Air Transport World

American shakes off deregulation woes. (American Airlines)

New York--One of the early arguments against deregulation was that it would allow the industry's giants to become more gigantic, swallowing up or hammering into the ground the smaller airlines. Of course, it hasn't worked out quite like that. Instead, lower-cost airlines, including new startups, have battered the older airlines with low fares and by leaping into niches that were being abandoned or neglected in the mad rush by the trunks to establish new beachheads in major markets. At the same time, regional and commuter airlines were extending their own nets and keeping for themselves much of the feed traffic they had previously handed off to others.

Many observers were convinced that if the "dinosaurs"--the large, established airlines--did not change their ways, they were doomed to extinction. And indeed, while the major airlines--those with annual revenues of $1 billion and more--were generally suffering, the nationals and regionals were generally gaining.

Well, the giants have been stirring. Now it looks as if the industry may be in for a new series of bloody slugging matches in the next few years. The matches will pit the heavyweights against each other and against the middleweights and welterweights.

Take a look at what American Airlines is up to. American, to use the words of Robert Crandall, its president and chief operating officer, "is growing a new, low-cost airline inside the old one." This "new" airline will be able to compete with anyone on a fairly even basis, Crandall asserts. It is based on a reduction in labor pay rates, increases in productivity, and a steady stream of new, more cost-effective aircraft.

The potentially awesome power of the "new" American is indicated by the performance of American in 1983, an airline still in transition (the figures are for parent company AMR, but the airline accounts for about 95% of overall revenues and expenses): From a 1982 net loss of $19.6 million, AMR bounced back in 1983 to a record $227.9 million profit. The third- and fourth-quarter profits of $100.7 million and $115.6 million, respectively, were also records for the company. Breaking out the airline figures separately, American showed an operating profit of $249.5 million in 1983, compared with a loss of 18.2 million in 1982. Denver hub

Crandall makes no bones about it. American is coming out slugging. It will be returning to markets it had left, entering new ones, increasing frequencies in existing markets, restoring nonstop flights to cities that are currently served via the airline's Dallas/Ft. …

Log in to your account to read this article – and millions more.