AMR's Horton Aims to Stay Grounded
Tom Horton was bonefishing in the Bahamas recently when he got the call from Gerard Arpey, the chief executive of AMR (AMR), about returning to the company he left four years ago.
"I said, 'Gerard, I think I just want to go back to fishing,'" Horton recalled.
But after a few more conversations, Horton rejoined AMR last month, in an expanded role as chief financial officer and executive vice president of finance and planning.
On Wednesday, he told reporters on a conference call that his decision wasn't based on the fact that he was returning to the airline industry, even though he kept a roomful of airplane models in his office at AT&T (T), where he was vice chairman and CFO. Instead, he said, it was about returning to AMR and working with Arpey, whom he called "probably the most principled guy I've ever known."AMR is a proud company in an industry of intense corporate loyalties, and it's currently on a roll, the only one of the six legacy airlines that has never sought bankruptcy court protection. AMR, the parent of American Airlines, has cut annual expenses by $5 billion since 2002, while figuring out how to gain revenue premiums over its competitors. International flying, with its higher yields, now accounts for about 40% of its operations. AMR's shares, which fell as low as $1.25 in March 2003, closed Wednesday at $28.10. Still, American faces serious challenges. The carrier has $20 billion in debt, and its fleet of 699 aircraft includes 327 inefficient MD-80s. Avoiding bankruptcy means that its labor costs exceed those of its competitors. And its fuel costs rose by $1.7 billion in 2005, eating up a sizable portion of the cost improvements. "The biggest challenge is to avoid complacency and not to confuse a rising tide with a solution to a problem," Horton said. "We've done a great job here in managing the cost structure of the company. Unfortunately, we've gotten our cost structure about to (the level of) the network carriers, and what's happened since is that the network carriers went through bankruptcy and cut their costs below ours. So we keep going."
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