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

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.

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