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October 12, 2012

An interview with AMR CEO Horton, Part II (fewer delays, on-time is getting better)

In this next section of the interview with AMR chief executive Tom Horton, he discussed the thousands of delays and cancellations that plagued the carrier's operations in the past few weeks.

ST: American announced [Thursday] morning that you were going to continue its 1 percent capacity cut into November to deal with operational issues. From your point of view, why did your company go from 85 percent on-time performance to 55 percent?

Horton: With record load factors. Like I said a minute ago, the company has been performing very well and the people of American have been standing tall and doing a really good job. So we had a disruption and I think the reasons for that are well documented and understood so I don’t think it serves our interest here to spend a lot of time on that. It has, the operating performance has improved markedly in recent days. It is not yet back to what I think customers expect from American and we’re doing everything we can to get it right back to that standard. But the progress in recent days has been very significant.

ST: In a letter to the pilots union, American threatened legal action, yet you did not take them to court. Why not? We have seen other carriers take legal action during a work slow down.

Horton: You’re right. You know a lot of people acted like this was some extraordinary, unprecedented event. It is not in the airline industry. I very much regret the effect it has had on our customers and our people. This has been hard on everybody. So our first order of business is to take care of our customers, to do what is necessary to get the operations back to where it needs to be and we’ve done many things including what you alluded to, pulling the schedule down to give us more fleet and crew flexibility and I think that was a wise thing to do. I think it was wise to extend that into the first couple of weeks of November. But yes, others have sought court relief. US Airways did it just about a year ago, prior to that United did it after a pretty big disruption in the summer. So it’s not unprecedented. Our first instinct in the wake of the contract judge’s ruling to allow for rejection of the contract was to get right back to the table. In fact, with the pilots voting down the tentative agreement we had made with the union, we said, I said personally at the time, I said it in a letter to all of our folks our objective is to get right back to the table and try to recraft an agreement that better addresses our pilots' priorities but also ensures the successful restructuring of the company. So that's been our mission from day one. It took a little while for everybody to get prepared to get back to the table. I'm pleased to say that our negotiators and the union negotiators are now working together to craft an agreement and that's ongoing as we speak and I have encouraged both sides as I did the first time around to be creative, to be thoughtful, to be collaborative and to find common ground for an agreement and I'm hopeful that's what we'll do and when we do we can turn the page on this chapter and move forward.

ST: Have you been personally involved in the talks this time?

Horton: Yes. Right now it’s at the negotiator level but I have been involved.

ST: How do you convince the customer who was looking at 50 percent chance of making it to their destination on time, to come back to American, particularly during the holidays? Or the business traveler who needs to get to a meeting on time, and that reliability was not there for the past two weeks?

Horton: It was. For about two weeks. I think it all starts with performance, Andrea. We just have to get the company back to performing to its potential and we’ve made you know a big move in that direction. The combination of the improvement we’ve seen with the schedule adjustments we’ve made, I think are having the appropriate effect but we’ve gotta make more progress. And I’m hopeful what we’ve done in concert with progress at the negotiating table can help us move forward.

ST: The disruption was systemwide?

Horton: Yes. It was systemwide. It was not isolated to any one base or location and yes, we saw it across the system.

ST: Did you already see a revenue impact?

Horton: Yes, we’ve seen some revenue impact. As you would expect as a customer in a situation like this, but….

ST: How much?

Horton: Well, we haven’t disclosed that yet and we won’t until next week when we release our earnings for the third quarter. But I think folks can have confidence that American is going to be a reliable product. They can have confidence in American. And you know if you look at our on-time reliability these days its back up to the high 60s. It’s not where we’d like it to be but it’s moving steadily in the right direction.

ST: Have you seen an impact in your holiday bookings?

Horton: Again, not yet prepared to comment on that Mike, we’ll have more to say about it next week.

ST: So you will give a bookings outlook next week?

Horton: Yes. We will give the latest information.

-Andrea Ahles


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