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.


And some American Airlines union leaders worry that growth at Eagle represents lost opportunities for employees of the main airline.

"There is a perception among most of the pilots that this comes at our expense," said Ralph Hunter, an American pilot who is president of the Allied Pilots Association.

Financial backbone

AMR doesn't break out Eagle's financial information. But many details of the airline's performance are included in reports Eagle files quarterly with the U.S. Department of Transportation.

They outline an airline that appears to be doing better than its larger sibling.

Last year, Eagle reported a profit of $49 million on revenue of $1.4 billion. Revenue was up 28 percent from 2003, although net income was down.

That compares with an overall $761 million loss for AMR. Separately, American Airlines reported an $821 million loss to the Transportation Department.

Eagle also performed well during the first quarter of this year, reporting a $7 million profit on $404 million in revenue. American, meanwhile, posted a $171 million loss.

"The regional airlines are the ones making the money right now," said Ron Kuhlmann, vice president of Unisys R2A Transportation Management Consultants, a Hayward, Calif., aviation-consulting firm.

Bowler cautions that the financial data reported to the government don't tell the whole story. He said the data do not include the results of Executive Airlines, a small regional carrier owned by AMR that flies under the Eagle name in the Caribbean.

And like most regional airlines, Eagle does not make 2money directly from passengers. American pays Eagle a predetermined rate for each takeoff and landing. That means American handles ticket sales, marketing and other services aimed at bringing passengers to the airline - costs Eagle doesn't have to worry about.

It's the industry standard for how regional airlines are reimbursed, and American switched to this method last year, largely so that Eagle could be compared to its peers.

Eagle owns its airplanes, which means it doesn't have to account for lease payments like many other regional airlines.

But analysts say that regardless, Eagle has clearly been a bright spot for AMR amid the industry turbulence of the past few years. And AMR has an advantage because it owns Eagle outright instead of contracting with independent carriers.

"American is doing some things very well right now, and that includes Eagle," Kuhlmann said.

New airline, same mission

In many ways, Eagle's turning point was in April 2003, when American Airlines union members approved a concessions package valued at $1.6 billion. Although cuts in salaries and benefits garnered the most attention, a key provision in the new contract with pilots loosened some restrictions on how Eagle operates.

Under those rules, Eagle's growth had been frozen in late 2001 when American began to furlough pilots. That left Eagle unable to expand when rivals like Delta Air Lines began substantially increasing their use of regional jets.

"That was a significant change," Bowler said. Unfettered, Eagle was able to use its 50-seat regional jets to fly longer routes that didn't have enough demand to justify full-sized American Airlines jets.

Eagle has also been flying more nontraditional routes. For example, it operates a New York-to-Washington, D.C., bus8iness shuttle, competing with Delta and US Airways.

But Bowler maintains that overall, Eagle's purpose remains the same - to feed passengers into American Airlines hubs in D/FW, Chicago and Miami.

"Our mission has stayed consistent, to support American Airlines' network," he said. About 50 percent of Eagle's passengers connect to American flights, according to Bowler. That number is even higher at D/FW, he said.

He said that Eagle provided $350 million in connecting revenue to American during the second quarter of this year.

Even as it feeds the network, Eagle's newer airplanes have allowed its reach to grow substantially. That's helped the airline become a major international airline at D/FW Airport, with nonstop service to several Mexican cities.

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