As United Airlines and Delta Air Lines led the frenzied deal-making reshaping the global airline sector, archrival American Airlines adopted the opposite tack, a “slow and steady wins the race” strategy.
Analysts were confounded; shareholders furious. But American CEO Gerard Arpey and President Tom Horton refused to budge. The next year will start to tell whether they made the right call: that American can keep pace with the two behemoths by simply focusing on airline basics.
While megamergers vaulted United and Delta past American to the world’s No. 1 and No. 2 rankings, respectively, American channeled resources into a lower-risk “virtual merger” with British Airways, reconnecting with customers and bolstering hubs like Chicago’s O’Hare International Airport.
Analysts blasted American as unimaginative, and its industry-lagging results for 2010 seemed to prove them right. But market dynamics are starting to work in American’s favor, said Horton, lanky and soft-spoken, who brings a marathoner’s perspective to his post.
“I think that for those who don’t follow the herd, there are some really interesting opportunities,” Horton told the Tribune last month.
But will those opportunities materialize quickly enough to win over shareholders and analysts focused on short-term gains? Wall Street, so far, isn’t convinced.
The Texas-based carrier’s $2.6 billion market value is dwarfed by Delta’s $9.83 billion capitalization and United’s $7.65 billion value. American’s labor discord, aging aircraft fleet and retiree benefit costs all weighed on its stock, analysts said.
American’s financial results are beginning to nose upward, however. Ray Neidl of Maxim Group is one of several analysts who think American’s stock has the greatest upside potential among its peers for 2011 since it was the most battered major airline stock this year.
Passengers already are reaping dividends as American tackles service bottlenecks, like with a program created by its O’Hare workers to speed international travelers with tight connections through immigration…