American Airlines CEO rallies the troops in employee letter after “operational challenges”

Loose seats and a wider third-quarter loss notwithstanding, AMR CEO Tom Horton sent a letter to employees this morning noting that the airline’s analysis of “strategic alternatives” is continuing and arguing that a “unified team” is necessary to turn the carrier around.

After getting bankruptcy court permission to scuttle the pilot’s contract and facing slowdowns in “the past few weeks [that] have tested us all,” Horton wrote “we are again working constructively alongside APA (Airline Pilots Association) toward an agreement that addresses the priorities of our pilots while ensuring the company can be successful. All around our airline, we are making changes to be more efficient so that we can look to the future with much greater confidence.”

No details were forthcoming on how American would execute the balancing act of addressing the pilots’ demands while trying to gut labor costs.

Get a load of these load factors

Horton talked of the financial progress the airline made in the third quarter, including “the best unit revenue growth in the industry,” and “record load factors.”

And, if you exclude reorganization costs and one-time expenses, Horton wrote, then American posted a $110 million net profit in the third quarter.

However, if you count those pesky bankruptcy costs and non-recurring expenses, the airline’s loss widened to $238 million.

Reading the tea leaves

Because AMR has been in bankruptcy protection since November 2011, there was no third-quarter conference call today with executives, and thus Horton’s letter to employees is the latest tipoff about the airline’s thinking.

There was no specific mention of a possible merger with US Airways or Horton’s favored go-it-alone strategy. However, Horton did note that various options are on the table.

“Our careful review of strategic alternatives continues, but regardless of the outcome, our improvement in both revenues and costs reflects what the new American can be,” Horton wrote.

Let’s go team

American has cut back on some of its flights since the maintenance write-ups of the past few weeks, and slipped-up big-time with the fallout from the airline’s loose-seats fiasco.

Still, Horton in his letter sought to rally employees toward toughing it out in the next few months.

“Our path has not been easy, but we have moved forward with determination and resolve,” Horton wrote. “Now, with the goal in sight, and especially in the wake of the past few weeks, we must strive to serve our customers with the very best American has to offer.”

Here’s the full text of Horton’s letter to employees:

A Message from Chairman and CEO Tom Horton

Dear American Team:As we approach the one year mark in our journey to build a new and successful American, our third quarter results underscore the progress we’ve made. At the same time, recent operational challenges remind us that our customers expect nothing less than our best, and we must deliver in order to succeed for the long haul.

Thanks to the extraordinary efforts of our entire team, our strong revenue performance led the industry once again, just as it has for six months in a row. By delivering the best unit revenue growth in the industry, and with record load factors, we posted a $110 million net profit, excluding reorganization and nonrecurring costs – a $272 million improvement from last year and our second consecutive quarterly profit after many years of losses. Importantly, we saw unit revenue increases across all five of our hubs and across all international regions, reflecting the growing strength of our enhanced network and alliance partnerships.

We also made excellent progress in reducing costs this quarter. Operating expenses, excluding special charges, were almost three percent lower than last year, and there is a lot more to come. As our restructuring efforts continue to take hold, we will realize increasingly greater savings over the coming quarters, and we are well on track to achieve our targeted savings. While our financial performance is not yet where it needs to be, the improvement thus far is encouraging.

It’s fair to say the past few weeks have tested us all. We have taken action to address our operational challenges in a manner consistent with our absolute commitment to customer safety and service. With improved stability in our operations, we can and must return to the high level of operating performance we had achieved this year until recent events.

Of course, having a unified team is essential as we continue our efforts to put American back on top. Implementation of the new TWU and APFA agreements is well underway, and we are again working constructively alongside APA toward an agreement that addresses the priorities of our pilots while ensuring the company can be successful. All around our airline, we are making changes to be more efficient so that we can look to the future with much greater confidence.

With plans for the newest fleet in the industry, including roughly 550 new aircraft on order, hubs in the best US markets, and the best international partners in oneworld, we are well on our way to restoring our leadership as a strong, profitable and growing company.

Our careful review of strategic alternatives continues, but regardless of the outcome, our improvement in both revenues and costs reflects what the new American can be.

Our path has not been easy, but we have moved forward with determination and resolve. Now, with the goal in sight, and especially in the wake of the past few weeks, we must strive to serve our customers with the very best American has to offer.

Thanks for all you do!

Sincerely,

Tom