It's been a rocky decade. But up until 2010, American's income moved with the rest of the industry. Last year, it took a loss while its competitors made a profit. This year, it's set to do the same.
The problem, again, is costs. By going through bankruptcy early on, American's competitors shed expensive union contracts and restructured their debt. American chose a different route, opting to bargain for large concessions from its unions. It got to stay out of court, but the savings weren't enough. The company now has the highest unit labor costs of any major U.S. airline. And the situation wasn't likely to improve any time soon. In the last several weeks, the company has been stuck in contentious labor negotiations with its pilots and flight attendants.
As CEO Tom Horton said on a conference call yesterday, "It became increasingly clear that the cost gap between us and our biggest competitors was untenable."
American's competition found the path to profit. Now American is following in their footsteps.
This article available online at: