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Shame on American Airlines

Posted Apr 10 2008, 04:10 PM by Robert Walberg
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In the words of Ricky Ricardo, the CEO of AMR Corp. has "some 'splainin' to do."  Whether you believe the parent of American Airlines is merely the victim of a reactionary FAA or not, the fact of the matter is that management had 18 months to comply with the FAA's request regarding the wiring on the MD-80s and failed to act.

Yes, the planes have been flying safely for years, and yes, the FAA is likely overreacting to criticism from Congress after it was made to look inept in the Southwest Airlines debacle a few weeks back. Nevertheless, the single most important task of any airline CEO is public safety. Failing to address a potential safety risk merely because you didn't think you would get caught is a miserable excuse.

Maybe AMR's management simply thought the cost of fixing the problem would be too high -- especially since the FAA really hadn't checked that carefully in the past.  With jet fuel costs skyrocketing and the economy slumping, spending more money on maintenance that didn't seem necessary had to be a tough pill to swallow. So AMR chose not to take its medicine in small manageable doses over the past 18 months in hopes that the problem would just go unnoticed.

Talk about bad decisions. As a result of the CEO's leadership, or lack thereof, AMR has canceled thousands of flights and will be canceling more. The immediate dollar cost of those cancelations is estimated in the tens of millions. But my guess is those estimates will be too low because it's very difficult to measure the loss in customer loyalty -- a cost likely to continue to hurt AMR for years to come.

If it were me stuck at an airport for days because the airline I chose didn't take the steps necessary to secure my safety, I would think long and hard about using that carrier again.  At the very least, I would demand more than a public apology. I would expect a full rebate on my canceled flight, maybe a certificate for a free round-trip within the next 12 months and an assurance that all safety measures had been addressed. Finally, I would want to see the CEO fired.  

Bottom line: This was an inexcusable mistake and one that should cost CEO Gerard Arpey his job. Until this step is taken, I wouldn't just avoid the stock, I would also avoid the airline. I doubt I'm alone.

Comments

 

Sounds like a bunch of poeple who are as misinformed as the author of this article.  Read the WSJ today, this isn't a safety related repair it is a technical repair required by by the paper pushers in Washington.  The market is an amazing thing....airlines have an interest in safety because crashes are bad for business.  I do agree that if service is lacking then they are asking for trouble in the long run (can you say Northwest), but that suggests internal deficiencies, not safety problems.

All you so called employee's of American Airlines, have not even bothered to find out what is the cause of the grounding. You are sitting here talking out your rear. It is a non safety Item. Its a matter of having put electrical tape on the outside of the snakeskin jacket, and String ties that were not exactly 1" apart. There were a very few done with tie wraps instead of string, but the AD was for the moving of the wires away from a moving part. None of the planes had misrouted wires. Why don't you guys walk down to the maintanance area's and open your eyes for a change??

Problems with horrible airline service seem to me to have much to do with the naive assumption that any industry will provide good service and value to its customers based upon "market forces" alone. Yes, market forces are an essential component that has SOME power to ensure that businesses provide good value to their customers. But when customers have few concrete rights -- no matter what airline they fly -- there is an equal playing field for airlines to race to the bottom on service so they can complete. From a business perspective, why do they really CARE if passengers receive poor service if all of their competitors are equally bad (more or less). There must be laws in place to punish ANY airline financially for failing to deliver to a customer what they promised. If they fail to deliver, they pay a penalty. This would of course require some major changes and ticket prices would likely have to go up some. But as it is, wouldn't most of us choose to pay more if we knew we would get there and the conditions were less miserable? But no airline can do this on its own, for it would place them at a competitive disadvantage. Regulation must be put in place so that they have an equal playing field at a HIGHER level of customer service. Until then, the economic incentives encourage a continued race to the bottom in the name of competition.  BTW, I don't care if the CEO has a family or not. He makes millions and they won't starve. He supposedly gets paid these millions because he's a gee-whiz, honest-to-god supergenius. Fire the guy. This was a stupid thing to do that showed complete disregard for passengers.

This CEO and his associated management team are the same that collected a huge amount in bonuses (April 2007 ?) for great performance..in stock price and earnings. Now, 1 year later AMR stock price is 75% cheaper and the company is near to reach the ground in every issue... worst customer service in the industry, safety issues, financial performance, and so on. They were  squeezing costs to pump earnings and stock price last year, even safety and maintenance related costs

Dennis has a very valid point in that this will not change consumer's flight habits. In six months, nobody will care. Furthermore, the aviation industry has simply followed other corporate models (see Wal-mart, and every other major retailer) in that they've stopped bothering with customer service. It's not necessarily a bad thing, it does keep costs down and profits up, it's just different. If you want an airline that gives good customer service, you should expect to pay more money and even then you probably won't find one. Their ground employees are paid to be efficient, not caring. You will have to work with these people, because their job is not to go out of their way for you. If you don't like the possibility of lets say, missing a connection and then having to wait hours for another flight (or even having a flight simply canceled) then don't fly. You should respect that it is general consumer sentiment, as well as stockholder sentiment, that have created these changes. In essence you shouldn't be shocked when the employees say they don't care, you should either try to come to a reasonable agreement with the employee (to get to your destination), see a supervisor (still to get to your destination), or get your money back and choose a different method of travel (still to get to your destination). In other words put your money where your mouth is, if you don't like the airlines don't fly (my bet is that you will fly regardless, because as much as people complain about the industry it is better than any other alternative even when you factor in how late flights typically are).

The number 1 job of a CEO is to show a profit.  Any public safety concerns are a subset of that:  If a plane crashes there will be a big 'unplanned' expense, less revenue going forward, and therefore less profit.  With a lax oversight process by the FAA, the number one concern rules.

Yet another example of the way today's CEO (including Financial Services executives--the mess with auction rate securities comes to mind) disregard "good business" for self promotion and profit at the public's expense. Perhaps we should begin to "audit" corporate compensation boards to put these folks on the same performance basis the rest of us enjoy!

Hey, if you don't like to fly, take a cab!

It seems that almost everyone missed one point except "An a&p". It's not that the inspections were not done, they were done. Then after the SouthWest 737 issues the FAA changed their mind and came back with an audit and said that's not good enough we wanted it done this way, do it again! Not just American but everyone flying MD-80's was affected.

Yes, American has some explaining to do, but the the FAA is the reason for massive delays.  Our goverment is breaking down under the Bush administration, and this is just another exsample.  Remember FEMA, Justice Department, credit crisis, energy policy are just a few.  Rome is burning, and Bush is playing the fiddle.

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