American Airlines CEO Horton Sticks to Go-It-Alone Reorganization Plan
By James Shillinglaw
October 08, 2012 10:30 PM
Tom Horton, American Airlines’ chairman and CEO, speaking at a press conference at the Four Seasons Hotel in New York City to announce the addition of Qatar Airways to the oneworld airline alliance, of which American is a member, became a story himself as he continued to show a preference for a go-it-alone strategy to bring his airline out of Chapter 11 bankruptcy protection. Horton had made similar statements at the Global Business Travel Association’s conference in July.
On Aug. 31, however, US Airways and American unveiled a non-disclosure agreement so US Airways could plan for a possible merger, but no US Airways bid has emerged and American has been sticking to its own self-generated strategy for emerging from bankruptcy protection. “As you know we're 10 to 11 months into restructuring,” Horton said at the oneworld press conference. “American was last of the big U.S. airlines to go through restructuring, but it is something we had to do to make the company stronger.”
Horton asserted that American has made enormous progress in its plan. “Our revenue performance has been toping industry for many months, a testament to our network alliance strategy,” he said. “Our company is returning steadily to profitability…up until a couple of weeks ago our operations were at the top. We have labor agreements with seven of eight unions…only the pilots voted it down. We are prepared to get back to the table. As of this week the company and the pilots union are back at the table working toward an agreement.” He also pointed out that American has made the largest aircraft order in its history, some 550 new planes, in order to completely renovate its fleet.
Indeed, American reported September consolidated passenger revenue per available seat mile (PRASM) increased an estimated 4 percent versus the same period last year, continuing the positive trend the airline has seen throughout this year. Absent the impact of operational challenges due to flight cancellations and delays during the second half of September, unit revenue improvement would have been approximately 0.4 points higher.
Consolidated capacity and traffic were 3.4 percent and 2.8 percent lower year-over-year respectively, resulting in a consolidated load factor of 81.1 percent, an increase of 0.5 points versus the same period last year. International load factor increased 3 points to 83.6 percent, as traffic increased 3.2 percent on 0.5 percent less capacity. The Atlantic entity recorded the highest load factor of 86.9 percent, an increase of 4 points versus September 2011.
Domestic capacity and traffic were 5.5 percent and 7.1 percent lower year-over-year, respectively, resulting in a domestic load factor of 80.5 percent, 1.4 points lower compared to the same period last year.
Over the last two weeks, however, American has been hit by a series of flight cancellations and delays that it says have been the work of disaffected pilots, who have been operating without a contract since 2003. Those flight disruptions have abated recently, however, after the pilots agreed to return to the bargaining table. Nevertheless, American pilots were picketing outside the Four Seasons during the oneworld press conference.
For their part, American’s pilots, who have already forged an agreement with US Airways if a merger takes places, believe that Horton and his management team will never agree to a merger, preferring instead to follow his own reorganization plan. Most airline analysts believe that the only chance American has to survive is to merge with US Airways. But American’s ultimate fate may not be determined until December, when both the airline and other companies, including US Airways, must file their individual reorganization proposals with the bankruptcy court and American’s creditors.
One key American Airlines supporter appears to be British Airways, which has said it will take a stake in the reorganized carrier. “American Airlines has got to go through this restructuring,” said Willie Walsh, chief executive of IAG, parent of British Airways and Iberia. “What you see at American today is a determination to make American the best in the U.S. We have absolute faith in American’s management team to do just that.”