For some, a bit of nostalgia vanished when American Airlines' parent, AMR, opted to file for Chapter 11 reorganisation on 29 November. As American's legacy competitors each took their respective trips through bankruptcy during the last decade, American loudly beat the drum that it, for one, had never opted to embark on that journey.
The period from 2000 to 2010 is referred to by many airline executives as the "lost decade", in which carriers were pummelled by the 9/11 terrorist attacks, the SARS breakout, ash-spewing volcanoes, swine flu and volatile fuel costs.
During that time, American continued to pride itself on the fact that it was the last legacy carrier standing without the help of the bankruptcy courts to toss out labour contracts and transfer pension burdens to the US government. But part of that gratification enjoyed by management was belied by discord among labour groups angered by the bonuses reaped by American's executive team during 2007 as the concession deals which labour agreed to in 2003, in order to stave off bankruptcy, remained unchanged.
Still, management argued in 2010 that it had a $600 million labour cost disadvantage relative to its network peers, and in its statement on the Chapter 11 filing emphasised its plans to initiate further negotiations with unions to reduce labour costs to competitive levels.
"A proud man is always looking down on things and people; and, of course, as long as you're looking down, you can't see something that's above you," wrote CS Lewis. The view above American during the past few years is a dramatic shift in US airline industry dynamics driven by tough, but necessary, decisions by its legacy peers to merge, slash supply to meet demand and zero in on cost control like never before to weather the fuel spikes and economic volatility that awaited them after they emerged from bankruptcy protection.
A year after those carriers gladly bade adieu to the lost decade, American has dropped from first to third in terms of revenue market share among US majors, and it was the only legacy carrier to record a loss in 2010.
That performance clearly shows American has more to fix than labour cost disadvantages as it embarks on the restructuring process. The airline needs to leave pride at the door and take a realistic look above and below if it is to ensure that the American name survives the next decade.
(The above article appeared as the main leader article in Flight International, 6 December)
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