believe greater differentiation of seating classes on American's fleet of planes is the key to driving more revenue and higher profit margins.

Why? Primarily because passengers have shown a willingness to pay up for a seat and service beyond basic economy.

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"What premium economy does is allow an airline to offer a stairway to heaven if you will," said Henry Harteveldt of Atmosphere Research Group. "You have standard coach for people who have the most limited budgets, you've got premium economy as an affordable in between, and then you have business class for people who have the means to enjoy the greatest comfort."

For American, standardizing the seating on its fleet of 67 Boeing 777s should also eliminate the cost and headaches of rebooking passengers when the airline has to swap out planes due to a last-minute cancellation. In the past American would sometimes have to make a last-minute replacement of a 777-200 seating 289 passengers with a 777 that had 260 seats. The change would mean rebooking 29 passengers on a different flight.

"That means there is a bit of Russian roulette going on and sometimes somebody gets bumped down," said Harteveldt. "Airlines want to try to reduce that from happening."

American's reconfiguration of its 777 planes will be completed in December. In Everett, it takes Aviation Technical Services six days to strip out and replace seats, rewire the electronics and finish the upgraded interiors.

Time is of the essence. In less than a week, this reconfigured 777 will back in the air flying American passengers from Dallas to Sao Paulo.

Workers from Aviation Technical Services retrofitting an American 777 aircraft.
Meghan Reeder | CNBC