Letting technology fly From jet repairs to passenger services, American is back on course as an innovator

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Funny thing about laptop computers - they can make everybody more efficient.

Say you're sitting on an American Airlines jet that's stuck at the gate because of a mechanical problem. You can get some work done on your laptop while you wait.

At the same time, underneath the airplane, laptops are also helping your plane get fixed more quickly.

American Airlines Inc. maintenance supervisors Gene Blasavage and Gary Carlson can't tell you how much their new computer system has increased productivity.

But they can tell you how much faster American's mechanics can put broken airplanes back in the air. And that's the bottom line for them.

"Planes are waiting at the gate, people are on it, and you've got to do stuff," Mr. Carlson said. "We can turn a 45-minute wait into 10 or 15 minutes."

They're doing it with laptops and a wireless network that can call up repair manuals, parts lists, airplane records and other information instantly.

Such a system was only a dream 10 years ago, but now it's part of the daily routine for the line mechanics who hustle to keep American's planes flying.

The software and the system's infrastructure was designed within the company, evidence that the airline has made great strides in rebuilding the technological prowess that largely departed in the late 1990s after parent AMR Corp. spun off its technological arm, the Sabre Group.

Overseeing the effort has been Monte Ford, a former executive at Associates First Capital Corp. and Bank of Boston. Mr. Ford was hired in late 2000 by former AMR chairman and chief executive Don Carty to build back its capabilities.

Early leader

From the time it created the Sabre reservation system in the 1970s, American had developed a reputation for technological superiority in how airlines operate. And it went far beyond just a computer system to help it and travel agents book travelers.

It was a leader in revenue management, or pricing tickets to get the most money out of each seat. Its programmers developed software to better schedule airplane crews, ground employees and aircraft for maximum productivity.

It produced call center software and hardware to better handle reservations calls; tools to manage AMR's finances, including for its investment subsidiary; and other technologies to help the airline run better.

Initially developed for AMR's internal needs, its services and programs were sold to other airlines and to companies outside the travel industry. By the time Sabre was spun off in March 2000, it had annual revenue of more than $2 billion, more than 150 airline customers and many nontravel clients.

"We put a lot of value into Sabre," Mr. Ford said. "We put a lot of substance into Sabre to maximize the benefit and value to shareholders in that spinoff deal, which it did. Shareholders got a great deal out of that. But in doing so, we also spun off most of the thinking and most of the IP," or intellectual property.

American retained information technology people after Sabre left. But, Mr. Ford said, the "think tank" of intellectual property had largely moved on.

As a young IT manager in banking, Mr. Ford would take field trips to American Airlines and Sabre "because they were so state-of-the-art," he said. "We were all in awe of what American Airlines was able to do because it was the technology leadership company."

Mr. Ford said he thinks the desire to establish an independent identity from Sabre helped hold back innovation to help American.

"American lost a little ground in that creativity and innovation there, and I think both companies probably suffered a little bit from that," said Mr. Ford, senior vice president of information technology and chief information officer.

Mr. Ford's mandate was to bring that creativity and technological leadership back to American, with the understanding that Sabre (and later Electronic Data Systems Corp.) would handle a lot of its IT needs.

"There are a lot of things one can easily outsource and gain value from and benefit from," Mr. Ford said. "Thinking, direction, architecture [or] strategy in my opinion is not one of those. We needed to bring those back in-house."

His first year at American was taken up by the integration of Trans World Airlines Inc., a deal announced in January 2001 and finalized that April.

With the TWA plans well under way by late summer 2001, Mr. Ford planned a big meeting to launch American's technology leadership plan. It was scheduled for Sept. 12, 2001.

"We didn't make it," Mr. Ford wryly noted.

The terrorist attacks of Sept. 11, in which two of the four jets that were crashed belonged to American Airlines, sent the industry into the worst period of its history.

Suddenly, "we're not focused on leadership," Mr. Ford said. "We're focused on surviving and saving the company. What we were focused on were employee productivity, efficiency of operations at the airline, all the things that were going to save the airline," he said.

A 2003 restructuring, including $1.6 billion in concessions from unionized employees, kept American out of bankruptcy. In 2006, American was finally back in the black, with $231 million in net income, after losses totaling more than $8 billion in 2001-05.

Halfway there

Mr. Ford and his organization are now only part way through the technological changes planned. American is changing out the flight operations system and is early in the process of upgrading the passenger services system. It is working on changes to the frequent-flier system.

To handle the higher level of computerization, American replaced its network, including all the front-end computers, and put in higher bandwidth to carry data, pictures and graphics.

"We've done a lot, come a long way," Mr. Ford said. "I'd say we're about 50 percent of where we'd like to be. But we have an eye on that last 50 percent that will let us get there a lot faster than the first 50 percent."

Hal Sirkin, senior vice president at the Boston Consulting Group, makes the point that cutting costs alone won't save airlines. Airlines must be innovative in technology, products, operations and other ways to survive, said Mr. Sirkin, co-author of Payback: Reaping the Rewards of Innovation (Harvard Business School Press).

"The airline is constantly inventing itself," Mr. Sirkin said. "It probably has more innovation than most industries because it's so darned competitive. If you think about the basic product, it's an airplane seat. So to be successful, you have to find ways to differentiate your product in some way, shape or form."

American in the past has done an "incredibly good job of differentiating itself" through its technology, he said.

"Innovation comes in many different ways. Some of it comes from the IT structure because you need IT to deliver the innovation," he said. "A lot of their innovation has been driven by IT. Clearly Sabre was a significant part of it. But you don't necessarily need Sabre to be innovative."

D/FW offices

Nowhere is American's technological innovations more apparent than in its maintenance offices at Dallas/Fort Worth International Airport, where mechanics use 28 Panasonic Toughbook laptops to provide them almost all the information they need to keep American's 500-plus departures from the airport each day as on time as possible.

The system, called Quantum, links the computers wirelessly through the Sprint cellular network with American's mainframe computers, on American's internal Vianet network.

The result is that mechanics can pull up all the information they need to work on airplanes without having to run back to the office to look up information on microfilm, bound volumes or desktop computers.

"Before, they might make three or four trips into the office to get on the mainframe," said Mr. Carlson, production manager in maintenance and engineering at D/FW for American.

The line mechanics at the airports are the first-aid workers for broken airplanes, as opposed to the mechanics who do the heavy maintenance and repairs on the west side of D/FW and at Tulsa, Kansas City and Alliance Airport in Fort Worth.

A similar technological revolution is going at those bases as American and its Transport Workers Union members compete for heavy maintenance work from other airlines as well as doing American's in-house work faster and cheaper.

Mr. Blasavage, a tech crew chief, said the amount of information now available to his mechanics is much greater than just a year ago, when Quantum was launched. And the wireless laptops have untethered the mechanics.

"Anything you do on a desktop, you can do through here," he said, tapping his laptop. "The nice thing about it is you can be anywhere in the world and if you have a Sprint connection, you can pull up everything. If you go to another station where they don't have maintenance, you can take this with you and access all the information."

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