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Tuesday, August 13, 2013

Op Ed by Robert L. Crandall

Mr. Crandall forwarded the following Op Ed piece.

Our former boss always has something good to say.


Sometimes you can’t help but wonder what the people who run our government are thinking.
On Tuesday, the Justice Department sued to prevent the merger of American Airlines and US Airways.  According to Justice, the merger will mean less competition and higher prices for consumers.  Surprisingly, Justice reached a different conclusion when evaluating the mergers between Delta and Northwest and United and Continental. Those mergers, between companies that were much more competitive with one another than are AA and US, have demonstrated that consolidating to build nationwide service ubiquity, gain economies of scale and reduce excessive competition is a sound strategy.  Since the mergers were approved, the industry has added very little capacity, load factors have risen, and ancillary fees of all types have multiplied and increased. Remarkably, an industry renowned for losing money became profitable.

While consumers are paying more than they did in years past, and getting less luxurious service than they would prefer, a profitable airline industry is a positive for both the country and consumers.  Absent profits, the industry will be unable to support the enormous capital spending required to refresh and increase its fleet, pay for the expanded and improved ground facilities needed to serve an ever growing customer base and provide decent jobs for its many employees.
But sustaining competition is also important for consumers, for having too few airlines that are financially able to challenge the largest competitors will remove the threat of competitive entry, which is the only constraint for companies that might otherwise raise prices or diminish service to an unacceptable degree. In a deregulated, capital intensive industry with formidable barriers to entry, competition should be encouraged.  

Preventing the AA-US merger will reduce the industry’s competitive intensity and move the country closer to a major carrier duopoly. Neither American nor US serves a sufficient share of US and international cities to compete effectively with United and Delta for the corporate accounts that are an essential part of the customer mix for every major carrier. Nor are they large enough, individually, to achieve the economies of scale available to their larger competitors.  Moreover, AA and US are essentially non-competitive, with far fewer route overlaps than either of the previously approved mega-mergers. Combined, AA and US will be slightly larger than either Delta or United; individually, they are each far smaller and will inevitably – over time -- be squeezed out of an industry in which both ubiquity and scale are uniquely important.

If Justice wants to increase competition in the airline industry, it should withdraw its suit and clear the way for the creation of a third major US carrier.  Handicapping AA and US is unfair to their shareholders, their employees, their customers and the country itself, which needs a third major carrier to compete on its behalf in international markets.  

Tuesday, April 9, 2013

Upward and Onward!

Recently, American Airlines Chairman and CEO, Tom Horton was spotted looking through binoculars from his corner office overlooking the DFW airport.

It seems, while hosting some front line employees there, he was asked a question regarding the future of American.  Mr. Horton - reminiscent of a proud father - encouraged them to have a look through the binoculars at American's new Boeing 777-300 ER aircraft.  Stating:  "Take a look - there is the future of the "new" American."

It's a future that includes hundreds of new, modern aircraft, with some of the strongest hubs in the industry.  All flying to and from the major business and population centers of the world.  New York, London, Tokyo, Miami, Dallas - Fort Worth just to name a few.  The shiny "silver birds" of American blanket the skies over the Americas and beyond.

With the advent of the recently announced merger with USAirways American will continue to dominate the Latin America market.   AA's presence at New York's LaGuardia and Washington D.C.'s Reagan will be greatly enhanced.  The new 787s will arrive in just over a year and afford us even greater connectivity opportunities from far off lands through DFW and other hubs.   The addition of hubs in Charlotte, Philadelphia and Phoenix will afford many medium sized and smaller communities access to the American Airlines system.  As the nation's largest airline, AA should have the presence to deliver on all the promises made to the patrons, employees and owners of the company. And overall the new American will provide customers with a fourth competitive domestic carrier and one that is positioned to compete against the world's finest, while creating more competitive balance among the three aviation alliances.

However, it's going to take the efforts and focus of everyone on the new AA team to bring these "synergies" to fruition.  All parties involved need to abandon any "not invented here" bias.  Acknowledging that while the soon to be CEO Doug Parker has committed to the new company being decidedly "American," we original AAers must be mindful of the rich history USAirways brings to our company.  By keeping an open mind I am sure we all have a few things to learn from our new colleagues.

Lets not ignore the elephant in the room either.  Seniority integrations in the airline industry are renowned for their inherent difficulties.  Truth is, the history of the American Airlines, US Airways integration is ours to write.  It's time to put aside the acrimonious relations and divisive positions of the past.  No longer are we "natives", TWA, "east" or "west".  We will all be American Airlines employees.  The unionized work groups have each acknowledged, endorsed and embraced the integration process as agreed and as stipulated by McCaskill-Bond.  While I would be disingenuous to not admit to my own personal concern for every AA and USAirways employee (myself included) I am prepared to accept whatever outcome the inevitable seniority integration arbitration brings.

The management of AA (new and old alike) are committed to employing a thoughtful and methodical process toward integration of the two airlines.  Utilizing the latest in technology we will hopefully avoid the pitfalls being experienced by United and others in botched mergers.

With each new day we will no doubt face a new challenge.  But that is part of the allure of the airline business.  While there is no doubt there will be a few frustrations along the way we must stay focused on the good of the collective whole.  We owe it to our fellow employees (all of them), our shareholders, and most importantly, our customers.

 I think this bears repeating:  The history of American is still ours to write!

Upward and Onward....

Somewhere Over the Americas,

CA Howie

Saturday, January 19, 2013

Some straight talk and a little credit where credit is due...

Although most were unaware, in late 2010 and into 2011 there was a large internal struggle at AMR.  On one side was avocation of further retrenchment and "shrink to profitability."  On the other, an argument that the fleet must be updated and the airline must grow.  Otherwise, there was no way for the revenue to outpace the cost increases associated with ever older, more senior employees.  Moreover, any company must always grow its revenue base (at least keeping pace with inflation) to cover an ever expanding fixed overhead cost structure.

Enter the then President of American, Tom Horton.  He personally argued in front of AMR's Board for growing and expanding the airline.  He eventually won the argument and took the initiative to negotiate the largest order of jets in the history of aviation.  All creatively financed on the manufacturers' balance sheets.

Then, after numerous breakdowns in union negotiations, the AMR Board decided to enter into court supervised restructuring.  They named Tom Horton CEO. 

Under his leadership the company has nearly completed restructuring - all in record time.  Absent restructuring charges we are posting profits. 

American is reshaping the image of our airline - inside and out.   Most importantly for our employees, our new planes coupled with the growth plan will provide unprecedented job opportunities.  Although he has yet to get credit for these efforts from the unions, he has set the stage (absent a merger) to grow this company.  All while restoring profitability.  In the event of a merger, we are poised to minimize the rationalization of the systems.  This is good for all of us, our customers and the communities we serve.

Unfortunately, in response to the brand roll out an APA spokesman took shots at Tom Horton, his management team, the business plan, etc.
The fact is, without Tom's leadership, there would not be any new planes, a new livery, or a new brand.  We likely would still be mired in stagnation waiting for the world around us to improve.  Still bemoaning our status as "victims" of a cruel airline business environment.  
At the end of the day, regardless of whether we merge or not, give a little credit where credit is due.  Tom Horton is not the "big bad wolf."  He executed a relatively quick restructuring unlike nearly any other in the industry.  A restructuring where employees saw hourly raises and did not see defined benefit pensions terminated.  Some work groups (Pilots and Flight Attendants) are seeing hiring or recalls of laid off workers.  Oddly, they are his most vocal of critics.
In a world where other restructurings have resulted in 40%+ pay cuts,  massive layoffs, terminated pensions and unresolved seniority disputes after 7+ years I will take Tom Horton any day of the week. 

Thursday, January 17, 2013

The New Look of American...

Come and fly with me on the New American!
The above is the end result of a decade of hard work, sacrifice and tribulation by myself and my co-workers. It would be a shame to be forced to share the opportunities this new day brings with 30,000 folks from outside of our company.
Nonetheless, if this merger occurs I will welcome our new co-workers from US Airways to our ranks and on board our new aircraft.  I am hopeful these new AA'ers will remain grateful to the Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union for the opportunities afforded to them.  I am sure they will join with me in hoping for a brighter future.