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TheStreet Open House

Big Airlines' Paths Diverge

"It's not a secret that on a relative basis our costs are not where they need to be," she said. "We can't allow this to persist for the long term. For a company that has $20 billion worth of debt, with record fuel prices, clearly the challenges are there."

Goulet said American has reduced costs by $5 billion since 2002 and has identified $700 million more in 2006 cost reductions, not including the potential additional impact from a third round of hub restructuring. The airline also expects $300 million in 2006 revenue improvements.

Continental and American are at odds on the benefits of the simplified fare structure introduced by Delta in January 2005. American subsequently adopted, in part, its own new fare plan. Delta filed for bankruptcy protection in September.

Smisek didn't mince words about his feelings. "I still think simplified fares are stupid, (and) I think Delta got what it deserved." He said Delta's move to stop requiring a Saturday-night stay for passengers to get a lower fare was "criminally insane."

American has benefited from its simplified fare structure, which has enabled it to lure back business travelers who had fled for low-cost carriers.

On Heathrow, Smisek said a revised Open Skies agreement is pointless without improved access to the airport. But Goulet said that airlines who want slots at Heathrow will have to find ways to secure them.

"I don't think we expect it to be quite the skies-falling scenario that some people envision," she said.

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