DALLAS TheStreet) - Executives of American Airlines parent AMR ( AMR) told a skeptical investment community Wednesday that the carrier has methodically addressed its competitive problems and now is singularly focused on the one issue that remains: A labor cost disadvantage. "The most important element of becoming more cost efficient is to achieve next generation labor contracts that will allow us to become more competitive," said CEO Gerard Arpey, on the carrier's earnings conference on Wednesday. "Now is the time to accomplish this objective."
"We have powerful assets and have put most of the components (of) long term success in place," Arpey added. In the past year, he noted, American has secured anti-trust immunity for joint ventures across both the Atlantic and Pacific oceans and placed the largest aircraft order in history. Now, the carrier's focus is on contract talks with hopes that a deal with its pilots is close at hand. Arpey spoke on a day when American shares fell 7%, the biggest decline among airline stocks, although JetBlue ( JBLU) fell nearly as much after its
chief financial officer abruptly resigned. American's share price has been volatile over the past month, falling 33% one day amidst bankruptcy chatter. Shares subsequently made up the entire loss, before falling back on Wednesday. Arpey has steadfastly opposed bankruptcy, a course chosen by every major network competitor, and repeated that opposition on Tuesday. "Our past actions and statements have made it clear that (bankruptcy) has not been our preference or our goal," he said. "At the same time, were well aware of the fact that all of our legacy competitors have used chapter 11 to reduce labor costs." Asked by a reporter to more strongly make the case that American would not file going forward, Arpey demurred, saying he had said all he had to say. In any case, it seems clear that American is making progress towards a tentative agreement with its pilots. On the conference call, Jeff Brundage, senior vice president of human resources, said negotiators last week "made real significant progress on schedules and benefits (and) we see a path to an agreement.
"We understand that the time to work on this is now," Brundage said, adding that negotiation were scheduled to resume on Wednesday afternoon. American has pegged its labor cost disadvantage at $800 million annually, a number disputed by its flight attendants. American's cost and revenue problems mean that it will likely be the only carrier to report a third-quarter loss. However, if it were to one day return to profitability, its methodical approach will likely be applauded. Some of the problems may have been of its own making, but others seem almost punitive. For instance, for years, American lacked anti-trust immunity for a trans-Atlantic joint venture with its European partners, a privilege that competitors Delta ( DAL) and United ( UAL) both enjoyed before regulators enabled American to join them. Even after new labor contracts are signed, American will still have a smaller presence in Asia and a smaller domestic network than its rivals have. However, Arpey said American has "an opportunity to grow in that part of the world" because it has "better partners" including Qantas, Cathay Pacific and Japan Air Lines . Additionally, the carrier has added routes from Chicago and Los Angeles to China, and Arpey noted that American is by far the strongest carrier in Latin America. As far as domestic growth, Tom Horton, the company's president, said the carrier has the ability to grow, partially enabled by its aircraft order and partially because "there may be a case for further consolidation in the U.S. - more could occur." Asked whether that consolidation might involve American, Horton responded, "It could." -- Written by Ted Reed in Charlotte, N.C. >To contact the writer of this article, click here:
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