American’s Flight Plan

Donald Carty, the president of American Airlines, stopped in Los Angeles recently to touch bases with his troops in Southern California. Carty, the likely successor to Robert Crandall, chief executive of American and its parent, AMR Corp., also met with reporters for a wide-ranging discussion about the airline industry. Here’s some of what he said:

* On Uncle Sam’s unhappiness with rising air fares: The higher prices reflect what the market and competition will allow, yet despite record earnings for the industry, “this is not a wildly profitable business” in terms of what each airline earns as a percentage of its revenues.

“The question is: What’s Washington going to do?” Congress won’t want the cumbersome job of regulating every airline’s fares as it did until 1978, nor can it forbid major airlines like American from cutting prices simply to protect start-up airlines, Carty said.

He agreed, though, that fare structures--such as the wide gap between business and leisure fares--remain complex. His prediction? “Congress will float around this thing” but ultimately will not regulate again. “My prognosis is that the industry will find their way to a more sensible fare structure.”

* On American’s interest in an alliance like the one announced by Northwest and Continental: “We’re not talking to anybody, and if we were, I couldn’t comment.” But, “we know what carriers would help us,” and if American seriously considers one for an alliance, it will be aimed at growing American’s revenue, not at slashing its overhead expenses. “We’re not interested from a cost-reduction viewpoint.”

* On travel, and travel agents: Paper tickets and paper boarding passes will ultimately disappear, completely replaced by electronic ticketing. And agents--their ticket commissions now capped by the airlines--will have to rely on “their value-added” services to prosper. Agents who excel at planning trips, finding bargains, assembling appealing vacation packages and so forth are the ones who will succeed.

* On United Airlines’ growing strength at LAX: Much of United’s rising market share at LAX reflects the growth of its short-haul Shuttle by United, and “I’m more interested in doing more longer-haul flights out of Los Angeles,” especially nonstop flights to and from LAX. “We’ll be growing Los Angeles, and aggressively. Los Angeles is a market that no one carrier can dominate.”

* On fallout from American’s contentious labor negotiations with its pilots last year: Passenger loyalty is mostly unaffected; “our customers have been tolerant and very forgiving. The residual effect is harder inside the company,” with some workers still harboring hard feelings. “But it’s starting to come back together.” Even if some employees don’t like American’s management, “they love the company.”

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United Airlines on Thursday said the slump in its Pacific service--stemming from the Asian economic crisis--is worse than expected, which means its 1998 revenue will “be lower than originally planned.” Its parent, UAL Corp., reported revenue last year of $17.4 billion.

The forecast didn’t sit well with investors. UAL’s stock tumbled $2.63 a share, to $83.50, in New York Stock Exchange composite trading Thursday.

However, UAL said it’s not revising lower its profit outlook for this year, because it expects to find cost savings to offset the revenue shortfall.

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United’s Shuttle recently polled business travelers and found that workers aren’t wild about sitting next to their bosses on airplane trips.

The nationwide survey found that 87% of respondents preferred sitting next to co-workers rather than superiors. The bias also was more prevalent in the West. “We suspect the pressure of a lengthy conversation [with the boss] is the primary reason,” said Shuttle President Amos Kazzaz.

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Times staff writer James F. Peltz can be reached at james.peltz@latimes.com