Free to be an airline again: the excitement among American Airlines' senior management team is almost palpable. Chairman Don Carty's decision to divest none-core companies and focus on American and regional subsidiary American Eagle has ignited enthusiasm for a number of growth plans in key areas.
In line with Carty's desire to strengthen American's network on both domestic and international fronts, the company is investing heavily in new terminal buildings, improvement schemes and expansion plans at several of its US bases, including its headquarters' hub at Dallas/Fort Worth International Airport, as well as at Boston, Chicago and Miami. At New York's Kennedy Airport alone, a new $1.3 billion terminal is being constructed that will offer three concourses and 56 gates, capable of handling more than 14 million passengers a year after it is completed in 2006. Carty describes Kennedy as a "cornerstone of our international operations in the new millennium".
American is looking in all directions, however. If American can win a fierce lobbying battle against UPS Airlines, Delta Air Lines and United Airlines for new China routes, then the airline would launch non-stop services from its Chicago hub to Shanghai and Beijing from April next year. If successful, Chicago might be developed as a mini Asia hub for American, rivalling United Airlines, which is based at Chicago, and Northwest Airlines in nearby Minneapolis.
Strong overseas markets
American managers insist, however, that such plans will not distract attention from the airline's traditional strong overseas markets - Europe, the Caribbean and South America. While Continental Airlines and Delta have made big pushes into the South American markets recently, American believes its strength at Miami will remain unchallenged. "Miami is such an excellent gateway for South America with its own large population base with strong links to that region," says Mike Gunn, executive vice-president of marketing and planning.
"Other airlines might try and create Latin American hubs out of other US airports, but they will never have the power of Miami." American is also keen to cultivate its partnerships with three of the region's strongest airlines - LanChile, TACA Group and TAM of Brazil. Such relationships help to ease the pain of a "relatively modest" investment in Aerolineas Argentinas that fell foul of that airline's financial woes. American refused to put more money into the airline, which Carty describes as "a very sick company", and its management team was unceremoniously booted out of Buenos Aires.
Another sore point for American has been the demise of former oneworld partner Canadian Airlines, which is now owned by Air Canada. The Canadian Government has paid back money that American had invested in Canadian, but American has lost the network benefits that its partnership with Canadian had brought. Carty seems relaxed about the situations in both Argentina and Canada: American will continue to serve both countries directly and will use the presence in Canada that its other oneworld partners have to fill in gaps. "It is not a priority to find a new partner in Canada," says Carty.
Carty talks defiantly of oneworld as "an exceptionally well-placed alliance", although he admits that the lack of an antitrust agreement between any of the partners makes it "less rich as a network". He and other American managers talk confidently, however, of an anticipated major move forward in forthcoming US-UK open skies talks that they appear to believe could still lead to an antitrust relationship with British Airways. Others in the industry are sceptical and no-one believes that the talks, set for June, will achieve such a breakthrough. But Carty talks of optimism for later in the year. "In my own view, they would not have another go at this without feeling that there is a deal to be done and if there is a deal to be done, then it will be in American and British Airways' interests," he says.
Carty adds that "cooler heads" now prevail around the negotiating table; the issue of slots at Heathrow is no longer predominant; there is more "creative thinking" about how to unlock the dilemma and there is the added pressure for a deal coming from British Midland, which wants access to the US market. "The credibility of some of our critics during the last round has also diminished since that time," says Carty.
Just how that "creative thinking" might play out remains the subject of many industry rumours, but some believe that oneworld may undergo some major changes in the coming months; for example, Carty makes no secret that American would "love to see Swissair come into the alliance".
West Coast push
On the domestic front, American is making a major push into the West Coast market after being all but beaten out of there by Southwest and United. Not only is American strengthening its presence on major connecting centres, such as Los Angeles and San Jose, but it is adding more services between Los Angeles and Boston, Dallas and other large US cities. The key to winning the West Coast market this time, says American, will be service differentiation. American will make sure, for example, that aircraft on the Boston to Los Angeles routes will all have extra leg room in economy by the end of June - ahead of some other routes. "When we were there before, there was way too much capacity," says Carty. "All of us were losing substantial amounts of money, so we pulled out, but we did so reluctantly because California is a big part of our network. We are one of the biggest east-west carriers in the USA and we cannot afford to cede our customers to United because we don't go to San Francisco. It's not just the West Coast itself, it's about the network."
American, it seems, is on a track that will put some global muscle back into the silver bird. Carty says he will be "fiercely competitive, but never suicidal" in this policy.
Source: Airline Business
