Restructuring of the executive ranks at AMR Corp is widely considered cosmetic for the short term, with an eye towards labour negotiations. However, the restructuring is also focusing on preparing for longer term goals such as forming partnerships and joint ventures, especially in information technology.
Robert Crandall turned his position of American Airlines president over to Donald Carty, formerly AMR's and American's finance chief, in March. Crandall will continue as AMR's chief executive and chairman of the airline.
As part of the company's 'Reinventing Headquarters' plan, the top-tier change reshuffles the line of command, but only somewhat. Carty will have responsibility for labour negotiations and also oversee marketing, capacity planning, cargo and American Eagle.
While confirming the long-held supposition that Carty will succeed him, Crandall made clear he is still much more than a titular leader. Reporting to him directly are appointed Sabre Group president Michael Durham, CFO Gerard Arpy who replaces Durham, general counsel Ann McNamara and government affairs vice president Ed Faberman.
This level of participation by the rough-edged Crandall has made unions suspicious of the real impact of the changes. Management and employees have been involved in protracted negotiations, with Crandall leading talks attempting to get $750 million in concessions which are part of a $1 billion cost reduction programme. The negotiations have been difficult partly because of enmity towards Crandall. A pilot union spokesman says they will deal with Carty cautiously, until his 'independence' is ascertained.
Part of $250 million in cost cuts outside of employee give-backs, the corporate restructuring goes beyond the executive ranks and is expected by next year to turn in savings of $93 million annually. Of 900 positions targeted for rationalisation, 600 employees have already been laid off or offered 'incentivised' leave. Several vice-president positions have been cut, and the plan calls for lower management to be reviewed until targets are met.
The top-tier reorganisation is an attempt to assure investors and especially potential partners that AMR is not leaving the airline business, as its own rhetoric has sometimes suggested. The thinking is that strong managers in each area of the company's business will mitigate perceptions of one person overseeing all areas of operation.
The other significant change is Durham's appointment to head Sabre, the information technology and consultancy group. Crandall praised Durham's deal-making skills, suggesting AMR will pursue new partnerships, especially in on-line technology.
Management specialists believe that the 'Reinventing Headquarters' plan shows promise of changing what has become well known as a combative, vertical corporate culture, producing interdepartmental duplication and increased competition.
A restructuring team headed by company treasurer Teri Teats identified areas of rationalisation, and Crandall says that the ultimate goal of that plan is to create 'cross-functional' working groups. These will ensure decision-making is more efficient for managers, believes Evans Papanikolaou, marketing manager for Andersen Consulting's transportation practice: 'If they can reverse [the practice of people] maximising their own objective, it would be a quantum leap.'
Source: Airline Business
