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American Airlines CEO: How We Do Things Differently

Arpey's life has been an airline life. His father worked for various airlines starting with TWA, and Arpey loaded bags for Delta (DAL) during summer breaks from college. "I was bitten -- infected might be a better word -- by the airline bug at a very young age," he said, in a March 2010 speech.

Since college, Arpey has had one employer, which he joined in 1982.

The contrast in work history with his peers is telling. Delta CEO Richard Anderson has worked at three airlines and spent three years in the health care industry. United (UAUA) CEO Glenn Tilton spent 32 years at Chevron (CVX) before joining United in 2002. Designated United CEO Jeff Smisek will come from merger partner Continental (CAL): he previously spent a dozen years as a corporate lawyer.
 Gerard Arpey

For the record, Arpey is a member of Peace Lutheran Church in Hurst, Texas. Asked if he is religious, he responded: "I am a Christian."

Arpey discussed his faith in a 2009 speech on "Life and Business" at the University of Oklahoma Business School, saying "I'm not here to proselytize, except to say I have a world view. I am a Christian, not by birth but by grace and reason, and I would be remiss if I didn't tell you that my faith has been the overarching anchor of my soul, from which a reservoir of fortitude has sprung.

"I hope you have such an anchor --- one that strengthens you as you confront the inevitable setbacks and difficulties that await you," he continued.

Arpey's sense of mission was buttressed by American's involvement in the 9/11 terrorist attacks. Obviously, the airline was heavily impacted: two of its airplanes were seized and crashed and 17 crew members were killed.

Most airlines have strong corporate cultures, shaped by long, colorful histories and by high proportions of employees entranced by the airline industry. Nowhere is this more so than at American, where the culture has not been diminished -- nor has it been enhanced -- by mergers with roughly equivalent companies.

Turbulence Ahead

For years, American was the largest airline. In 2008, it was overtaken by Delta, which merged with Northwest. On top of American's cost disadvantage, it now seems destined to compete with bigger airlines that have more economies of scale. Arpey and President Tom Horton have made it clear they see little benefit in a merger with US Airways (LCC), despite widespread speculation about such a deal.

But the pair insists the future is not as dim as might seem. For one thing, they say, their $600 million annual labor cost disadvantage will go away as labor rates rise at other carriers. That will limit those carriers' ability to chop fares in markets where every single airline offers the same product: a one-stop flight through its hub. Additionally, it was not until this summer that American won regulatory approval for transatlantic antitrust immunity, which both peer airlines already had. Transatlantic immunity, expected transpacific immunity and a new hub strategy should add $500 million in annual net income by 2012, Horton said.
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