Air Transport World

U.S. majors. (air lines) (1984 Market Development Report)

U.S. Majors

American: Putting two great years back-to-back, American and AMR Corp., its parent company, earned a net profit of $233.9 million in 1984--which, combined with the $227.9 million earned in the previous year, resulted in a $461.8-million two-year profit. The airline's operating profit increased 35.9% to $339.1 million last year as revenues rose 12.2% to $5.1 billion and expenses increased 10.9% to $4.8 billion.

American launched a massive expansion campaign in late 1983 when its unions approved management's unprecedented proposal for a lower pay scale for all newly hired employes--an accomplishment that garnered the airline the 1984 ATW Labor Management Award. This expansion resulted in an 11.9% increase in ASKs for 1984--up to 94.4 billion--and a 7.6% increase in RPKs to 59.1 billion. Load factor dropped 2.4 points to 62.6%.

Robert Crandall, carrier president who took over the post of chairman and CEO March 1 after the retirement of Albert Casey, said American will increase capacity about 18% in 1985-86. New service is being launched this year to the U.S. Virgin Islands, Paris, Frankfurt and many new domestic markets. Last year the airline added 12 new destinations and increased service to more than two dozen others.

To fuel its expansion, American last year hired and trained 1,694 flight attendants and more than 550 pilots, all under the new rates. Total workforce expansion during the year was 10.4%, increasing the personnel rolls to 46,900. Crandall admitted American was having trouble attracting pilots at the new pay rate, and said it would be raised. However, there is no problem hiring in other jobs, he said.

Also fueling expansion is a $6-billion capital expenditure program covering the next five years that includes the delivery of 20 more Boeing 767s through 1989, 67 McDonnell Douglas MD-80s by 1987 and three used McDonnell Douglas DC-10s this year.

American has launched a franchised commuter operation tagged "American Eagle,' with the first designated commuters at its Dallas/Fort Worth hub.

Early this year, American surprised the industry by instituting a new low discount fare program called "Ultimate Super Saver' while trying to wipe out most other discounts. American hoped that airlines matching the new fares also would match the restrictions, including a Hawaii and Alaska blackout, roundtrip only restriction, 25% cancellation charge and 30-day advance purchase. While generally this occurred, there have been enough variations to produce at least a slight yield decline for many carriers. Main purpose of the Ultimate Super Saver fares is to restrict the market growth of low-fare carriers, according to Crandall.

An increasing sentiment to divest vendor airlines of their computer reservation systems, including American's Sabre, was sidetracked by an agreement of the major vendors to eliminate biased "secondary screens' from the displays. Ill will remained, however, about CRS user charges.

Continental: Rebounding from a self-imposed shutdown when it declared Chapter 11 bankruptcy in September 1983, Continental in 1984 posted its first net profit since 1978. That profit, a $50.3-million gain compared to a $218.5-million loss in 1983, was assisted by the suspension of payments on debts incurred before bankruptcy was declared.

Phil Bakes, Continental president, last year stated a firm reorganization plan would be submitted for court approval next month, but that target has been pushed back to "sometime this year.' In a proposed reorganization plan, the airline said it could repay all creditors but that repayment would take as long as 13 years for some unsecured creditors. As an alternative, those creditors would have the option of taking 50 cents on the dollar immediately after reorganization.

Compared to 1983 traffic totals diminished by the shutdown and subsequent contraction of the route system from 78 cities to 25, 1984 RPKs rose 17.7% to 17.6 billion as ASKs increased 13. …

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