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CIO Monte Ford's Challenge: Return American Airlines to Profitability

By Todd Datz

November 01, 2002 — CIO — During the past couple of years, the biggest U.S. airlines wrestled with the devastation wrought by the recession and 9/11. But by August, they were screaming uncle. In one three-day stretch, U.S. Airways declared bankruptcy, United Air Lines’ stock price hit an all-time low on fears it would follow suit, and American Airlines launched a cost-cutting campaign designed to alter the guts of its core business model.

On Aug. 13, American, the world’s largest airline, announced that its Dallas/Fort Worth hub would begin spreading out flights more evenly throughout the day (a process called depeaking) in November; retire its 74-jet Fokker 100 fleet; reconfigure and consolidate a number of aircraft fleet types; reduce capacity 9 percent by November; and cut 7,000 jobs by March 2003.

Combined with other initiatives already implemented, AA expects to save $1.1 billion in annual operating costs?and that’s before taking account of the capacity reductions. But that’s not nearly enough: In a September speech, Chairman and CEO Don Carty said that during the next several years the $19.6 billion company needed to reduce structural costs by at least $3 billion annually.

A Center Seat

In the middle of all this is Monte Ford, 43, American’s senior vice president and CIO, who joined the airline two years ago at a calm-before-the-storm moment with orders (from a CEO who emphasizes IT’s importance) to rebuild his company’s IT department almost from scratch as it goes through one of the most difficult periods in its 76-year history. Ford and his IT group are smack dab in the middle of American’s efforts to rethink every aspect of its business. Almost everything the company does to right its ship and recover from the past couple of years?from the recession to the 9/11 terrorist attacks?affects IT’s roles and plans.

For his part, Ford remains upbeat in the face of the utterly downbeat straits the company finds itself in. The fact is, he gets lift from his group’s central role. He believes ITS (for Information Technology Services) can deliver.

"All of the things Don Carty said we have to do?with the exception of moving seats on some of the airplanes?has technology as the long tent-pole, has technology at the center of it, has the delivery of technology as the fundamental part of the ability to make the change," Ford says. "There’s not a product, service or enhancement we can make that doesn’t involve technology."

One key example: The depeaking efforts?spreading out flights more evenly throughout the day, a vital part of American’s altering the way it runs the hub-and-spoke model?rely on ITS’s operations research group, which used its data warehouse capabilities to calculate new flight and airport scheduling. The depeaking that started at Chicago’s O’Hare Airport in April 2002 was a proving ground for the airline to announce the changes at its Dallas/Fort Worth hub that start this month.

 

 

 

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