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AMR risks key customers
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February 10, 1999: 5:57 p.m. ET
Business travelers, key to profits, may defect if dispute drags on
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NEW YORK (CNNfn) - The longer American Airlines is forced to cancels flights, the greater the chances the nation's No. 2 carrier may start losing its most important customers - business travelers, industry analysts and travel experts said Wednesday.
Thousands of travelers are already upset with American, which has canceled 2,000 flights since Friday as pilots staged a sickout to protest how the airline is integrating Reno Air, a small regional carrier it bought late last year.
But if the dispute drags on much longer, business travelers - who pay full fare and are an airline's bread-and-butter - may start looking to fly other carriers, the experts said.
"American is running the risk of alienating their most important customers," said one industry analyst, "and once you lose them, it's going to take some effort to get them back."
The dispute is costing American $5 million to $10 million a day and will depress profits - and the stock of parent company AMR Corp. (AMR) - in the short run, the analysts said.
The chances are that both sides will come to their senses and end the dispute soon, the analysts said. Obviously the longer it drags on the worse for travelers - and the airline.
American won a round Wednesday when a federal judge ordered the pilots back to work - calling the job action "inappropriate" - but that doesn't mean the dispute is over, analysts said. It depends on whether individual pilots comply.
"The pilots definitely have the power in this relationship," said analyst Helane Becker at Buckingham Research. "If they don't want to fly, you don't fly."
Nearly 1,000 flights canceled
American said 906 flights, or about 40 percent of its schedule, were canceled Wednesday - the biggest day of cancellations so far.
The two sides had resumed talks Tuesday after they recessed Friday night, when the job action began. The dispute with the Allied Pilots Association centers around pay for the 300 pilots at Reno, who earn about $65,000 a year, less than half the average for American's 9,200 pilots.
The pilots - many of whom remember previous strikes against American - are concerned the airline wants to start a low-cost carrier that will mean lower pay or less work for them. American says its plans to integrate Reno over 12 to 18 months will mean more jobs for pilots.
There was no word Wednesday on whether new talks were scheduled. Pilots staged their sick-out ahead of the President's Day weekend that leads into spring break for school kids - one of the heaviest travel weeks of the winter.
If the dispute lasts only a week or two, "they could win (business flyers) back relatively easily," the veteran analyst said. "But if it gets into a protracted dispute, then all bets are off."
While the dispute is a short-term issue, "it's not a good sign," said analyst Glenn Engel at Goldman Sachs. "The fact that AMR continually has labor problems weighs on the company and the industry in general."
"It's one reason the airline stocks sell at relatively low multiples (to earnings)," he said.
AMR stock, which has fallen from near 62 last week before the dispute began, rose 9/16 to 56-1/16 on the New York Stock Exchange.
-- by staff writer Steven Radwell 
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American Airlines
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