The downward spiral of American Airlines

We’ve been watching with dismay the downward spiral of American Airlines.

This once-great carrier is hardly recognizable any more. It is perplexing to us how a management team that got its training under Robert Crandall and helped create such a great carrier could have gone so wrong.

Crandall retired in 1998 and was succeeded by Don Carty. We have to admit we preferred that Bob Baker, the EVP of Operations, succeed Crandall but Baker already had battled cancer and was viewed as probably on a shorter life span given the nature of his cancer. Unfortunately, this assessment was correct and Baker died a few years later.

Carty, on the other hand, was Crandall’s number two (to Baker’s number three) in the company. But Carty had also been CEO of Canadian Airlines and frankly, we were never too impressed with his leadership there. It was this that gave us trepidation when he succeeded Crandall.

The Crandall team also included Gerard Arpey, who subsequently succeeded Carty after Carty so screwed up labor relations that he had to go. Carty acquired Reno Air, a small MD-80 operator with a hub in Reno (NV) and in the course of doing so, created immense discord with the AA pilots union, having failed to lay the ground work with them for the acquisition. Reno Air brought zero to American and less than zero when the labor relations debacle is considered.

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Odds and Ends: China’s Wings; B-17; Airbus Market Forecast

We just finished a book about China National Aviation Corp. (CNAC). It’s a long book, 498 pages. it’s meticulously footnoted. The Bibliography is 100 of the 498 pages. We found the book a bit tedious for all the detail, but others will find the vast, detailed history of CNAC and the politics of dealing with the pre-World War II Chinese government fascinating.

The book details the famed “Douglas 2 1/2,” the war-damaged DC-3 with the right wing replaced by one belonging to a DC-2. The airplane flew, as did another with a mis-matched, smaller engine and smaller propeller.

There are several instances of the DC-3 being flow overweight, one in which the airplane carried more than 70 passengers vs the then-standard 21. The airplane couldn’t get off the runway. But the runway was built ending against a sloped berm, and the DC-3 became airborne ski-jump style.

CNAC was run by an American, William Langhorne Bond, whose son Langhorne became US Transportation Secretary under President Carter (and who was responsible for grounding the McDonnell Douglas DC-10 after the crash of American Airlines flight 191 in Chicago-a crash we covered as a reporter).

The senior Bond was one of those rare individuals who successfully went up against the legendary Juan Trippe, whose Pan Am owned a minority stake in CNAC, and persuaded him to stick with CNAC when Trippe was ready to abandon the airline during the Sino-Japanese war preceding Pearl Harbor.

Bond’s disappointment of losing CNAC to the Communists after World War II after all he’d been through to keep the airline alive is palatable.

The book is easily available through Amazon.com.

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Odds and Ends: Dire outlook for airlines; 787 Deliveries; American-USAirways

Dire Outlook: This article is nothing to cheer about. The author predicts a low growth in global GDP, and this is what Airbus and Boeing rely upon for their growth and production forecasts. It says airlines are emitting much more pollution than generally thought, and if true, this means more costs (especially in Europe) in fees. Also buried in the article is the revelation from Air New Zealand that it costs the airline $1.25m to operate a Boeing 777-300ER round trip from NZ to London, with more than 50% of the cost being in fuel. No wonder the prospect of the Boeing 787 and Airbus A350, with 20% lower fuel costs and 25%-30% lower trip costs, is so important.

787 Deliveries: They are still slow but they are picking up, and it will be about 1 1/2 years before the backlog of airplanes parked at Paine Field in Everett is cleaned out. But it’s progress.

American-US Airways: AirInsight has a podcast discussing the disruptive impact of a merger here.

Odds and Ends: 737 faces challenges; 737 MAX and China; American Air

737 Challenges: The Puget Sound Business Journal has this long piece about the challenges facing the 737 from Airbus and others.

737 MAX and China: Meantime, China is, at long last, looking at the MAX for its airlines.

American Airlines: A merger with US Airways makes the most sense, says Aspire Aviation (we agree as long as US management is in control)

Odds and Ends: Judge smacks down American; ailing Hong Kong Airlines

We were traveling Wednesday so we’re a little behind on this:

American Airlines: The judge overseeing American’s bankruptcy denied a request to void labor contracts, particularly the pilot contract. This is a huge blow to management–and would seem a boost for the US Airways merger effort.

Hong Kong Airlines: This financially ailing carrier, under growth restrictions by the authorities, may cancel its order for the Airbus A380. The airline was supposed to firm up an order for the Boeing 747-8I that was announced as an “Unidentified” commitment during the Paris Air Show last year, but it never did.

Odds and Ends: Seeking an injunction against A320 sharklet sales; more

A320 Sharklets: Remember the lawsuits between Aviation Partners and Airbus over winglets and sharklets? AP wants an injunction against A320 sharklet sales. That sure got Airbus’ attention.

American and US Airways: Bloomberg has a long piece on US Airways’ effort to acquire American Airlines.

Emirates Airlines: The fast-growing carrier is about to become the world’s third largest.

Airbus and US Spending: Airbus wants to double its US supply-chain sourcing to $24bn.

Boeing BWB: This article has some pictures of Boeing’s latest version of the Blended Wing Body research model.

Ft Worth columnist blasts American’s Horton

This is one of the most blistering critiques we’ve seen of a company CEO where no improprieties were involved.

Mitchell Schnurman of American’s hometown paper, The Ft. Worth Star Telegram, just pummels AMR/American CEO Tom Horton.

Odds and Ends: the cost of a 737-800; Planes take off despite ground mishap; ‘We know about this’

Boeing 737-800: Wells Fargo’s aerospace analyst team issued a note today that confirms its previous calculations that American Airlines is paying $40m-$41m for its 737-800s.

Update, August 1: We received this note from Wells Fargo: What was confirmed was AA’s SELLING price to AerCap and ILFC, NOT what AA is paying.

American Airlines: AirInsight has this analysis of the current American Airlines situation.

Speaking of American: Flight Global has this story about how an American 767-300ER and a Ryanair 737-800 brushed each other on the ground all pilots were unaware and both airplanes took off.

One more American: The Seattle Post-Intelligencer has this series of 49 photos and airline liveries, past and present, starting with American.

And then there is Alaska Airlines: A passenger snapped this photo on an Alaska Airlines flight. Via NYCAviation’s Tweet.

AMR’s goofy merger explorations

So AMR says it will explore merger opportunities as part of its bankruptcy process.

The choices of potential partners are odd, indeed. According to The Wall Street Journal, AMR’s choices for a potential combination with American Airlines are US Airways, JetBlue, Alaska Air Group, Republic Airways Holdings’s Frontier Airlines, and Virgin America.

The Wall Street Journal notes: Besides US Airways, none of the others has publicly expressed a desire to merge with American. JetBlue and Alaska Air have indicated they prefer to remain independent, and people familiar with closely held Virgin America also said the company isn’t interested. Asked about that, Mr. Horton said: “If somebody’s not interested, they’re not interested.”

The choices, aside from US Airways, are pretty goofy. None is a network carrier that would add a system to American. JetBlue and Alaska Airlines would certainly beef up the East and West coasts, respectively, where American is weak. JetBlue would add strength to American’s JFK international hub. But neither brings a network to the airline.

Frontier Airlines and Virgin America wouldn’t bring even the attributes offered by JetBlue and Alaska. Frontier’s Denver hub competes with United Airlines and Southwest Airlines. Does American really want to get into this fight? We think not.

Virgin America, which regularly posts huge losses, isn’t strong in San Francisco where it is based and neither is American. We don’t understand why this airline is even mentioned.

The only airline that makes sense for consideration among those mentioned is US Airways. US Airways has a network, strong East Coast presence, and a sharp management, which wants to be in control and this seems to be the biggest obstacle for the AMR/American management.

And it only makes sense for the US Airways management to be the surviving one.

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