5 Reasons Tom Horton Can Lead AMR Back From Bankruptcy

T o Tom Horton, new CEO of American Airlines' parent AMR Corp. (NYSE: AMR ),
the legacy carrier's bankruptcy filing on Tuesday isnt just the way out of its
myriad troubles, it's the way up. While it's customary for corporations to
put the best spin possible on the worst news imaginable, in AMR's case, Horton
has a very good chance of being right now that he has taken over from Gerard
Arpey, who headed AMR for seven years. American, which at $24.7 billion in
assets ranks as the second-largest airline bankruptcy in U.S. history, is by no
means penning its epitaph. In fact, bankruptcy might turn out to be the
beginning of the storied airline's Second Act . Since the tragedy of 9/11
which came on the heels of AMR's acquisition of bankrupt TWA American has
lost $10 billion over the decade, and its cost gap reportedly is $600 million
higher than that of its rivals. While the airline has fought hard for years to
avoid filing Chapter 11, the convergence of many factors defined for AMR that
this could be a "now or never" moment. "Over the past decade, virtually
all of our big competitors took this step," Horton told CNNMoney . "And as a
consequence, they lowered their costs and improved their capital structure in a
way that made them much more competitive." The U.S. airline industry has been
bedeviled by economic adversity, fuel price volatility, high fixed costs and
fierce competition from low-fare carriers like Southwest (NYSE: LUV ) and
JetBlue (NASDAQ: JBLU ). AMR rivals Delta (NYSE: DAL ), United (NYSE: UAL ) and
U.S. Airways (NYSE: LCC ) filed for bankruptcy over the last decade. All
improved their fates in the process. By opting for bankruptcy protection, those
carriers lowered costs and improved their capital structures to become more
competitive. Now it's American's turn to see if the fix that fueled its
rivals' fortunes still has the power to change its fate and secure its future.
But as Horton no doubt already knows, hell need to plot the right course through
AMR's turbulence just as these leaders of competing airlines have had to do
in the recent past: Delta CEO Richard Anderson replaced his predecessor, Gerald
Grinstein in 2007, after DAL emerged from bankruptcy. The company, which under
Grinstein had fended of a hostile takeover attempt by US Air earlier that year,
subsequently merged with Northwest Airlines (which had filed for bankruptcy on
the same day) under the Delta brand. It didn't hurt that Anderson knew
Northwest well he had been CEO of the airline from 2001 to 2004. You might say
Jeffrey Smisek stole the bride away from US Airways CEO Doug Parker at the
altar. When US Airways and United were in the 11th hour of merger talks back in
April 2010, the new Continental CEO sold his board on the urgency of making a
play for United, eventually sweeping Parker's would-be bride off her feet.
Now, Smisek toils to effectively blend the two carriers' cultures, fleets,
systems and sets of employees into the world's largest airline. Meanwhile, US
Airways' Parker, who remains a true believer in airline consolidation, is
still looking for a partner. And AMR just might fit the bill. Parker, who was
CEO of America West before taking over the merged US Air-America West in 2005,
shares a history with Horton at AMR both worked in finance positions with the
airline in the late 1980s and early 1990s.