AMR wants to emerge from bankruptcy quickly
FORT WORTH, Texas (AP) — It took Thomas W. Horton 26 years to reach the corner office, but the promotion came with a catch:
His company was going into bankruptcy protection.
Horton was elevated from president to CEO of American Airlines parent AMR Corp. on a late-night phone call last November. On the same call, the company's board finalized the decision to file for Chapter 11 the next morning. Horton says he got little sleep, knowing that he would have to explain the move to thousands of investors, employees, business partners, and reporters.
The filing wasn't a surprise. American, once the world's biggest airline and known for innovations such as the frequent-flier program, had lost more than $10 billion since 2001. Fuel and labor costs soared, competitors grew bigger and tougher, dropping American to third place in the U.S. airline industry. The company seemed to lack fresh ideas. Investor patience with CEO Gerard Arpey was running out.
The 50-year-old Horton, a devoted runner who trains for marathons, wants to set a fast pace and push American through bankruptcy. He says the company can't afford to move slowly in Chapter 11 unless it wants to be sold to a rival or broken up. He's willing to make unpopular moves — he wants to cut 13,000 jobs.
Horton sat down recently for an interview with The Associated Press in his sixth-floor corner office. He has a view of Dallas-Fort Worth International Airport on the horizon. One wall is dominated by a photo of aviation pioneer Charles Lindbergh in the cockpit of a Robertson Aircraft plane, one of the companies that formed American Airlines 80 years ago.
Horton discussed managing in the 21st century, dealing with unhappy workers, and his plan to rescue American. Here are excerpts from the interview, which was edited for length:
Q: What happened the day you were picked to replace Gerard Arpey as CEO?
A: We had a board meeting in New York. I flew back here that night, and we had a board telephone call late that evening to make final what had been tentatively decided earlier in the day. I was made chairman and CEO on that phone call, and the next morning we filed. That was a night that I didn't get a lot of sleep.
Q: Did the board think AMR needed a new face as CEO going into restructuring?
A: I think Gerard has said publicly that his view was that maybe I was better wired for this task. I don't know if that's true or not. Time will tell.
Q: What's it like to lead a company during this kind of turmoil?
A: I'll get back to you in about a year.
Q: But I'm sure when you were back at the Cox School (Southern Methodist University's business school), you didn't imagine you'd make CEO on the eve of the company going into bankruptcy.
A: No, I did not imagine that. (Laughs) This was not exactly the way I would have planned it. But I do love this company. It is a great American institution. It's a company that bears the name American, it flies the flag all over the world, and so I think there could be no higher duty or calling than to return this company to leadership. That's a tall order, but I'm going to give it everything I've got.
Q: Do you hear from (former AMR CEOs) Gerard Arpey or Bob Crandall?
A: This is a company that hasn't had many CEOs, and it's unique in that regard. That is humbling. These statues right here (he turns and points to bronze figures, each about a foot high, of a Pony Express rider and an Indian warrior) belonged to C.R. Smith (CEO of American Airlines for more than 30 years; he died in 1990). I feel the weight of the office, and I do talk to these folks. I hear from Bob, and I talk to Bob often, and I hear from Gerard.
Q: Do they offer advice or do they just say, 'Hang in there?'
A: I would say they're pretty good about offering advice when asked for it.
Q: They don't offer it unsolicited?
A: Not often.
Q: What was the unsolicited advice?
A: Oh, I would never betray that.
Q: What can or should a CEO do to boost morale when the company is going through bankruptcy?
A: The most important thing we can do is make the company successful, make it a winner again. People want to be part of a winner. Look, I've talked to thousands of our employees over the past three months. I've just spent a lot of time meeting with people, and it's really been helpful to me because I get to hear perspectives. I also get to explain what I think the future of the company can be. But often when you hear someone who is unhappy and you get up under it, it's often that the company has not been successful.
Q: You've had employees picket at airports to complain about AMR management. Is that difficult to watch?
A: I don't pay attention to it. I don't know how many people have been out picketing. It must not be very big because I haven't seen it, but I've talked to thousands of people, real people doing real work on board our airplanes or out at our airports, and what I see is people doing a real good job and wanting to get behind the company and excited about the future.
Q: There are a lot of satirical videos on the Internet about AMR management ...
A: I never watch that sort of thing. Never.
Q: Have you heard about them?
A: I have heard about them, yes. To me that's just not relevant. That's a side show, so I do not look at things like that. I don't think that has anything to do with advancing the future of this company.
Q: What's it like being a CEO in the age of social media when people can put something critical of the company up on YouTube?
A: Always try to do what's right. It's not always what's easy. Being a leader is not easy. You're going to take fire whatever you do because there will be people who will disagree with you.
Q: A few (weeks) ago, you had a flight attendant who apparently had a breakdown on a flight. Passengers took video with their cell phones and posted it online.
A: A company with 80,000 employees is really just a slice of America, a slice of the world. We have people with all sorts of opinions, hopes, dreams, challenges, personal issues. Yes, we had that incident. It was a medical incident at the end of the day, and that individual is being treated. It happened at JetBlue. These things do happen in business.
Q: What do you say to the passengers who were on that flight?
A: Well, I don't say anything to them. (The company apologized to passengers in a statement.) All you can do is apologize. You can't make that right. I mean, it's very unfortunate that people had to hear things like that and to be troubled and disturbed on the outset of a trip.
Q: Your reorganization plan envisions $2 billion in cost saving and $1 billion in extra revenue every year. Some analysts are skeptical about the $1 billion in new revenue. Is it real?
A: I think it's very real. It's really about being able to tailor what airplanes we're flying to what markets and there's a lot of revenue there. We are also going to fully capitalize on the joint business agreements that we've put in place over the last couple of years (with British Airways and Japan Airlines and a pending deal with Qantas). And then of course we would foresee more flexibility to code-share (work together and share revenue with other U.S. airlines). All those things taken together add up to a lot of revenue.
Q: How long will the bankruptcy process last?
A: I want to go as quickly as we can. We must do this right. We must do it only once, and we must be sure that the company is profitable, successful and growing coming out the other side. I've given our team a target to have that done by the end of the year. I will admit that is an aggressive target by prior standards. There's no reason why we can't do it.
Q: Recently, you've opened the door to a possible merger but not while you're still in bankruptcy protection. Is that a new position?
A: No, nothing new at all. For years I've said that I think consolidation has been — can be healthy and constructive for the U.S. airline industry. But right now we are in the midst of a very complex restructuring and so our focus is singularly on returning the company to profitability and growth. The idea of doing the two together strikes me as a bridge too far.
Q: Will American need a merger partner at some point?
A: I think American needs to be bigger, which is why our business plan in the restructuring is all about renewal and growth. We've got 460 new narrowbodies (mid-range aircraft) on order with 465 options on top of that. Largest aircraft order in history. It came with $13 billion in manufacturer financing, so that is a great opportunity for our company not only to be on the path to having the youngest fleet in the industry but also it gives us great capacity to grow where it makes sense. I don't think American is compelled to do a combination, but the point I have made is we don't rule anything out.
Q: What's the outlook for the airline industry this year? With high fuel prices and questions about the European debt crisis, is this going to be a tough year for airlines?
A: Yeah, it's challenging. Oil prices are up, there is uncertainty. The revenue environment (travel demand) has been pretty decent thus far this year, but it has to be to offset the very significant increase in fuel prices.
Q: What's your forecast on oil prices?
A: It's a good question, and I have no idea. The only thing I can say is, expect volatility because there is obviously great uncertainty in the Middle East right now, and that has not been helping.
Q: We've had many ticket price increases in the past year. Are consumers and business travelers maxed out?
A: I don't know. Load factors (percentage of seats sold) have been quite strong in the industry by historical standards.
Q: You've got two kids (a college freshman and a high school senior). What would you say if one of them came to you and said, 'Dad, I'm going into the airline business?'
A: I would say that's great. It's a fun business. It's a noble business. It's a hard business, so prepare yourself.
Q: Is it going to be a good career in the future?
A: It has been for me, and it has been for an awful lot of people in this company and others. I think we all tend to be colored by the events of the last decade, which were just so extraordinary. This company has had an 80-year history. It's had a very rich and great history. It's had some good history, it's had some bad history, and I think the last few years have been hard. But I try to take a very long perspective.
Q: You've mentioned that you're in a stressful job. What do you do to relieve stress?
A: I run. I run. I run marathons. I usually run five to six days a week. On the weekdays I'll run four or five miles and then on Saturdays I usually get out and do a 9- or 10-miler. And if I have time, I like to fly-fish, but this is probably not going to be a great year for fishing for me.
Q: When do you get time to run?
A: Early in the morning. I get out there at 5:30. Even on weekends I go do my long run usually early so I can be home when my wife and kids are around. I've been running for a very long time — probably a serious runner for the better part of 20 years. I love it. And the great thing about it is you can do it anywhere you go. I travel a lot, and I love to run in the cities of the world. I just love to hop out and go.
Q: When's your next marathon?
A: Don't have one on the books. This might be a year of the half-marathon. We'll see.
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Follow David Koenig at http://www.twitter.com/airlinewriter
