AMR — More Thoughts

So, what can we learn from the AMR bankruptcy?

First, bankruptcy is not a solution for firms in our industry.  In my 40 years in the industry, I have only seen one company ever come out of bankruptcy and survive.  Rather than spending a lot of time exploring the reasons why bankruptcy has not worked, let’s take a look at Southwest Airlines (hmm, another North Texas transportation company) and what they’ve done right.

American Airlines was about providing a broad range of services to everywhere, which required a diverse amount of equipment.  They also pursued the glamorous (and expensive to support) overseas markets.  In contrast Southwest flew only one plane (still does – Boeing 737) and focused on short hop flights which were under-served.

American was a legacy airline with legacy labor costs.  Extremely strong unions and management took an adversarial approach.  One of the biggest snafus was a recent one in which employees were asked to take serious cuts in wages and benefits.  When things got healthy management was rewarded with very large bonuses — and employees got nothing.  Southwest is known for its iconoclastic approach to labor management.  Flight attendants tell jokes, sing and dance (yes, they do!) and several times I’ve seen flight captains who were dead-heading home help out the flight attendants by passing out peanuts.  You won’t see that type of esprit de corps in any other airline.

Although Southwest gets flack for their boarding process, their gate turn is inordinately faster than the legacy airlines and that translates into less people and less aircraft.  Throw in their “no bag fee” approach, and it all translates into bottom line dollars.

So, which do you want to be? A Southwest Airlines or an American Airlines?


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