American Eagle Ascends Under the Radar

It's developed a financial footing that would be the envy of many larger airlines, posting a $49 million profit last year, while the industry overall lost billions.

For several years now, this Fort Worth airline has been one of the nation's fastest-growing carriers, and it's profitable, too.

But you won't hear it hyped on Wall Street or touted on magazine covers like high-profile discounters JetBlue Airways or Dallas-based Southwest Airlines. It doesn't advertise, and you can't even buy a ticket directly for its flights.

Nonetheless, quiet regional carrier American Eagle, owned by Fort Worth-based AMR Corp., has moved into a crucial position aiding the recovery of its partner, American Airlines. It's developed a financial footing that would be the envy of many larger airlines, posting a $49 million profit last year, while the industry overall lost billions. Along the way, a growing number of Dallas/Fort Worth Airport passengers are flying on Eagle, even to some far-flung destinations.

And the airline remains a financial ace in the hole in case AMR is pushed to the brink of bankruptcy. Analysts predict that if necessary, Eagle could fetch hundreds of millions of dollars - even as much as $1 billion - if its parent company needs to raise cash fast.

"We are a different company than we were just a few years ago," said Peter Bowler, Eagle's president.

This summer, Eagle, which has 12,000 employees, including 3,000 workers in North Texas, accepted the last of 236 new small jets that it began adding to its fleet in 1998. The airplanes have powered the airline to growth averaging 20 percent a year, even as American significantly slowed the expansion of its domestic schedule.

And Eagle has added scores of new destinations from D/FW, including routes to distant cities such as Chihuahua, Mexico. Just this month, Eagle announced new service to Chattanooga, Tenn.; Rochester, N.Y.; and Syracuse, N.Y. - all considered long-haul flights.

Eagle's D/FW operation grew by 35 percent in June, and it was the airport's second-largest carrier, after American.

This year, AMR executives estimate that Eagle will carry 20 million passengers, up from 14 million two years ago.

Eagle accounts for about 5 percent of AMR's total flying, according to the most recent traffic statistics.

Like other carriers, AMR is using Eagle's small planes, with 50 seats or fewer, to provide frequent flights on routes that don't justify full-size jets. They can serve markets that remain untouched by low-fare competition - and thus command higher airfares than for other routes. And while it continues to feed American Airlines hubs at D/FW, Chicago and Miami, Eagle is also increasingly carrying nonstop passengers on city-to-city routes.

Eagle pilots and flight attendants also earn significantly less than their American counterparts, which keeps the regional carrier's labor costs low. The airline has signed new labor contracts with all of its major employee groups except flight attendants in the past 12 months. A tentative contract with attendants was reached last week and still needs to be ratified by members.

"This is part of a definitive shift by the big carriers," said Alan Sbarra, an aviation consultant with Roach and Sbarra Airline Consulting in San Francisco. "They're seeing the regional airlines as a way to solve part of their financial problems."

But the strategy has risks as well. Because they carry fewer passengers, in some ways small jets are less cost-effective than their larger counterparts, analysts say, and generally rely on higher fares to be profitable. If discount airlines move into regional markets, they could cut quickly into those profit margins.

JetBlue has vowed to do just that. The New York-based airline has ordered smaller 100-seat airplanes from Embraer, and executives say they plan to deploy them in small cities that so far have not benefited from much discount competition. If JetBlue is successful, other discount carriers could follow suit.

"If you see low fares in those markets, it could be a disaster" for the regional airlines, Sbarra said.

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