Treasurer Beverly Goulet was confronted by a series of pointed questions at an analyst conference Tuesday and offered up a frank response: "It goes without saying that our results need to improve."
Goulet faced the grilling at the Deutsche Bank Aviation and Transportation conference in New York. One analyst asked whether the carrier is considering a bankruptcy. Another wanted to know if the company is losing market share to larger competitors,
. Still another queried that while other carriers are pulling back to the hubs they dominate, American has tried to grow at hyper-competitive Los Angeles International Airport, asking: Can't American pull back more "instead of blaming labor" for its problems.
The company's poor financial performance was also up for discussion. "At some point, you have to start making money," one analyst said. "You can't run an airline forever losing money."
American reported a loss of $286 million for its fiscal second quarter ended in June, the only loss reported by a major airline. The airline has not made money since 2007. Going back to 2001, it has lost a total of $12.4 billion. The shares are down 56% so far this year. In early afternoon trading, the stock is up 16 cents to $3.44.
Goulet mounted a spirited defense, conceding some points but also insisting that American's strategy is working.
That strategy involves creating a route system centered on high-yield airports Chicago, Dallas, LAX, Miami and New York Kennedy, and on a
huge aircraft order , announced in July, that will give American the youngest fleet in the industry, reducing maintenance and fuel costs.
"We will soon have a superior and modern fleet plan that will differentiate AA," Goulet said.
American has said that the creation of joint ventures, immunized from anti-trust concerns, across the Atlantic and Pacific, combined with its new route strategy, should improve net income by about $500 million annually. Goulet acknowledged that those gains have been slow to materialize.
"We're working with urgency to unlock the benefits in our joint ventures," she said. "We expected the benefits to start to accrue in those arrangements a little sooner than they have." Across the Atlantic, she said, American and partners
have all used different approaches to pricing, scheduling, and corporate sales. It takes time to synchronize, she said.
But changes are being implemented, such as reducing trans-Atlantic capacity this fall, particularly on Tuesday, Wednesday and Saturday, which are slower travel days. Goulet said American would reduce winter capacity by 0.5% more than it had previously announced. She said American is seeing "improvement in the Atlantic, (but) the Pacific is still a bit of a challenge."
Across the Pacific, the March 11 earthquake and tsunami forced capacity reductions on American partner
, which reduced the connecting flights available to American passengers. Also, due to the disaster, American has deferred the start of its New York-Tokyo Haneda flight until mid-2012. The airline is also working to change its arrival and departure slot times at Haneda and Beijing, which are viewed as inconvenient for passengers.
The American bankruptcy question surfaces periodically, primarily because American is the only network carrier never to have filed for bankruptcy protection, leaving its labor costs higher than its competition.
On Tuesday Goulet firmly denied any likelihood of a filing, just as
she did in 2008, when bankruptcy chatter also escalated.
"We have worked very hard to run our business in what we believe is the right way," she said. American CEO Gerard Arpey has said that he has
a moral aversion to bankruptcy.
In responding to the bankruptcy question, Goulet referred to American's labor cost disadvantage, which she put at about $800 million annually, including about $600 million for wages, benefits and work rules, and $200 million in pension costs. American's two principal competitors were able to abandon fixed benefit pension plans through the bankruptcy reorganization process.
"It's no secret," Goulet said. "Our labor costs are a significant consideration for us." American is currently in contract talks with all three of its principal unions.
-- Written by Ted Reed in Charlotte, N.C.
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