With the heat up on American Airlines’ financial situation as well as the strict scrutiny its share price has gone through, the old dog called merger has started to pop up again. 

The truth is, financial analysts and investors want to see something more happening at American Airlines.  Something that goes beyond “we’ll stay the course with our fixed strategy and hope other airline’s costs rise to ours before our money runs out.”   That really is what has been communicated thus far. 

There is a new culture at some airlines.  It’s a culture of fiscal responsibility that is fostered by airlines leaders such as Richard Anderson (CEO of Delta) and Jeff Smisek (CEO of United).  It’s the idea that a stready return on investment is necessary for airlines going forward.  It is refreshing and it does seem to help as a basis for decision making at airlines.  Enough so that they’re starting to convince me that capacity discipline really will continue in the United States.

On the surface, it would appear that American has the right executive leadership to execute that strategy.  It’s an airline that has a strong reputation for financial management and one would expect that they would lead on this subject.

However, as much as I do think the strategy has value, it ignores the human element of airlines.  We all too often talk about the capital requirements for airlines and the huge amount of cash flow necessary to keep operating and even the huge labor component.  What we don’t talk about is the people.

At the end of the day, airlines are made up of people.  It is a labor intensive business and it requires many different kinds of people and it continues to be an industry that generally grabs you and holds onto you once you work for an airline. 

To drive those tens of thousands of people into the same direction and achieve success requires a bit more than being a good numbers man.  It requires a certain vision, a certain charisma and the ability to get people to follow you. 

American Airlines hasn’t got that.  It’s got a clinical, almost detached view on its labor and leadership that continues to ignore the human component to their success.  

What investors and analysts want to see is some revolution, not evolution.  Steady is the course has simply seen debt rise, cash holdings drop and angrier employees.  Those who know airlines, know that that is the precursor to a long, ever quickening drop into failure. 

You can manage those pennies all you want but if you can’t get your people to turn an aircraft quicker or your pilots to work more productively or get your staff to treat customers better, you’ll still fail.  Even analysts know that. 

American won’t engage in a merger with its current leadership.  However, CEO Gerard Arpey won’t stave off a coup with his present course either.  There will come a time when the board will decide new leadership is necessary.  It will happen rapidly and it will be a result of a sudden consensus view by the board that they’ll be held responsible for further failure.  I would argue that that set of circumstances may be closer than Arpey & Co thinks.

While I don’t think a merger is on the horizon, I do continue to wonder what the executive team at US Airways could do with American Airlines.  They’ve worked wonders with enormous challenges and a disadvantage to virtually every other legacy airline.  They’re reponsible to providing a return on investment and they seem to have figured out how to please customers better every place improvement was called for.

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