Airline Debt Takes Off as Passenger Traffic, Profits Rise
By Tim Catts and Mary Schlangenstein -
Oct 31, 2010 6:11 PM MT

Bonds of airlines are proving unbeatable two years after the industry struggled with record high fuel prices and an economy in freefall.

Borrowers from Dallas-based

Southwest Airlines Co., the world’s biggest discount carrier, to Australia’s Qantas Airways Ltd. led gains of 2.36 percent for the sector last month, topping the Bank of America Merrill Lynch Global Broad Market Corporate index, which was little changed. The increases pushed total returns this year to 15.4 percent, the best of the 17 industries making up the index.

Bondholders have more confidence airlines will have an easier time meeting debt payments as the International Monetary Fund in Washington forecasts the world economy will expand more than 4 percent next year, compared with the average of 3.69 percent from 2000 through 2008. The eight largest U.S. carriers are reporting quarterly profits for the first time since 2007 as the industry holds the line on adding seats.

“Performance has been incredible, and it really doesn’t have to be over,” said

William Hochmuth, an analyst at Minneapolis-based Thrivent Financial, which manages $67 billion. “The biggest thing that everyone was focused on in third- quarter earnings was the maintenance of capacity discipline and as long as we have that, there’s pricing power.”

‘Very Good Shape’
United Continental Holdings,

Delta Air Lines Inc. and AMR Corp.’s American Airlines said they plan to limit capacity increases to 3.5 percent or less next year. Profit at the eight biggest U.S. airlines was $2.44 billion in the third quarter, beating analysts’ average estimates. Average airfare per mile excluding taxes rose every month this year through August after falling in 2009, according to the Air Transport Association.

“The airlines have had very good financial results through the summer,” said

Roger King, a debt analyst at fixed-income research firm CreditSights LLC. “They have a lot of cash and they’ve been able to push out their debt maturities. So from a credit metrics standpoint they’re in very good shape.”

Elsewhere in credit markets, the extra yield investors demand to own company bonds rather than government debt worldwide narrowed for a fourth week, capping the biggest monthly drop since July. Global corporate bond issuance declined before

Federal Reserve policymakers meet this week amid speculation the central bank will announce another round of large-scale asset purchases, or quantitative easing. Leveraged loan prices rose, reaching the highest in almost six months.

Yield Spreads
Spreads on company bonds from the U.S. to Europe and Asia shrank 3 basis points last week to 164 basis points, or 1.64 percentage points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. That’s a decline of 9 basis points for the month. Average yields of 3.45 percent on Oct. 29 have slid from 4.4 on Dec. 31.

The cost of protecting corporate bonds from default in the U.S. and Europe fell for a second week. Credit-default swaps on the Markit CDX North America Investment Grade Index declined 1.9 basis points to 94.5 basis points, according to Markit Group Ltd. The index, which has dropped from 106.7 at the end of September, reached 92.5 on Oct. 26, the lowest since May 3.

In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined 2.5 basis points for the week to 96.9. The Markit iTraxx Asia index of 50 investment- grade borrowers outside Japan rose 0.2 basis point for the week to 107.06, according to prices from data provider CMA. It fell 1 basis point to 107 as of 8:35 a.m. in Singapore today, Barclays Plc prices show.

The indexes typically fall as investor confidence improves and rise as it deteriorates. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Loans Soar
The

Standard & Poor’s/LSTA US Leveraged Loan 100 Index climbed 0.26 cent for the week to 91.34 cents on the dollar, the highest since May 6. Prices on the index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, climbed from 90.46 cents at the end of September.

Seven leveraged loan deals closed last week for $3 billion, bringing the total for the month to $15.3 billion, according to JPMorgan Chase & Co. Year-to-date volume stands at $114.1 billion, compared with $38 billion in all of last year.

In emerging markets, relative yields fell 11 basis points for the week to 242 basis points, according to JPMorgan index data. The index, which closed at 276 last month, touched 237 on Oct. 28, the narrowest level since April 20.



Rio Tinto Group, the world’s third-largest mining company, led $59.4 billion of corporate bond sales worldwide last week, down from $67.7 billion in the period ended Oct. 22, Bloomberg data show. Monthly sales of $273.5 billion compare with $376.5 billion in September and $282.3 billion in October 2009.

Rio Rallies
London-based Rio Tinto’s $1 billion of 3.5 percent notes due November 2020, issued Oct. 28 at 99.225 cents on the dollar, rose to 100.276 cents to yield 3.47 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Fixed-income investors will be watching as Fed policy makers meet Nov. 2-3 to discuss their plans for economic stimulus. The Fed has already cut interest rates almost to zero and bought $1.7 trillion of government and mortgage securities.

The meeting ends two days before the U.S. government may say that the

jobless rate probably held at 9.6 percent for a third month in October, according to the median of 61 estimates in a Bloomberg News survey. Payrolls likely rose by 60,000, the first gain since May.

Airline Rebound
Airlines’ performance for debt investors in October compares with a return of 0.08 percent for corporate bonds worldwide, based on Bank of America Merrill Lynch indexes. Their bonds gained 1.6 percent in September and 1.86 percent in August, versus market gains of 0.22 percent and 2.14 percent.

More than a dozen carriers collapsed in the first half of 2008 as they faced spiraling fuel costs and the worst economic crisis since the Great Depression. Seeking to slash expenses, carriers expanded efforts to charge for snacks and checked bags.

“Airlines are struggling for survival,”

Giovanni Bisignani, the chief executive officer of the International Air Transport Association, said in a speech in Istanbul in June 2008. That was a month before crude oil prices reached as high as $145.29 a barrel.

Airlines are poised to record their first positive fourth quarter in a decade, according to

Michael Derchin, a CRT Capital Group LLC analyst. Before this year’s third quarter, the last time all of the eight largest U.S. airlines were profitable was the same period of 2007.

United Leads Rally
Bonds from United Airlines were the best-performing last month in the Bank of America Merrill Lynch U.S. Corporates Transportation index, gaining 4.61 percent. United’s $500 million of 9.875 percent notes due August 2013 have climbed to 109.25 cents on the dollar from 99.25 cents on Jan. 13, Trace data show. United and Continental Airlines merged to become United Continental Holdings on Oct. 1.

Atlanta-based Delta’s bonds ranked second in the index, returning 3.06 percent in October.
The reduced supply of aircraft seats is aiding carriers as demand picks up from business travelers, who generally buy tickets closer to their departure dates and pay higher fares.
“In terms of absolute strength of revenue, we’ve achieved a level I think is sustainable at Southwest for at least in the near term,” said

Gary Kelly, CEO of Dallas-based Southwest. “I’d call that roughly 12 to 24 months. That’s under the assumption the economy doesn’t slip back into recession and travel demand continues to strengthen.”

Airline Default Swaps
Southwest’s bonds rose 1.1 percent in October, according to the Bank of America Merrill Lynch index data. Qantas’s U.S. dollar-denominated bonds returned 0.76 percent. The Sydney-based carrier’s $513.6 million of notes maturing in April 2016 rose 0.98 cent to 110.78 cents in October, Trace data show.

Credit default-swap spreads on North American airlines fell to an average 650 to 700 basis points from 900 to 1,000 basis points in June, Bloomberg analyst

George Ferguson wrote in an Oct. 25 report.

Contracts on Delta, the world’s second-biggest carrier, tumbled to the lowest in almost three years on Oct. 29. The contracts declined to 570.7 basis points, from 725 at the end of September, CMA prices show.

S&P increased its outlook on Delta, from negative to stable on Oct. 21. “Continued strong earnings, coupled with debt reduction” could lead to an upgrade, S&P said. Delta cut its debt by $750 million in the quarter, it said in a statement.

To contact the reporters on this story:

Tim Catts in New York at tcatts1@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net
To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net; Ed Dufner at edufner@bloomberg.net

Image via Wikipedia Southwest Wants to Fight
By Ted Reed 10/29/10 - 11:04 AM EDT

Recent consolidation means the number of legacy network carriers has been pared back to four while the number of major low-cost carriers will fall to two.

One might think that a pullback to fewer competitors might make the remaining carriers content to sit back and count their money, but that is not the way the airline industry operates.
Instead, American(AMR_) and United(UAL_) have launched new fights for Los Angeles International Airport, and Southwest is mounting assaults on some markets the legacy carriers have long dominated.

In fact, Southwest plans major growth in two of the industry's biggest, most profitable hubs: Newark and Atlanta. The carrier said Thursday it will begin Newark service in March with six daily flights to Chicago's Midway Airport, as well as two daily flights to St. Louis.

Chicago O'Hare is the number one destination from New York LaGuardia, with 1.1 million passengers in the year ending July 30, according to the Bureau of Transportation Statistics. It is the number two destination from Newark with 648,000 passengers during the same period. These are big markets for American and United, with hubs in Chicago; for Continental from its Newark hub; and for Delta (DAL_), which has regional partner Shuttle America operate more than ten daily round-trip flights.

Obviously, a market with nearly two million annual passengers looks like a gold mine to Southwest, which is offering introductory one-way fares of $72. "Southwest is proud to expand its wings into a very popular market and to provide low fare competition," said CEO Gary Kelly in a prepared statement. The carrier also has three daily Midway flights from LaGuardia.
Meanwhile, Southwest also plans aggressive growth grow in Atlanta, where Delta operates the world's biggest hub with more than 1,000 daily departures.

At Southwest's recent media day, Executive Vice President Bob Jordan said that once a proposed merger with AirTran(AAI_) is complete, Southwest can offer two dozen new destinations out of Atlanta to cities that already have a Southwest presence but do not have AirTran service from Atlanta.

"We have the opportunity on some of those routes to drop fares 40%," Jordan said, according to The Dallas Morning News. "It's almost a no-lose if you can go into a market and not only ... offer a great product, but ... bring fares down 40%, stimulate the market [and] provide a lot of competition."

-- Written by Ted Reed in Charlotte, N.C.
>to contact the writer of this article, click here: Ted Reed

Jet Suffered Two-Foot Hole, Decompression
10/28/2010
By ANDY PASZTOR
Boeing Co. and federal air-safety officials are stepping up scrutiny of certain Boeing 757 aircraft after a two-foot hole opened earlier this week in the fuselage of an American Airlines jet cruising at 31,000 feet, resulting in rapid cabin decompression.

The emergency, which occurred on an AMR Corp. American Airlines jet en route from Miami to Boston on Tuesday, prompted the crew and 154 passengers to don oxygen masks about half an hour into the flight. The twin-engine 757 descended to a lower altitude, turned around and made a safe landing at Miami International Airport. There were no injuries.

But industry officials said the incident—which created a rupture roughly two feet long and a foot wide above the jet's front left cabin door—bears some similarity to cracks found last month in the fuselage of a United Continental Holdings' United Airlines Boeing 757.

According to industry officials, manufacturer Boeing working on a safety alert, called a service bulletin, dealing with stepped-up inspections of certain portions of older 757 models. Industry officials said both planes had logged between 20,000 and 25,000 flights, which would make them middle-aged aircraft. Enhanced-inspection programs often apply to older planes that have undergone greater structural stress from many more takeoffs and landings. Rapid cabin decompressions are rare events, and they may stem from undetected metal fatigue that can suddenly peel back a portion of an aircraft's aluminum skin in midair.

It's too early to tell what caused the rupture on the American Airlines plane. Both the Federal Aviation Administration and the National Transportation Safety Board are investigating, but agency officials on Thursday declined to comment on their focus. Investigators, though, are looking for links between Tuesday's event and the damage found earlier on the United jetliner.

A Boeing spokeswoman declined to comment, except to say the company is providing technical assistance to the safety board and "will take appropriate action" as warranted by the investigation.

The American plane is out of service. Its flight-data and cockpit voice recorders have been shipped to the safety board, which also will examine the ruptured portion of the fuselage.

A spokesman for American Airlines confirmed details of the incident Thursday, adding that airline engineers and technicians are cooperating with government safety officials to determine the cause.

Based on initial reports, the spokesman said, the pressure loss inside the cabin started "with a small hole in the fuselage just above the first door on the left side" of the plane behind the cockpit, and then ripped open a gash two feet long.

American operates a fleet of more than 100 Boeing 757s on domestic and transcontinental routes, as well as to serve some international destinations. Hundreds of others are flown by major U.S. carriers, and 757s are widely used by large international carriers. Whatever stepped-up inspection procedures Boeing ultimately distributes will apply world-wide. But because such maintenance bulletins are only recommendations and aren't binding on carriers, U.S. and foreign air-safety regulators typically follow up with mandatory directives.

This week's incident caught the attention of investigators partly because the American jet isn't particularly old, and it doesn't fall into the category of ageing aircraft prone to metal fatigue and therefore already subjected to heightened scrutiny and structural inspections.

The cause of the latest in-flight rupture, according to industry officials, appears to have some parallels to a July 2009 incident involving a Southwest Airlines Co. Boeing 737 jet that made an emergency landing in Charleston, W.Va., after developing a one-foot hole on top of its fuselage at 30,000 feet. In that incident, the cabin rapidly lost air pressure, oxygen masks deployed and the plane diverted and made an emergency landing without any injuries.

Boeing subsequently urged operators of more than 130 older 737 jets to step up inspections or install certain strengthening metal parts around suspect areas. In January, the FAA ordered enhanced structural checks—repeated roughly every few months—of affected aircraft without the modifications. The agency said undetected cracks "could result in sudden fracture and failure of the fuselage skin panels, and consequent rapid decompression."

Write to Andy Pasztor at andy.pasztor@wsj.com

American Airlines, Through BlackAtlas.com, to Host Exclusive Music, Food and Wine Tasting Event at Marcus Samuelsson's New Restaurant, Red Rooster Harlem

Registered Users of American's BlackAtlas.com Website Can Win Tickets to Meet Celebrity Chef and Sample Food and Wine at Pre-Opening Party on Nov. 15 Grand Prize Includes Trip for Two to New York City with Airfare, Hotel, $200 Gift Card and Tickets to Event

Press Release Source: American Airlines On Thursday October 28, 2010, 12:21 pm

NEW YORK, Oct. 28 /PRNewswire/ -- American Airlines, through BlackAtlas.com, the first online travel community for people interested in Black culture, will host a private music, food and wine tasting for some of its lucky members next month. Registered users of BlackAtlas.com will have the opportunity to join Travel Expert-at-Large Nelson George and celebrity chef Marcus Samuelsson on Nov. 15 for a preview of his eagerly-anticipated restaurant, Red Rooster Harlem.

Award-winning chef and cookbook author Samuelsson is the youngest chef ever to receive two three-star reviews from The New York Times, the first in 1995 after just three months as Executive Chef and co-owner of Aquavit, and the second in 2001, also for Aquavit. He has received consecutive four-star ratings in Forbes' annual All-Star Eateries feature, was named one of the "40 Under 40" by Crain's, and has been hailed as one of The Great Chefs of America by the Culinary Institute of America.

Recently, Chef Samuelsson won out over 21 fellow chefs on the second season of the television competition "Top Chef Masters" on Bravo, and received $115,000 for the UNICEF Tap Project. A video of Chef Samuelsson exploring Harlem, the location of his new restaurant Red Rooster Harlem, can be found on BlackAtlas.com.

American Airlines and Chef Samuelsson will host a pre-opening dinner party at Red Rooster Harlem. The restaurant will celebrate the roots of American cuisine in one of New York City's liveliest and most culturally-rich neighborhoods. The event will consist of a four-course meal, prepared specially by Chef Samuelsson.

Each course will be paired with a South African wine, provided by Heritage Link Brands, the preeminent importer and distributor of wine produced by people of African descent throughout the world. A musical performance by American R&B and soul singer-songwriter Chrisette Michele will conclude the evening's activities.

"These unique BlackAtlas.com events in New York allow those of us at American Airlines to share and support our customers' interests and build a closer relationship with them," said Art Torno, American's Vice President for New York. "It also allows us to show our support for such beloved New Yorkers as Chef Marcus Samuelsson, a 'global citizen' whose new restaurant, Red Rooster Harlem, will represent the diverse tastes of American cuisine."

Currently registered members of BlackAtlas.com, and those who register between Oct. 27 and Nov. 4, will be entered to win a grand prize of one pair of tickets to the exclusive event, which will include round-trip Economy Class airfare for two to New York City on American from anywhere in the 48 contiguous united States, two-night hotel accommodations for two and a $200 gift card.

The grand prize winner will be announced on or around Nov. 5. In addition, 15 users of BlackAtlas.com who live in New York and New Jersey, who are currently registered or who register between Oct. 27 and Nov. 9, will also be entered for a chance to win a pair of tickets to the event. Local winners will be announced on or around Nov. 10. See www.blackatlas.com for full terms and conditions.

"BlackAtlas.com, has taken social networking to new heights for Black travelers," said Monte Ford, American's Senior Vice President and Chief Information Officer. "The online community has become the resource for those looking to explore their passions and interests in Black history and culture worldwide. BlackAtlas.com has given Black travelers everywhere the opportunity to better plan their next trip and share their stories when they return."

BlackAtlas.com is the first-of-its-kind social networking site combining the best features of a travel site with the power of an online social network for travelers to share experiences unique to the Black community. Through video, commentary, photos, and blogs, BlackAtlas.com users can share content across social networks, create profiles, rate content, save content to Favorites, create downloadable travel guides and link to promotional fares on AA.com.

Content is categorized into destination/city-specific information and category-specific information, such as travel tips, restaurants, nightlife, culture, arts and museums, historic sites, beauty and barber shops, and places of worship. The Red Rooster Harlem Music, Food and Wine Pairing event is part of a series of events that American Airlines has been presenting exclusively for members of BlackAtlas.com in New York.

For more information on Black culture, the Red Rooster Harlem Music, Food and Wine Pairing and the BlackAtlas social network, please visit BlackAtlas.com.

American Airlines Enhances Inflight Service With New Eco-Friendly Coffee
Complimentary Java City Coffee Now Offered Onboard All American Flights
Press Release Source: American Airlines On Thursday October 28, 2010, 11:00 am

FORT WORTH, Texas, Oct. 28 /PRNewswire/ -- As part of its complimentary onboard beverage service, American Airlines will offer Java City™ coffee to all its customers inflight beginning Nov. 1. The eco-friendly, hand-roasted blend is 100 percent Rainforest Alliance Certified™, grown on sustainably managed farms.

"We are committed to exploring greener options for all of our products, both inflight and on the ground, to enhance the travel experience for our loyal customers," said Rob Friedman, American's Vice President – Marketing. "Java City strikes the perfect balance by offering a high-quality, great-tasting, eco-friendly coffee."

Coffee onboard American will now be served in 10 ounce cups. The new, larger cups are co-branded with Java City and the Rainforest Alliance logos in addition to the American brand.
"We're thrilled to provide American Airlines customers with an eco-friendly, great tasting Java City coffee experience," said Chuck Van Vleet, CEO at Java City. "While socially and environmentally responsible coffees have become integral components of our company's mission, we've worked hard to maintain the roasting principles that produce the 'uncommonly smooth' coffee our customers and consumers have come to expect."

Java City uses a sustainably grown, Central American blend of 100 percent Arabica Beans. The specialty coffee blend is Rainforest Alliance Certified, a seal awarded to farms, plantations, and cooperatives that meet comprehensive and rigorous standards covering social, labor, and environmental conservation issues.

"American Airlines' commitment to sourcing Rainforest Alliance Certified coffee shows that consumers around the globe are embracing sustainability," said Tensie Whelan, president of the Rainforest Alliance. "Passengers can enjoy their cup of coffee knowing that it comes from well-managed farms, where ecosystems and wildlife are protected and where workers enjoy access to health care, education, decent wages and dignified housing."

American currently participates in a number of onboard initiatives in an effort to lessen its impact on the environment. For example, this year the company trimmed the weight on 55 percent of its galley carts, which will reduce annual fuel consumption by 1.9 million gallons and lower American's annual carbon emissions by 5.9 million pounds. Also, American switched to a lighter weight water bottle – a change that will reduce carbon emissions by 1,000 pounds and plastic usage by 20,000 pounds annually.

American Airlines to Begin Seasonal Saturday Service Between Chicago and Cozumel, Mexico
New Flight Will Take Away Cold Winter Chill for Chicagoans and fellow Midwesterners

Press Release Source: American Airlines On Tuesday October 26, 2010, 11:34 am
CHICAGO, Oct. 26 /PRNewswire/ -- American Airlines is launching new service from Chicago to Cozumel, Mexico. The Saturday-only service will begin on Saturday, Feb. 12, and will run through April 2. The flight will return to American's schedule for the winter season in November 2011.

"We're very excited to be offering this new flight from Chicago O'Hare to Cozumel," said Tom Aichele, American's Vice President – Central Division Passenger Sales. "Midwesterners enjoy traveling to Mexico and other sunny, warm destinations during the cold winter months and this new flight will give them yet another location to enjoy."

Here is the schedule:
From Chicago to Cozumel:
AA 1867
Departs 9:50 a.m.
Arrives 1:40 p.m.

From Cozumel to Chicago:
AA 1870
Departs 2:45 p.m.
Arrives 6:35 p.m.


The new route will be flown using American's 160-seat 737-800 aircraft, which offers 16 First Class Seats and 144 Economy Class seats. The airline's Next-Gen 737s offer new slimline seats in the Economy cabin, featuring adjustable headrests and additional leg and knee room. The aircraft also have additional power ports and digital entertainment systems.

From Chicago, American also offers service to other destinations in Mexico – Acapulco, Cancun, San Jose del Cabo, Puerto Vallarta and, starting Dec. 16, daily nonstop service to Mexico City.
About American Airlines

American Airlines, American Eagle and AmericanConnection® serve 250 cities in 40 countries with, on average, more than 3,400 daily flights. The combined network fleet numbers more than 900 aircraft. American's award-winning website, AA.com®, provides users with easy access to check and book fares, plus personalized news, information and travel offers.

American Airlines is a founding member of the oneworld® Alliance, which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any airline can provide on its own. Together, its members serve nearly 700 destinations in more than 130 countries and territories. American Airlines, Inc. and American Eagle Airlines, Inc. are subsidiaries of AMR Corporation. AmericanAirlines, American Eagle, AmericanConnection, AA.com, We know why you fly and AAdvantage are trademarks of American Airlines, Inc.

Delta Keeps 787s, Defers Deliveries Into Next Decade
By Mary Jane Credeur

Delta Air Lines Inc., the world’s second-largest carrier, reaffirmed its order for 18 Boeing Co. 787-8 jets, while deferring deliveries into the next decade.

Delta and Boeing reached the agreement during the third quarter, the airline said today in a regulatory filing. Northwest Airlines Corp., which Delta bought in 2008, was slated to take deliveries of the 787 planes between 2008 and 2010. Boeing has delayed the plastic-composite jet’s entry into commercial service six times, into 2011’s first quarter, after initially planning a May 2008 debut.

Delta is pushing out the delivery schedule of the widebody jets because it already has 180 planes capable of ocean-crossing flights, with an average age of about 11 years. Chief Executive Officer Richard Anderson said as recently as April that the company is “in good shape in terms of trans-ocean airplanes right now.”

Delta spokesman Trebor Banstetter declined to comment on the Atlanta-based company’s order beyond the regulatory filing.

“We are pleased that Delta Air Lines has reaffirmed its order for 18 firm 787 Dreamliners,” said Jim Proulx, a Seattle- based spokesman for Boeing. He declined to comment on delivery schedules or other terms of the Delta discussions.

Delta’s order is valued at about $3 billion, using average list prices on Chicago-based Boeing’s website.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

American's chief describes Bombardier's C Series as compelling

By Lori Ranson

American Airlines chief executive Gerard Arpey believes the Bombardier CSeries is "definitely worth considering" as the carrier looks at its growththrough 2020.Responding to a query about the aircraft today during an earnings call Arpey explains that American views aircraft decisions in the context of capacity, and that the carrier's capacity growth is correlated with GDP. Over the long term American's strategy is to grow its network consistentwith GDP "in regions of the world where we operate", Arpey explains.

Using that rationale as a baseline Arpey states the C Series "is aninteresting airplane". Later in the call Arpey called the aircraftintriguing and stated the airframe-engine combination "does lookcompelling".

However, Arpey states American's current labour agreements are notconstructed in a way that allows the carrier to easily introduce new fleet types due to the training requirements in those agreements."You don't have to train everybody through every aircraft type you have,"says Arpey. "There are ways to do it that are smarter and would be good forthe company and pilots."Any decision regarding introducing new aircraft types at American depends ondiscussions with pilots, but Arpey believes aspects of the CSeries could "be of interest to us and our pilots".

16 Secrets Your Pilot Won't Tell You
By Justin Rohrlich October 22, 2010 09:57 AM


Reader's Digest interviewed 17 commercial airline pilots and asked them for the inside dope on what really goes on up there in that skinny metal tube 35,000 feet above the earth.

Here are some selected answers they gave:

1. “I’m constantly under pressure to carry less fuel than I’m comfortable with. Airlines are always looking at the bottom line, and you burn fuel carrying fuel. Sometimes if you carry just enough fuel and you hit thunderstorms or delays, then suddenly you’re running out of gas and you have to go to an alternate airport.”

2. “We tell passengers what they need to know. We don’t tell them things that are going to scare the pants off them. So you’ll never hear me say, ‘Ladies and gentlemen, we just had an engine failure,’ even if that’s true.”

3. “The Department of Transportation has put such an emphasis on on-time performance that we pretty much aren’t allowed to delay a flight anymore, even if there are 20 people on a connecting flight that’s coming in just a little late.”

4. “The truth is, we’re exhausted. Our work rules allow us to be on duty 16 hours without a break. That’s many more hours than a truck driver. And unlike a truck driver, who can pull over at the next rest stop, we can’t pull over at the next cloud.”

5. “The two worst airports for us: Reagan National in Washington, D.C., and John Wayne in Orange County, California. You’re flying by the seat of your pants trying to get in and out of those airports. John Wayne is especially bad because the rich folks who live near the airport don’t like jet noise, so they have this noise abatement procedure where you basically have to turn the plane into a ballistic missile as soon as you’re airborne.”

6. “No, it’s not your imagination: Airlines really have adjusted their flight arrival times so they can have a better record of on-time arrivals. So they might say a flight takes two hours when it really takes an hour and 45 minutes.”

7. “There’s no such thing as a water landing. It’s called crashing into the ocean.”

8. “Is traveling with a baby in your lap safe? No. It’s extremely dangerous. If there’s any impact or deceleration, there’s a good chance you’re going to lose hold of your kid, and he becomes a projectile. But the government’s logic is that if we made you buy an expensive seat for your baby, you’d just drive, and you’re more likely to be injured driving than flying.”

9. “Pilots find it perplexing that so many people are afraid of turbulence. It’s all but impossible for turbulence to cause a crash. We avoid turbulence not because we’re afraid the wing is going to fall off but because it’s annoying.”

10. “There is no safest place to sit. In one accident, the people in the back are dead; in the next, it’s the people up front.”

11. “If you’re a nervous flier, book a morning flight. The heating of the ground later causes bumpier air, and it’s much more likely to thunderstorm in the afternoon.”

12. “We don’t make you stow your laptop because we’re worried about electronic interference. It’s about having a projectile on your lap. I don’t know about you, but I don’t want to get hit in the head by a MacBook going 200 miles per hour.”

13. “I always tell my kids to travel in sturdy shoes. If you have to evacuate and your flip-flops fall off, there you are standing on the hot tarmac or in the weeds in your bare feet.”

14. “Most people get sick after traveling not because of what they breathe but because of what they touch. Always assume that the tray table and the button to push the seat back have not been wiped down, though we do wipe down the lavatory.”

15. “Remember this before you complain about the cost of a ticket: Fares today are about the same as they were in the 1980s.”

16. “We miss the peanuts too.”

Japan Air-American, All Nippon-United Win Japan Approval for Cooperation
By Chris Cooper and Kiyotaka Matsuda -
Oct 21, 2010 9:02 PM MT

Japan granted antitrust immunity for Japan Airlines Corp. and All Nippon Airways Co. to cooperate with partners on U.S. flights, clearing the way for deals that may cut costs and boost sales.

Japan Air won approval for its alliance with AMR Corp.’s American Airlines, and All Nippon for its partnership with United Continental Holdings Inc.’s United and Continental units, Japan’s transport ministry said today in a statement.

The U.S. and Japan are set to sign an “Open Skies” accord on Oct. 25 that will end limits on how many carriers can fly between the two countries and what prices they can charge. The U.S. gave preliminary antitrust approval earlier this month, subject to the agreement being signed.

“The joint business with American will contribute to the growth and stability of both our businesses,” Japan Air President Masaru Onishi said in a statement. “We are intent on keeping the marketplace competitive.”

All Nippon rose 0.3 percent to 301 yen as of the 11 a.m. close of trade in Tokyo. Japan Airlines, which is restructuring under bankruptcy protection, was delisted from the Tokyo Stock Exchange in February.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net
To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

AMR Said to Hire Evercore, Bain to Study American Eagle Options

By Mary Schlangenstein and Zachary R. Mider - Oct 19, 2010 1:33 PM

American Airlines parent AMR Corp. hired investment bank Evercore Partners Inc. and consultant Bain & Co. to examine options for its American Eagle regional unit, two people with knowledge of the matter said.

Eagle probably will be spun off to AMR shareholders because of a lack of potential buyers, although a sale still is possible, said one of the people, who asked not to be identified because the talks are private. The evaluation for Fort Worth, Texas-based AMR may take more than six months, this person said.

A separation of Eagle would allow American to seek lower- cost ways to serve regional routes and enable Eagle to compete for contracts with other airlines. AMR said June 10 it would study divesting Eagle, reviving an earlier review of a sale that ended with the unit being taken off the market in July 2008.

“The options are pretty limited at this point” to find a buyer, said Hunter Keay, a Stifel Nicolaus & Co. analyst. “I don’t know who that would be. AMR is incentivized to get rid of Eagle, because it’s a drag on their cost structure. A divestiture would fit well in their turnaround plan.”
An Evercore spokesman declined to comment, and a spokesman at Boston-based Bain wasn’t immediately available.

“We have and will continue to evaluate any number of potential opportunities but do not intend to publicize specifics,” Roger Frizzell, an AMR spokesman, said in a statement. “We will announce any decisions that are made if and when appropriate.”

Valuing Eagle

AMR doesn’t break out complete financial data on Eagle, such as debt or whether the unit is profitable. Revenue for American’s regional operations rose 13 percent in 2010’s first half to $1.1 billion. Eagle, which operated 281 aircraft as of July, has about 1,500 daily departures.

“In a spinoff, it’s difficult to justify too much value there unless you have a long-term guarantee of their ability to provide regional lift for American for an extended period of time,” said Keay, who advises buying AMR.

AMR rose 14 cents, or 2.2 percent, to $6.52 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 16 percent this year. AMR may report a third-quarter profit tomorrow of $119 million, the average of nine analysts’ estimates compiled by Bloomberg, after seven straight losses.

Regional Consolidation



A possible sale of Eagle would follow three regional- airline deals since July 1. SkyWest Inc. is buying ExpressJet Holdings Inc. in a transaction valued at about $133 million when it was unveiled in August. Pinnacle Airlines Corp. is acquiring Delta Air Lines Inc.’s Mesaba for $62 million, while Trans States Holdings Inc. will pay $20.5 million for Delta’s Compass.

Evercore, the New York-based advisory boutique founded by Roger Altman, hired banker George Ackert from Merrill Lynch & Co. last year to focus on transportation and infrastructure deals. Ackert advised Delta on its 2008 purchase of Northwest Airlines Corp.

Bain is working with United Continental Holdings Inc.’s Continental and United airlines as they merge operations and helped Delta’s integration with Northwest.

AMR also would consider a private-equity infusion or a leveraged buyout for Eagle, Dan Garton, Eagle chief executive officer, said in a June interview.

About 77 percent of Eagle’s planes have 50 or fewer seats, a size that’s fallen out of favor because of operating costs and airlines’ demand for using larger, more-comfortable aircraft on regional routes to win more business fliers. Eagle can’t expand its fleet of jets with 70 or more seats because of a limit set in American’s pilot contract.

“The value of AMR Eagle is ultimately tied to management’s ability to extract concessions from mainline pilots that permit the carrier to fly larger 75- and 90-seat jets,” said Dan McKenzie, a Hudson Securities analyst in Chicago who rates AMR as “neutral.”

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Zachary R. Mider in New York at zmider1@bloomberg.net
To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net.

Image via Wikipedia Pete Roma On Behalf of the Flight Attendant
Field Study Project Team

Peter G. Roma, Ph.D.Associate Director, Human Performance Laboratory Institutes for Behavior Resources Baltimore, MD, USA

Adjunct Assistant Professor, Division of Behavioral Biology Department of Psychiatry and Behavioral Sciences Johns Hopkins University School of Medicine Baltimore, MD, USA


Greetings Friends,

If you received this email, then you are among the many dedicated US-based Flight Attendants who contributed to the recent Flight Attendant Work/RestPatterns, Alertness, and Performance Assessment field study project conducted by the Institutes for Behavior Resources.

It is indeed Fall here on the East Coast, and I've heard from a few of you who were curious about the results, so the purpose of this letter is to update you on the status of the project and distribution of the report(s).

After over a year of continuous data collection, we received the last of the equipment from our final study participant in June 2010, and following an extraordinary data processing and analysis effort, we submitted a draft report to the FAA for Congress in July. The FAA was so struck by our findings that they immediately submitted the unedited report to the US Congress.

The bottom line is that you're ALL fatigued before you even start work! To determine this, we took all those reaction time tests you did and calculated the average of your top 10% performances as a "best you can do" baseline. We then compared that optimal baseline to your average Pre-Work and Post-Work test performances, so the question we answered for each person was "How did you do before and after work compared to your very best performance?" Of the 200+ people who did the study, not one of you showed up for work at 100%. As expected, there were some effects of Seniority (senior vs. Mid vs. Junior) and Flight Ops (Domestic vs. Int'l), and we're now working with the data to determine what are the strongest predictors of performance deficits (such as length of duty day, trip length, time in hotel, # days off between trisect.). Of course these findings are no surprise to you (or me at this point), but the FAA and certainly Congress did not realize how pervasive fatigue was in cabin crew.

At this point, the report is being processed and formatted by the FAA for conversion into an official government Office of Aerospace Medicine (OAM) Technical Report. Of course, because the FAA is a big machine, it takes time to get something like this through, but it will be publicly available upon completion and approval. As soon as the official public report is released, I’ll make sure you all have access to it. In the meantime (although Improbably shouldn't do this), I've pasted a copy of the report's Abstract below, which is a one-paragraph summary of the results to hold you over:

Impaired vigilant attention and cognitive performance induced by fatigue may compromise safety in 24-hr operational environments, including commercial aviation. Given the direct role flight attendants play in managing passenger safety and the increasing demands on this segment of the civilian workforce, the US Congress ordered a comprehensive examination of fatigue in cabin crew, including policy reviews, a large-scale survey, and a field study of actual flight operations.

The present report provides an overview of the field study results, focusing on objective measures of sleep/wake patterns (via continuous autography) and neurocognitive performance (Psychomotor Vigilance Test [PVT] before and after sleep and work) over a 3-4 week period in 202 US-based flight attendants of all seniority levels working for network, low-cost, and regional carriers embarking on domestic and international flight operations.

On average, flight attendants slept 6.3 hyper sleep episodes on days off and 5.7 hr on work days, fell asleep 29 ministers going to bed, awoke four times per sleep episode, and spent 77% of each episode actually sleeping. After statistically controlling for any effects of reserve status, gender, and age, junior level flight attendants(vs. mid and senior) had the shortest sleep latencies during their days offhand flight attendants working international operations slept significantly less per episode (4.9 hr vs. 5.9 hr) and less efficiently (75% vs. 79%)during work trips compared to their colleagues working domestic operations.

In terms of performance, all flight attendants exhibited significant impairments during pre-work PVT test sessions when compared to their own optimum baseline performance (mean of top 10% PVT sessions), including a 21%increase in reaction times, a 14% decrease in response speed, and 3 more lapses on average.

Across the workday (i.e., pre-work to post-work PVTsessions), regional flight attendants committed fewer premature PVTresponses than both their network and low-cost counterparts, junior level participants produced significantly higher post-work reaction times than their senior level colleagues, and those working international flights produced better pre-work reaction times but a greater increase in lapses across the workday than flight attendants working domestic operations.

These objective data are consistent with other shift-work research and echo subjective survey findings of ubiquitous fatigue across the US-based flight attendant community. Broad factors such as carrier type, seniority, and flight operations are clearly relevant to flight attendant sleep/wake and performance patterns, and additional follow-up reports on the field study dataset will provide more detailed analyses that identify and assess the precise operational variables that contribute to fatigue in professional cabin crew.

As research scientists, what we did was provide objective behavioral performance data which apparently support the survey data and other opinion-based evaluations of the fatigue issue in cabin crew. As you know, this was no small task for any of us on the research side or on Flight Attendant side, but still a critically important step towards the rest of the world taking the concerns of the Flight Attendant community seriously--it's hard for anyone to argue with hard data.

Only time will tell if any policy changes are made to improve safety and quality of life for cabin crew, but no matter what happens, you should all be proud for making appositive contribution to your profession, and we thank you again for your efforts and dedication to the project.

Airlines seek to move air marshals from first class
10/18/2010 5:08 PM

By Alan Levin, USA TODAY

Airlines are asking the Federal Air Marshals Service to relax its policy of often seating undercover agents in first class because they say it has become a costly disruption that isn't justified by current security threats.

The Air Transport Association, the Washington trade group representing large carriers, and several airline CEOs recently appealed to Transportation Security Administration head John Pistole and his marshals service counterpart, Robert Bray, to move marshals to seats farther back in planes.

By going public with their concerns, the airlines have shone a rare light on the behind-the-scenes tensions that sometimes arise in the secretive force that protects against terrorism in the skies. The disclosure prompted a harsh backlash from a group that represents marshals.

The marshals service, the force of undercover marksmen that was greatly expanded after the Sept. 11 terrorist attacks, travels for free. Marshals are guaranteed a seat on a flight and they often take seats in first class, says David Castelveter, spokesman for the airlines' association.

The airlines and some security experts say the need isn't as great as it once was for marshals to sit in first class, where they can serve as a barrier to a suicide hijacker. They say security measures such as hardened cockpit doors and recent terrorist attempts in the rear of planes suggest that threats may be at least as great elsewhere on planes.

"We want to be absolutely sure that TSA is considering the risk level on board the airplane in determining the placement of the (marshals)," Castelveter says.

Though the loss of revenue in profitable first-class sections helped trigger the airlines' concerns, the carriers would not raise the issue if they didn't believe it was justified, Castelveter says.

Marshals contend it was "inappropriate" for the airlines to raise the issue publicly because it could expose the agency's tactics to terrorists, says John Adler, president of the Federal Law Enforcement Officers Association, which represents marshals.

Adler declined to speak about where marshals normally sit. He called the airlines' statements inaccurate and says he wrote to the House Homeland Security Committee suggesting airline executives be reprimanded. "They are sitting in the bleachers, and they don't have access to the playbook," he says.

Nelson Minerly, spokesman for the marshals service, declined to respond directly to the airline concerns. He says the agency deploys marshals based on intelligence and other analysis designed to identify the biggest risks.

A recent incident involving an international flight on a U.S. carrier helped jell airline concerns, Castelveter says. The flight, which he wouldn't identify, had a contingent of marshals aboard when federal officials sought to add marshals from a flight that was canceled. The agency wanted to place the newly added marshals in first class. After the airline objected, the agency relented and relocated the marshals.

Minerly says he had not been able to verify that the incident occurred.
.

AMR Heads Toward Profit
October 18, 2010

By MIKE ESTERL
FORT WORTH, Texas—American Airlines parent AMR Corp. is expected Wednesday to report its first quarterly profit in two years, a sign that the tide is turning for a beaten-down industry laggard.

The Texas-based carrier is riding an industry-wide surge in air travel, which already lifted its more cost-efficient rivals back into the black earlier this year after the recession receded. Bolstering its prospects, American is poised to reap higher revenue from lucrative international routes in the coming year.

After dropping to the No. 3 U.S. airline by traffic from No. 1 over the past two years amid mergers by rivals, American says it isn't ruling out a possible deal of its own. Industry analysts have named US Airways Group Inc., Alaska Air Group Inc. and JetBlue Airways Corp. among potential targets.

"We don't rule anything out. All options are on the table," Thomas Horton, American's president, said during an interview. He declined to comment on any specific merger or takeover candidate.
But American executives also insist that new international alliances and strengthening the carrier's hubs in the biggest U.S. cities will allow the airline to prosper on its own, and that they feel no pressure to make a big-bang acquisition.

Earlier this month, after more than a decade of failed attempts, American launched a joint venture with British Airways PLC to boost trans-Atlantic revenue. Regulators also gave American a tentative green light in October to deepen its alliance with Japan Airlines Corp., which is expected to give it a bigger foothold in Asia.

American estimates it will generate at least $500 million in new annual revenue through its joint ventures with British Airways and Japan Airlines, as well as a more modest cooperation pact it recently signed with JetBlue domestically. It said earlier this month that it is recalling 800 furloughed employees.

In the U.S., the Texas-based airline increasingly is focusing on its hubs in the country's four most-populated metropolitan areas: New York, Los Angeles, Chicago and Dallas-Fort Worth. It has a leading presence in Miami, its springboard to Latin America, where American is the largest U.S. airline.

"You want to be big where it matters," said Beverly Goulet, American's vice president of corporate development.

American is now behind United Continental Holdings Inc., which became the No. 1 U.S. airline measured by traffic after UAL Corp.'s United Airlines closed its merger with Continental Airlines Inc. this month. Delta Air Lines Inc. is No. 2, having overtaken American when it acquired Northwest Airlines in 2008.

American has a lot of catching up to do. It is saddled with high labor costs and older, less fuel-efficient airplanes than its rivals now have. The carrier likely will be unprofitable again in the full 2010 year, alone among major U.S. airlines. AMR last posted a full-year profit in 2007. The company's stock price has plunged 20% this year, even as shares of competitors have risen.
Many industry analysts expect American to book a full-year profit in 2011, although its operating margin is likely to lag competitors for another year or even longer.

Labor remains a big hurdle for American. Its labor cost per available seat mile in the first half of 2010 was 4.30 cents, highest among the 10 largest U.S. airlines. United and Delta's labor costs were 3.60 and 3.51 cents, respectively, according to the Bureau of Transportation Statistics.
Part of the reason for the difference is that American didn't land in bankruptcy court during the past decade, unlike several rival carriers, which slashed wages and benefits more aggressively. American estimates competing airlines on average enjoy a $600 million annual advantage in labor costs.

Jonathan Root, an airline credit analyst at Moody's Investors Service,
said the airline also has bought itself time "because of its good liquidity" after raising $6 billion in financing last year as capital markets thawed. American, which has about $2.5 billion in debt maturities next year, ended September with an estimated $4.8 billion in cash and short-term investments.

There also are signs of a potential improvement in relations between American and its unions, which are fighting for higher pay in federally mediated talks after making concessions to keep the airline afloat in 2003. David Bates, who took over as pilot-union president this summer, recently met with American Chief Executive Gerard Arpey, something Mr. Bates's predecessor refused to do.

"Both sides have tried to reach out and repair the fractured relationship,'' said Sam Mayer, a spokesman at Allied Pilots Association, the union representing American pilots.

American is pushing for higher productivity and greater flexibility in all its labor contracts. Among its targets: an earlier agreement with its pilots that caps the number of 70-seat jets it can fly through regional partners at 47, limiting its service on certain routes.

Some of American's unions asked the National Mediation Board earlier this year to allow them to strike, but their requests have been turned down thus far.

"We have continued to make progress every time we meet" with unions, said Jeffrey Brundage, American's head of labor relations.

Management also expects industry labor costs to continue to converge as bankruptcy-era contracts expire at rival airlines, forcing them to negotiate new deals that are likely to be more costly. Unions often also secure pay increases when airlines merge.

New American Airlines president aims high, relishes challenge ahead
10:27 PM CDT on Saturday, October 16, 2010

By TERRY MAXON / The Dallas Morning News tmaxon@dallasnews.com

Tom Horton grew up in a neighborhood where people aimed high in their careers. Now he's trying to match them.

Of course, the new president of American Airlines Inc. and parent AMR Corp. isn't literally emulating the fathers of some of his neighborhood buddies. He has no plans to go into outer space.

Tom Horton
Horton grew up in the Houston suburb of Taylor Lake Village, where four of the original seven astronauts lived not far from the Johnson Space Center.

Even today, he speaks with great admiration about the fathers he saw hanging around the neighborhood.

"They were regular superheroes," Horton said in a recent interview. "They were the most amazing people you could imagine, physically and intellectually, and just had capabilities that were extraordinary."

Now Horton simply has to duplicate their performance as he works with Gerard Arpey, chairman and chief executive at American and AMR, to right the ship at the Fort Worth-based airline.

AMR picked Horton to take over the president's job from Arpey, who had held all three top jobs at both AMR and American since 2004.

Some would say that it will require a superhero to fix American – a money-loser for seven of the last nine years (cumulative loss since 2001: $11 billion) and expected by analysts to lose more than $400 million this year.

It has restive employees who took big pay cuts and other concessions in 2003 and carry a big chip on their shoulders over executive pay and incentives. At the same time, Arpey and Horton estimate that American has a labor-cost disadvantage of $600 million compared with other U.S. carriers.

Among major U.S. airlines, American's fleet is older than all except that of Delta Air Lines Inc. It consistently ranks in the lower half of U.S. carriers on service indexes such as on-time arrival and consumer complaints.

Over the last two years, four of its largest competitors have merged. The two marriages have pushed American from the top spot in size to No. 3, behind United Continental Holdings Inc. and Delta, which has absorbed Northwest Airlines Inc.

Horton's July 21 promotion from executive vice president and chief financial officer was part of a general shake-up in American's top management ranks. Another executive vice president, Dan Garton, moved to take over American Eagle, and Horton assumed many of Garton's duties.
Horton indicated that he will spend a lot of time trying to improve American's face to customers.
"You know, I have a real sense of responsibility to our customer, because I've got a lot of the customer service functions and marketing functions and in-flight functions, technology, those types of things," he said.

American "has a long history of being, I think, one of the biggest and best airlines in this country," the 49-year-old executive said. "I want to do everything I can to make it the best it can be. So that's what we're going to do. That's what we're going to focus on."
Early career

Horton graduated from Baylor University in 1983 and went to work for a public accounting firm. He soon decided that he didn't want to spend his career in that field, so he earned a master's degree in business administration from Southern Methodist University in 1985.

To that point, he never considered a career in aviation, even though his father spent his career at NASA and his brother still works there. Even at SMU, he thought it most likely that he'd land a job at a bank or some other financial institution.

"On a whim, I saw that American was on the recruiting calendar over there, and thought, 'Well, that's interesting.' From my first interview, I was hooked," Horton remembered.

He started out as an analyst in American's financial planning group, with his first task to take a look at the maintenance and engineering operation. After several promotions, he was named vice president and controller in 1994 and vice president for Europe in 1998.

Donald J. Carty, who was running AMR and American at the time, named the 39-year-old Horton as CFO in 2000.

"Tom was and is a very bright, very analytical, self-confident, articulate guy, and he just did great work from the outset," Carty said. "In a group of a bunch of young people who were doing very good work, he was doing great work."

Flying high
It was a good time for AMR, American and the industry. That year, 2000, marked the end of AMR's most profitable period ever. From 1994 through 2000, the company earned $5.5 billion.
In April 2001, AMR bought Trans World Airlines Inc.'s assets. Five months later, on Sept. 11, terrorists hijacked and crashed two American and two United Airlines jets, helping send the industry and the economy into a sharp decline.

Before 9/11, a headhunter for AT&T Corp. had contacted Horton about the CFO job at the ailing telecommunications giant. He said no. Another feeler in the months after Sept. 11 also received a rejection from Horton.

But when chairman Dave Dorman called again in mid-2002, Horton listened to his persuasive pitch. He joined AT&T as senior executive vice president and CFO, eventually becoming vice chairman.

"It was the right thing for the family," Horton said. "It was a good time to go out and learn something new – try a different business, different location. The kids were young enough that we could move them and it wouldn't disrupt the family too much."

The move to New Jersey also meant a return to where Horton had met his wife, Janet. The summer before graduating, he had had an internship in Morristown, N.J., and stayed on the Fairleigh Dickinson University campus, where she was attending a weeklong summer class. They married the following year.

Time at AT&T
Dorman says AT&T needed someone who was cool under pressure and had experience dealing with difficult situations.

"Tom stuck out for a variety of reasons. First of all, he was a guy who seemed to me absolutely unflappable," Dorman said. AT&T also needed someone who knew more than numbers, he said.
"The training that American had provided Tom operationally, having run the international business, really appealed to me," Dorman said. "I would have a business partner in the CFO job, not just an accountant."

Horton "was parachuted into a very difficult position," said Paul J. Taubman, a Morgan Stanley executive who worked with AT&T and Horton.

AT&T's business was under attack, the stock was under pressure and big telephone companies such as SBC Communications Inc. and Verizon Communications Inc. were competing directly with AT&T.

Horton was quick to understand that AT&T needed to investigate its alternatives. After Horton and Dorman realized that AT&T could not remain independent, Horton helped bring AT&T to the merger with SBC, Taubman said.

"He inherited a very, very difficult strategic hand to play," said Taubman, co-president of institutional securities at Morgan Stanley. "A lot of the crown jewels had already been spun off or sold, including the cable and wireless business. In light of that difficult environment, he did a very admirable job in a very trying period."

Under all that pressure, Horton never blew up, even when he got angry, Dorman said.
"Tom did a controlled burn. He would get quiet. He wouldn't get loud. Generally, he would reserve himself. I don't think Tom ever got really angry with me. I watched him get angry with other people in situations," Dorman said.

"It has a lot to do with his faith, but he could be almost Buddhist-like in terms of his ability to deal with adversity. It was like 'Hey, this is not going to get the best of me,' " Dorman said.
In the end, AT&T could not be saved as an independent company. But the name lives on; SBC bought AT&T in late 2005 and renamed itself as AT&T. Horton said he was glad that they were able to save the brand and protect shareholders and employees as best they could.

"It turned out to be a great experience," Horton said. "I learned a lot. It was rewarding in every way, professionally."

Coming back
At the beginning of 2006, Horton was ready to look for another job, possibly a corporate job or with an equity company. He and his wife were in the Bahamas on a fishing trip in February 2006 when the bait was thrown to him.

"I checked my e-mail down there, and Gerard said, 'Give me a call.' So I did," Horton said.
Arpey had an opening because CFO James Beer had announced he was quitting to take the CFO job at Symantec Corp.

Arpey "made the pitch," Horton said. "That night, my wife and I had dinner, and the rest is history. She wanted to come back, and it felt right to me, too."

On March 29, 2006, AMR announced Horton's return.
"Tom is obviously a talented executive and great leader, evidenced by his success in his first stint with American and great accomplishments at AT&T," Arpey said last week. "But more importantly, to me he is simply a fine person – impeccable integrity, outstanding character and someone you can always count on."

"Tom cares deeply about American and its people," Arpey said, "which is why I think we were able to recruit him back – he certainly had no shortage of other opportunities."

Horton understands that many people probably wondered why he would return to such a tough job in a tough industry. But he tells them he liked the business, he likes the people and he's "never regretted it for a minute."

"Yes, there's madness all over this business," Horton said. "Of course, we have challenges, but I like challenges. Without the challenges, it's not interesting."

AT A GLANCE
Thomas W. Horton
Position:
AMR and American Airlines president

Education:
Baylor University, bachelor's degree, 1983; Southern Methodist University, MBA, 1985

Family:
Wife, Janet, married in 1983; two children in high school, including a son who was named a National Merit Scholarship semifinalist last week

Career:
•American Airlines, 1985-2002, 2006-present. Joined as a financial analyst; held a variety of jobs, including vice president of Europe, executive vice president of finance and planning and chief financial officer.

•AT&T, 2002-06. Joined as senior executive vice president and CFO; added vice chairman's job in 2005.