Air Transport World

US Majors. (ATW's World Airline Report).(major US airline statistics)

ALASKA AIRLINES: The main subsidiary of Seattle-based Alaska Air Group resumed the growth program that largely had been on hiatus for two years owing to the January 2000 crash of one of its MD-80s followed by the impact of 9/11. While most US Majors were shrinking last year, Alaska grew capacity (ASMs) 8%, second only to ATA Airlines among the 10 largest US passenger carriers. It also did a pretty good job of filling the extra seats as RPMs rose 7.6%, resulting in a virtually flat load factor.

With a cost structure positioned between the larger network airlines and the low-fare herd, Alaska has not been bled as badly as larger rivals, but it has not turned the corner on profitability either. At the group level it lost $118.6 million in 2002, or $67.2 million excluding the effects of a noncash charge relating to a change in accounting standards. Red ink continued to flow in the first quarter of 2003 as AAG reported a net loss of $56.3 million. Although this seemingly was an improvement over last year's first-quarter loss of $85.1 million, prior-year results were net of a $51.4 million noncash special charge. Deterioration was visible at the operating level, where operating loss widened to $78.6 million from $49.6 million in the 2002 quarter.

In late 2001, Alaska began operating transcon routes, a step that has improved utilization while reducing cost per ASM, which fell 2.4% last year excluding the impact of fuel and a further 1.3% in this year's first quarter. In May, Group Chairman John Kelly retired under a previously announced succession plan that saw President and CEO Bill Ayers assume the chairman position as well.

Alaska is one of a handful of US airlines not to have announced layoffs since 9/11. It reached agreement with its 2,200 aircraft technicians on a new two-year contract this spring.

AMERICAN AIRLINES: Don Carty spent most of 2002 and early 2003 trying to persuade unions at American of the need for substantial wage reductions and productivity improvements in order to avoid bankruptcy. The unions eventually came around, but Carty was not there to see it. In late April he was forced to resign as chairman and CEO after tentative labor agreements unraveled at the eleventh hour upon disclosure of the existence of special pension and bonus packages for senior management.

It fell to his successor as CEO, former President and COO Gerard Arpey, to complete the deals, which were softened from their earlier terms. American expects to save $1.8 billion per year over the next five years--down from 6.5 years in the original agreements--in large part owing to efficiencies in the new labor contracts that will permit it to operate with significantly fewer people, Shortly after they were signed, AA announced it would eliminate 7,000 positions. Partly reflecting the absorption of TWA in 2001, the workforce at the end of March still numbered 104,000, although this was down from 109,500 in the year-ago period.

The labor cost savings, in conjunction with nearly $2 billion in previously identified savings and revenue enhancements, mean that American has cut close to $4 billion in annual costs from its budget. But even now Arpey remains cautious about the carrier's ability to remain aloft without filing for Chapter 11 protection. "By any measure, we have our work cut out for us. We are clearly not out of the woods yet," he said after the labor agreements were ratified.

Such caution is understandable given the scale of losses over the past 24 months: $3.5 billion in 2002 on top of $1.76 billion in 2001, or $3.4 billion over the two years if special charges are excluded. Nor did things improve in the first quarter, when AA spilled another $1 billion in red ink.

Faced with low-fare competition in an estimated 80% of its markets and the dwindling high-yield business travelers around whose travel patterns high-cost hubs were designed, AA has gone back to the drawing board. In April 2002 it unveiled a "depeaked" or "rolling" hub at Chicago O'Hare and brought the model to Dallas/Fort Worth in November (ATW, 11/02, p. 22).

In May, in his first major step since taking command, Arpey said American will eliminate its More Room Throughout Coach program on its 34 A300-600Rs and 140 757s. …

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