The past glories and present struggles at American Airlines were on display across the country Wednesday.
American flew its last two dozen MD-80 planes into retirement in the New Mexico desert. Some still bore the sleek, polished aluminum livery created in 1967 by Italian designer Massimo Vignelli.
Few passengers will miss the noisy, smelly gas-guzzlers, but the planes and their iconic appearance were reminders of American’s lofty status in the airline business during the late 20th century.
Across the country in Boston, the airline’s president was apologizing to investors about American’s current problems, including a bitter fight with unionized workers and the long grounding of its new Boeing 737 Max jetliners. Those two events have led American to cancel thousands of flights this year.
Robert Isom said those twin challenges have slowed measures that American outlined last year to improve revenue, control costs and boost profit margins.
“We’re behind,” he said. “We certainly haven’t produced the kind of margins and earnings that we had hoped. We haven’t run the best airline in our history.”
It has been a frustrating time for many of American’s passengers.
In June, the last month for which government figures are available, American had the highest number of canceled flights among U.S. carriers. Its 4% cancellation rate was roughly double those of United and Southwest and nearly seven times Delta’s cancellation rate.
“We’ve disappointed a lot of customers this summer,” Isom said at a conference hosted by the financial-services firm Cowen. “I do think that we sent quite a bit of revenue to competitors this summer. That’s something that we’re going to put a halt to.”
Isom said American will get a labor contract with unions to end what the company — and a federal judge — termed an illegal work slowdown by mechanics that put unusually high numbers of planes out of service. The unions deny the accusation. Negotiations are set to resume Sept. 16, with help from a federal mediator.
And, Isom said, the Boeing Max — grounded since March after two deadly crashes — “will be flying certainly in 2020 and beyond.” Last weekend, American pulled the plane from its schedule for another month, until Dec. 3.
American executives say that airline employees have called passengers hit by the disruptions to apologize and even offer points toward free flights. Over the long run, American is trying to improve its financials by growing at its best airports.
American has added gates, destinations and flights at Dallas/Fort Worth International Airport, where it is the dominant carrier. Isom said American will add departures next year at another hub airport, in Charlotte, North Carolina. It plans to grow American Eagle flights at Reagan Washington National Airport in 2021.
The airline is squeezing more seats into its Boeing 737s to boost revenue, it is adding tools to better sell upgrades to passengers, and it plans to cut capital spending by close to $1 billion a year.
American has been on a multi-year spending spree — nearly $30 billion in six years — to upgrade what had been an aging, inefficient fleet and to invest in things including technology and sprucing up airport lounge. The resulting debt has led to concern that American is more vulnerable than its rivals to a recession, so cutting spending could assuage nervous investors.
Shares of Fort Worth, Texas-based American Airlines Group Inc. rose 49 cents to close at $27. After a five-week slide, they have lost 16% in 2019, far worse than rivals Delta, United, Southwest and the 17% gain in the Standard & Poor’s 500 index.
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