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TheStreet Open House

Common Cause Binds American

At its sprawling maintenance base in Fort Worth, Texas, American Airlines is demonstrating that it isn't always necessary to follow the pack.

American is not only the world's largest airline, it's also in many respects the most innovative of the major U.S. carriers. American, a unit of AMR (AMR), is the only one of the six major legacy carriers that has never sought bankruptcy court protection, and today it's embracing an effort at cooperation between labor and management that's unprecedented in the industry.

Moreover, despite a nationwide trend toward outsourcing, American is moving to bring more work in house. Its mechanics work not just on the AMR fleet but also on planes operated by others.

"You're standing in the only active, open, full-up running 777 heavy maintenance facility in North America," Peter Sirucek, the American managing director who oversees the Fort Worth base, said during an interview at the base. "No one else is doing it."

Last month, a team of Fort Worth managers, union leaders and workers agreed to work together to generate $400 million in new revenue and cost savings by the end of 2008. Combined with the goals at American's two other principal maintenance bases -- $500 million from the Tulsa base by the end of 2006, and another $150 million by the end of next year at the Kansas City facility -- the total benefit would be about $1 billion.

Local Input

AMR's shares, which closed Monday at $24.51, have risen steadily since reaching a 52-week low of $10 in September. The airline's cost-reduction efforts have contributed, along with the overall industry's rising demand and reduced capacity. Last week, Standard & Poor's boosted its ratings on AMR's credit.

"The upgrade reflects improving earnings and cash flow prospects, driven by better revenue generation and ongoing cost-cutting efforts, which have more than offset the effect of high fuel prices," wrote S&P analyst Philip Baggaley.

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