While its legacy brethren reported their highest profits in
years in the second quarter, American Airlines racked up yet another quarterly
loss, this one totaling nearly $11 million.
American attributed its loss-making margins to
disproportionally high labor expenses, which officials said saddle the carrier
with a $600 million annual cost disadvantage relative to its competitors that
have amended contracts through bankruptcy in the past decade.
Though American's labor groups have disputed that figure,
Dahlman Rose & Co. aviation analyst Helane Becker seconded management's
sentiment, calling labor contracts "one of the biggest obstacles to AMR
Corp.'s recovery." Becker said the carrier has been engaged in
renegotiations with its five major union groups for two years in efforts "to
replace contracts that became amendable in May 2008," but to little
avail.
The frosty relations between management and labor are
showing some signs of thaw, Becker said. "The pilots and the flight
attendants represent the two largest groups whose contracts need to be
negotiated," she said. "The company's pilots recently held elections,
and new leadership was installed that has recently made some conciliatory
remarks to management. If the company can reduce the wage gap between it and its
peer group, we would view that very favorably."
Also contributing to American's relative underperformance
during the quarter were the revenue opportunities enjoyed by legacy competitors
operating on transatlantic routes with antitrust immunity, the carrier said.
American anticipates that last month's final clearance from the U.S.
Transportation Department to move forward with its joint venture with Oneworld
partners British Airways, Iberia, Royal Jordanian and Finnair would translate
into hundreds of millions of dollars of annual revenue once fully implemented.
Becker said the carrier's approval to launch the joint
venture should add $500 million in annual revenue by year-end 2012.
AA is on pace to achieve $71 million in third-quarter
profits, Becker said.
This story originally
appeared in the August 9, 2010, edition of Business Travel News.