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American Air hopes to turn luck around with deals
Reuters, 04.13.03, 1:38 PM ET
By Jon Herskovitz
DALLAS, April 11 (Reuters) - American Airlines is betting that massive labor concessions
Will keep it out of bankruptcy as it tries to recover from some of the worst tragedy, sorrow and
downright bad luck a carrier has ever endured.
The company, the world''s largest airline, struck tentative agreements on March 31 with its three
main unions. By Tuesday, all members will have voted on the deals, which are aimed at saving
American $1.8 billion in annual labor costs.
If American wins agreement to the deals, it hopes to emerge as a carrier that can entice customers
with its leading global network and, with costs under control, to compete with low-fare carriers
such as Southwest Airlines Co. (nyse: LUV - news - people).
Almost the entire airline industry has been reeling since the Sept. 11, 2001, attacks on the United
States, which caused demand to plummet and increased costs for insurance and security. The war
in Iraq has only made matters worse.
But American, a division of AMR Corp. (nyse: AMR - news - people), has seemed to be
particularly hard-hit.
The company and other large-network carriers were struggling before Sept. 11 as demand shifted
away from business-class tickets and unrestricted fares that accounted for a significant percentage
of their profits.
American lost two planes and 17 crew members on Sept. 11. While employees mourned the
loss of their co-workers and the United States reeled from the attacks, AMR Chief Executive
Don Carty cut 20,000 jobs as the sharp drop in air travel turned the company''s financial woes
into a crisis.
Two months later, just as air passengers started to trickle back, American Flight 587 crashed
after taking off from New York''s Kennedy Airport, killing 265 people. The airline''s workers
mourned for more lost colleagues, while its managers went to New York again to console
victims and investigate the incident.
Then Briton Richard Reid attempted to explode a bomb hidden in his shoe on American Flight 63
from Paris in December 2001 in the most visible terrorist threat to a commercial airline after
Sept. 11.
EXODUS REVISITED
American missed out on receiving money from a federal loan guarantee program to help carriers
recover from Sept. 11 when the government said the company''s financial situation was not dire
enough to meet the criteria, airline officials said.
Meanwhile American kept losing money. It lost $1.76 billion in 2001 and then chalked up an
industry record loss of $3.51 billion in 2002. The top eight U.S. carriers posted a net loss
$7.5 billion in 2001 and $11 billion in 2002.
There were bright spots for American.
Its performance record improved. It expanded the use of automated check-ins and electronic
ticketing and allowed customers to use their own computers to print their boarding passes.
These changes should save about $2 billion in annual operating costs.
But the bad news and bad luck kept coming.
The war in Iraq helped push American onto the verge of bankruptcy by splashing frigid
water on already tepid demand for travel.
The airline has fewer flights to Asia than some rivals, but as luck would have it, images
of an American Airlines jet on the tarmac in San Jose, California, during a SARS scare
earlier this month were shown on live network TV. No one on the plane had the flu-like
virus, and the incident was a false alarm. But so far, only an American plane has had
such a high-profile quarantine at a U.S. airport.
Meanwhile, the odds on the carrier winning approval of the labor deals have been shifting.
Union leaders have indicated it may be difficult for workers to accept concessions without
additional terms that would benefit the rank and file when business improves for the
slumping airline industry.
While market forces and the mechanisms of its employee base buffet American, it seems that
Mother Nature also has had it in for the airline.
A few days after striking the tentative deals, a severe storm hit near American''s home
in the Dallas-Fort Worth area. It left the cities'' downtowns mostly untouched, but hail
nearly the size of golf balls damaged 59 American aircraft at the DFW International Airport.
The bad news is, we had hail damage, Carty joked in a recent address to employees.
The good news is that according to the Book of Exodus, we missed the Red Sea and the
plague of frogs. The other bad news is that we have locusts still to come.
Copyright 2003, Reuters News Service
So why can''t American pay it''s mechanics comparable to Southwest?
Reuters, 04.13.03, 1:38 PM ET
By Jon Herskovitz
DALLAS, April 11 (Reuters) - American Airlines is betting that massive labor concessions
Will keep it out of bankruptcy as it tries to recover from some of the worst tragedy, sorrow and
downright bad luck a carrier has ever endured.
The company, the world''s largest airline, struck tentative agreements on March 31 with its three
main unions. By Tuesday, all members will have voted on the deals, which are aimed at saving
American $1.8 billion in annual labor costs.
If American wins agreement to the deals, it hopes to emerge as a carrier that can entice customers
with its leading global network and, with costs under control, to compete with low-fare carriers
such as Southwest Airlines Co. (nyse: LUV - news - people).
Almost the entire airline industry has been reeling since the Sept. 11, 2001, attacks on the United
States, which caused demand to plummet and increased costs for insurance and security. The war
in Iraq has only made matters worse.
But American, a division of AMR Corp. (nyse: AMR - news - people), has seemed to be
particularly hard-hit.
The company and other large-network carriers were struggling before Sept. 11 as demand shifted
away from business-class tickets and unrestricted fares that accounted for a significant percentage
of their profits.
American lost two planes and 17 crew members on Sept. 11. While employees mourned the
loss of their co-workers and the United States reeled from the attacks, AMR Chief Executive
Don Carty cut 20,000 jobs as the sharp drop in air travel turned the company''s financial woes
into a crisis.
Two months later, just as air passengers started to trickle back, American Flight 587 crashed
after taking off from New York''s Kennedy Airport, killing 265 people. The airline''s workers
mourned for more lost colleagues, while its managers went to New York again to console
victims and investigate the incident.
Then Briton Richard Reid attempted to explode a bomb hidden in his shoe on American Flight 63
from Paris in December 2001 in the most visible terrorist threat to a commercial airline after
Sept. 11.
EXODUS REVISITED
American missed out on receiving money from a federal loan guarantee program to help carriers
recover from Sept. 11 when the government said the company''s financial situation was not dire
enough to meet the criteria, airline officials said.
Meanwhile American kept losing money. It lost $1.76 billion in 2001 and then chalked up an
industry record loss of $3.51 billion in 2002. The top eight U.S. carriers posted a net loss
$7.5 billion in 2001 and $11 billion in 2002.
There were bright spots for American.
Its performance record improved. It expanded the use of automated check-ins and electronic
ticketing and allowed customers to use their own computers to print their boarding passes.
These changes should save about $2 billion in annual operating costs.
But the bad news and bad luck kept coming.
The war in Iraq helped push American onto the verge of bankruptcy by splashing frigid
water on already tepid demand for travel.
The airline has fewer flights to Asia than some rivals, but as luck would have it, images
of an American Airlines jet on the tarmac in San Jose, California, during a SARS scare
earlier this month were shown on live network TV. No one on the plane had the flu-like
virus, and the incident was a false alarm. But so far, only an American plane has had
such a high-profile quarantine at a U.S. airport.
Meanwhile, the odds on the carrier winning approval of the labor deals have been shifting.
Union leaders have indicated it may be difficult for workers to accept concessions without
additional terms that would benefit the rank and file when business improves for the
slumping airline industry.
While market forces and the mechanisms of its employee base buffet American, it seems that
Mother Nature also has had it in for the airline.
A few days after striking the tentative deals, a severe storm hit near American''s home
in the Dallas-Fort Worth area. It left the cities'' downtowns mostly untouched, but hail
nearly the size of golf balls damaged 59 American aircraft at the DFW International Airport.
The bad news is, we had hail damage, Carty joked in a recent address to employees.
The good news is that according to the Book of Exodus, we missed the Red Sea and the
plague of frogs. The other bad news is that we have locusts still to come.
Copyright 2003, Reuters News Service
So why can''t American pay it''s mechanics comparable to Southwest?
