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American Airlines lands in China

By Lu Haoting (China Daily)
Updated: 2006-04-04 06:04

Passengers are warmly welcomed when arrive at Shanghai Pudong International Airport Monday, April 3, 2006 from Chicago OHare International Airport. The world's largest airline company started new daily nonstop service betwee the two cities. [newsphoto]

The trade relations between China and Latin America are expected to grow in the coming years, signalled by China and Chile signing a free trade agreement last November. China signed 39 partnership documents with Brazil, Argentina, Chile and Cuba during President Hu Jintao's visit to the four Latin American countries in 2004. The co-operation covers trade, investment, aviation, tourism and education.

Khan said the addition of India to American's network would be helpful for the airline to woo large US IT corporations, such as IBM and Dell, which are headquartered in the United States and conduct business in China and in India.

Continental started daily non-stop flight between Delhi and New York 15 days ahead of American's maiden flight to the Indian capital. Prior to that there was no non-stop service between India and the United States.

"Our load factors on the Delhi flight are absolutely much better than we expected," Khan said.

The start of the flights to India and resuming Osaka flights helped American's business in Asia surge 40 per cent last year.

As the world's largest airline expands aggressively overseas, Khan said that "the involvement of the entire employee base" is the key to making American's turnaround plans successful.

While other airlines are outsourcing their heavy maintenance to Central America and China to lower costs, American is the only major US carrier that still does its own heavy maintenance. American's employees at Tulsa, Oklahoma, the company's heavy maintenance base, last year came up with a goal of US$500 million in cost savings and revenue-generating in the next 12 months.

"They have decided to make their business profitable rather than being a cost to the company. The idea is to change the mentality of the mechanic group to become a revenue generating business unit," Khan said.

"This is also about niche marketing," Khan said. "There is business in the United States. If everybody moves out their heavy maintenance, when somebody needs it immediately, you can charge a good price."

American's cost-cutting programmes include cutting its fleet from 14 types of planes to six.

"Each fleet type, with one captain retiring, could mean millions of dollars in just training the next person to cover it," Khan said.

American last year saved US$50 million by rebating its in-flight product contracts.

"We looked at all the products on the airplane, such as slippers, and tried to find where we could save and how we could get a new supplier so that we could still maintain our quality and reduce our costs," Khan said.

With fuel being American's largest cost, the airline is trying to save fuel by burning only one engine when taxiing an airplane out of the gate.

"It is equally safe and equally reliable, but it is half the fuel we consume when pushing the airplane out of the gate," Khan said.

The price of aviation fuel rising 1 US cent equals an additional cost of US$29 million on American's balance sheet.

(China Daily 04/04/2006 page11)