AMR Corp. Chairman and CEO Gerard J.Arpey concludes a news conference after the AMR shareholders meeting in Fort Worth, Wednesday, May 20, 2009. AMR Corp. is the parent company of American Airlines. (AP Photo/LM Otero)
DALLAS -- The CEO of Southwest Airlines says an April pickup in travel has fizzled in May, forcing the company to speed up plans to raise more revenue.
Chief Executive Gary Kelly said Wednesday that the airline has been hurt by the swine flu outbreak, which made travelers nervous about getting on a plane. And the global economic slowdown has left Southwest uncertain what the rest of the year will bring.
"June is typically our strongest month of the year, so I think June will tell us a lot," Kelly told reporters after the company's annual shareholder meeting.
American Airlines parent AMR Corp. also held its annual meeting a few miles away in Fort Worth. Employees - and in one case, the teenage son of employees - challenged CEO Gerard Arpey over AMR's reluctance to approve pay raises. For its part, Southwest has struck tentative or final agreements with all of its major labor groups, most calling for annual pay raises of about 3 percent.
Times are tough at American, until last year the world's largest airline, and at Southwest, which now carries more U.S. passengers than any carrier. Delta Air Lines Inc., which bought Northwest Airlines last year, is now the world's largest carrier.
Both airlines have been losing money as demand for travel shrinks, and they've been eliminating some flights. On Wednesday, both CEOs gave guarded views of the future.
"Things are not getting worse, but they're certainly not getting a lot better," Arpey said.
Kelly said he didn't see the economy rebounding anytime soon, and added that there is often a longer delay before business travel returns to pre-recession levels.
Kelly said Southwest was moving more quickly to enact revenue-raising measures, which he declined to detail. He wouldn't rule out fees even though Southwest advertises that it doesn't charge "hidden fees," which Kelly explained meant charges for checking one or two pieces of luggage and other levies that customers dislike.
Southwest is testing in-flight Internet access, for which it would charge a fee, and it will tinker with its fares. Kelly suggested that the airline will be more aggressive about lowering some fares in specific markets, although he gave no details.
"We're preparing ... for a sustained recessionary environment where low fares will be needed and will carry the day," he said.
Southwest announced Wednesday that it would begin service later this year to Milwaukee, bringing to four the number of new points on its route map in 2009. The airline began flying to Minneapolis in March and plans to add New York's LaGuardia Airport and Boston later this year.
Lower fuel prices have been a gift for airlines this year, partly offsetting the slump in revenue. But the Southwest and American CEOs both complained that after the big plunge last year, oil prices are climbing again - up about 80 percent since February.
On the flip side, Arpey said there are signs that tight credit markets are beginning to ease, and that American has received offers to refinance planes.
"Last year, no one would answer the phone," he said "Now we are getting some interest coming to us about what we are going to do with those airplanes and that collateral." However, the terms of that refinancing still might be unacceptable, he added.
For a change, American's unions didn't picket outside the annual meeting Wednesday. But inside the hall, the event was dominated by complaints from employees and union leaders about stalled negotiations on new labor contracts. Unions are seeking pay raises to make up for wage cuts in 2003, but the company argues that its labor costs are already too high.
Eighteen-year-old Ian Merriman, the son of two American flight attendants, said his parents were working more yet earning less.
Merriman said he had to quit his school's baseball team and get a job to help his family, and he echoed employees who complain that Arpey and other managers get stock-based bonuses.
"Great leaders lead by example," Merriman said. "Great leaders share in successes and share in their failures."
Arpey congratulated Ian Merriman on becoming an Eagle Scout and getting a job. Then he said the company needed to balance employees' desires with the need to earn a profit.
Arpey said AMR spends about $250 million a year on retiree health, something many other airlines don't provide.
"That's a seminal competitive disadvantage for our company," he said.
Chief Executive Gary Kelly said Wednesday that the airline has been hurt by the swine flu outbreak, which made travelers nervous about getting on a plane. And the global economic slowdown has left Southwest uncertain what the rest of the year will bring.
"June is typically our strongest month of the year, so I think June will tell us a lot," Kelly told reporters after the company's annual shareholder meeting.
American Airlines parent AMR Corp. also held its annual meeting a few miles away in Fort Worth. Employees - and in one case, the teenage son of employees - challenged CEO Gerard Arpey over AMR's reluctance to approve pay raises. For its part, Southwest has struck tentative or final agreements with all of its major labor groups, most calling for annual pay raises of about 3 percent.
Times are tough at American, until last year the world's largest airline, and at Southwest, which now carries more U.S. passengers than any carrier. Delta Air Lines Inc., which bought Northwest Airlines last year, is now the world's largest carrier.
Both airlines have been losing money as demand for travel shrinks, and they've been eliminating some flights. On Wednesday, both CEOs gave guarded views of the future.
"Things are not getting worse, but they're certainly not getting a lot better," Arpey said.
Kelly said he didn't see the economy rebounding anytime soon, and added that there is often a longer delay before business travel returns to pre-recession levels.
Kelly said Southwest was moving more quickly to enact revenue-raising measures, which he declined to detail. He wouldn't rule out fees even though Southwest advertises that it doesn't charge "hidden fees," which Kelly explained meant charges for checking one or two pieces of luggage and other levies that customers dislike.
Southwest is testing in-flight Internet access, for which it would charge a fee, and it will tinker with its fares. Kelly suggested that the airline will be more aggressive about lowering some fares in specific markets, although he gave no details.
"We're preparing ... for a sustained recessionary environment where low fares will be needed and will carry the day," he said.
Southwest announced Wednesday that it would begin service later this year to Milwaukee, bringing to four the number of new points on its route map in 2009. The airline began flying to Minneapolis in March and plans to add New York's LaGuardia Airport and Boston later this year.
Lower fuel prices have been a gift for airlines this year, partly offsetting the slump in revenue. But the Southwest and American CEOs both complained that after the big plunge last year, oil prices are climbing again - up about 80 percent since February.
On the flip side, Arpey said there are signs that tight credit markets are beginning to ease, and that American has received offers to refinance planes.
"Last year, no one would answer the phone," he said "Now we are getting some interest coming to us about what we are going to do with those airplanes and that collateral." However, the terms of that refinancing still might be unacceptable, he added.
For a change, American's unions didn't picket outside the annual meeting Wednesday. But inside the hall, the event was dominated by complaints from employees and union leaders about stalled negotiations on new labor contracts. Unions are seeking pay raises to make up for wage cuts in 2003, but the company argues that its labor costs are already too high.
Eighteen-year-old Ian Merriman, the son of two American flight attendants, said his parents were working more yet earning less.
Merriman said he had to quit his school's baseball team and get a job to help his family, and he echoed employees who complain that Arpey and other managers get stock-based bonuses.
"Great leaders lead by example," Merriman said. "Great leaders share in successes and share in their failures."
Arpey congratulated Ian Merriman on becoming an Eagle Scout and getting a job. Then he said the company needed to balance employees' desires with the need to earn a profit.
Arpey said AMR spends about $250 million a year on retiree health, something many other airlines don't provide.
"That's a seminal competitive disadvantage for our company," he said.
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