"AAL bankruptcy would jeopardize hub at Lambert Field"

Saturday, March 15, 2003

Bankruptcy would jeopardize hub at Lambert Field
By CYNTHIA WILSO
The St. Louis (MO) Post-Dispatch


If speculation becomes reality and AMR Corp.'s American Airlines files for
bankruptcy, it's uncertain what will happen to the St. Louis hub acquired
when American bought bankrupt Trans World Airlines nearly two years ago.

If American sought bankruptcy protection, travelers here may eventually have
access to fewer flights on the airline and they would be more likely to
travel on smaller planes. More of American's St. Louis-based employees also
could lose their jobs because many fall near the bottom of union seniority
lists.

American has said it is committed to St. Louis and at least one analyst
believes the world's largest carrier will keep a hub at Lambert Field - but
a smaller one.

Large national and international carriers such as American use airport hubs
to give passengers easier access to cities served by their network. Jets fly
into and out of a hub, delivering passengers who may then take flights to
other locations. If you live in a hub city like St. Louis, you often have
more choices of direct flights to many destinations.

With about 860 daily round-trip, nonstop flights at Lambert, American is by
far the airport's largest operator. Southwest Airlines, with 148 daily
arrivals and departures, has the second largest presence.

Denny Coleman, president of the St. Louis County Economic Council, said
competition between the two carriers keeps air travel to major cities from
St. Louis affordable. The local economy also benefits because businesses
have easier access to the global market for goods and services, he said.

Airline analyst Ray Neidl said American's hub at Lambert Field is most
vulnerable to be closed because it is the weakest of American's hubs. But he
believes the hub has become an integral part of American's network and that
the airline will try to keep it.

"It's a good overflow hub from Chicago and Dallas," said Neidl, of Blaylock
& Partners LP, in New York.

Another industry analyst said the St. Louis hub will be at the mercy of how
American reconfigures its routes.

In the event of bankruptcy, "everything is reshuffled at that point," said
Sean Egan, of Egan-Jones Ratings Co., in Wynnewood, Pa.

American declined to comment on how war, or a bankruptcy filing could affect
its operations.

"We are not commenting on hypothetical situations," said Julia Bishop-Cross,
a spokeswoman for the airline's St. Louis hub. "We're focusing on working
with our employees to achieve our cost reduction goals."

Richard Fleming, president of the St. Louis Regional Chamber and Growth
Association, said that because St. Louis-area businesses have long factored
in the advantages of being in a hub city, they will continue to support
American Airlines, just as they supported TWA. "A hub is important for
everything we do in economic development," Fleming said.

Irrespective of American's future plans for the St. Louis hub, a bankruptcy
filing is not expected to immediately affect ticket holders.

If American joined United Airlines and US Airways in bankruptcy, it would
likely continue to take passenger reservations and fly. Protections offered
by bankruptcy court could allow the airline to cancel unwanted contracts and
try to negotiate better terms on those it kept. Under bankruptcy, some
creditors would require cash upfront before providing services. To cover
those costs, American would need a line of special financing before entering
bankruptcy.

But some industry experts believe bankruptcy would force American to cut
flight schedules throughout its system, at least until the economy recovers.

In bankruptcy, the number of flights eliminated in St. Louis could depend on
the degree of operational flexibility the airline negotiated with its
pilots' union.

Currently, American's agreement with the Allied Pilots Association requires
that the St. Louis hub be proportionally smaller than American's Dallas or
Chicago hubs. That means the number of Americans flights at Lambert can
increase only if the number of flights grows at Chicago and Dallas.

Since October 2001, American's customers have had about 120 fewer daily
round-trip, nonstop flights available to them from Lambert, and the
airline's St. Louis-based workers have suffered the brunt of the carrier's
layoffs.

If American files bankruptcy, its workers who were not former TWA employees
could begin to lose more jobs.

Hoping to avoid more layoffs, American's unions are actively negotiating
labor-cost reductions the airline says it needs in order to compete with
low-cost carriers such as Southwest Airlines. American must also lower costs
to compete with United and US Airways, which have lowered labor costs
through the bankruptcy courts.

Last week, United told creditors that the temporary pay cuts it received
from union members helped it boost daily cash flow in January, although
United still lost $382 million during the month.

American has said it is losing $5 million a day and cannot sustain the
losses.

"Avoiding bankruptcy is in the best interest of both the Association of
Professional Flight Attendants membership and American Airlines," said John
Ward, president of the flight attendants' union. American is seeking more
than $1.6 billion in concessions from its union employees. Ward said the
APFA membership must approve any agreement reached.

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