AMR Looks on the Bright Side

CEO Gerard Arpey is hoping regulators will change the way they view global alliances.
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American Airlines

isn't happy about last week's tentative agreement to lift many restrictions on trans-Atlantic flying, but CEO Gerard Arpey said the carrier could benefit if regulators alter the way they view global alliances.

Because American, a unit of



, is one of just two U.S. carriers at London Heathrow, "more airlines into Heathrow by definition is not a good thing," Arpey said Thursday during an investor conference.

"But I do see an opportunity in all this

because one of our objectives for a long period of time has been to get antitrust immunity across the Oneworld alliance," he continued.

Oneworld is a group that includes American,

British Airways

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, Qantas, Cathay Pacific and other airlines. The pact is meant to make it easier for fliers to use various carriers during their travels.

"If we can get the regulators to start looking at the world

by alliance instead of markets and say 'this is where the competition is going to be in this industry, we should create

antitrust immunity,' I think there's a big opportunity for our company in that," Arpey said.

Neither American nor British Airways would be willing to give up Heathrow slots in exchange for immunity, Arpey said. "They recognize as we do that it's ridiculous to ask us to give up

slots," he said.

He also noted that the Transportation Department recently awarded a Washington-to-Beijing route to



, "despite their dominance in the U.S.-China market."

However, he shouldered the blame for American's withdrawal of its application to fly from Dallas to Beijing after its pilots said their contract wouldn't permit them to fly the route.

American has a Chicago-to-New Delhi route under a contract exception, Arpey said. "In the case of this application, I made the presumption that in retrospect was foolish to make," he said. "That was really my failure, to not recognize the changing landscape. To do it over again, we should have sat down with the union prior to applying."

Meanwhile, CFO Tom Horton told reporters that employees will collect "a couple of weeks of pay to an extra month of pay" this year under a profit-sharing plan. Analysts expect the carrier to earn more than $1 billion in 2007.

In the first quarter, Horton said, bad weather has resulted in a 2.2% capacity reduction, meaning costs will be spread over fewer seat miles. But load factors are up, he said.

Horton also reiterated that American needs to replace its 300 aging MD-80s, and he said the Boeing 737-800 burns 20% less fuel. A 1996 deal with Boeing "gives us a lot of flexibility to get access to airplanes at attractive pricing on relatively short notice," he said, noting that American will have more to say on the subject "in the near future."

Additionally, Bob Reding, senior vice president of technical operations, said revenue from third-party maintenance would reach $175 million in 2007, up from $96 million a year earlier. Despite paying higher compensation, American can compete for business because its turnaround times are faster, its material costs are lower and its reliability is higher, he said.