| Journal: TWUK | Section: |
| Title: | Issue Date: 19/11/01 |
| Author: | Page Number: 8 |
| Copyright: Other |
The world’s largest airline was just beginning to return to normal after two months of turmoil when flight 587 went down in New York last Monday.
Days before, AmericanAirlines chairman and chief executive officer Don Carty had said there was “zero” chance of the carrier going bust. Immediately following the crash, American’s parent company AMR’s share price tumbled 13% to its lowest level since 1987. Shares in other US carriers including United Airlines were similarly hit, while shares in British Airways dropped 6%.
Last month Carty reported the company’s worst-ever third quarter losses – around £350 million – with the warning that the battle was now for survival, not profitability, in the face of “truly staggering” losses.
The airline has already axed 20,000 staff and is cutting costs by around £700 million. Now it has cancelled its post-September 11 advertising campaign to boost traveller confidence and a trade campaign in Europe.
So what does the future hold?Operations and safety editor of Travel Weekly’s sister publication Flight International David Learmount said much could depend on the outcome of the investigation into the crash.
“The danger is that if American turns out to have been at fault in this crash people may avoid travelling with them,”he said. “Whatever happens, it will now have to work extra hard to win back customers.”
Parallels with Pan Am’s demise after Lockerbie were played down by Learmount. “Lockerbie only accelerated what was already on the cards for Pan Am. American is a different kettle of fish.”
Aviation analysts believe the Fort Worth-based carrier is well-placed to recover. “Things don’t look good but I don’t see American going under,” said one. “There is insurance for this kind of thing, and – let’s face it – schedules and routes mean people don’t usually choose the airline they’re flying with.”
A source close to the airline said the situation was bleak but not hopeless. “American has cash reserves and an ability to tap into more resources. This is an unprecedented series of events but the long-term prospects are still reasonable.”
ABTA chief executive Ian Reynolds predicted the effect on American’s bookings in the UK would be small. “But given the context of September 11 there’s no doubt this will have more serious consequences than it would have done had the attacks not happened.”
One city commentator even held out the possibility that the New York crash would provide American with the impetus to speed up consolidation and work more closely with its fellow Oneworld partners.
“There is going to be even more pressure from American to push forward with the proposed transatlantic alliance with BA,” he said. “There’s even the possibility that KLM and Northwest – the so-called ‘Wings’ alliance – will merge with Oneworld.”
Difficult times ahead: American Airlines faces tough challenges to remain in business