Gerard Arpey Admits He Made 'Foolish Presumptions'

My bad. That's what American Airlines CEO Gerard Arpey told investors last week, in an apparent apology for losing the bid for a lucrative China route earlier this year.

TheStreet.com reports that during an investor webcast, Arpey (right) acknowledged he erroneously assumed pilots at the world's largest carrier would agree to overlook an hours-provision in their contract, in exchange for winning the bid. "In the case of this application, I made presumptions that in retrospect were foolish to make," Arpey said.

As Aero-News reported, American's original proposal to win a new route to China -- flying from Dallas-Fort Worth-to-Beijing -- was considered a front-runner against similar proposals from United, Northwest, and Continental. It also would have exceeded the maximum number of flight hours permitted under American's contract with its pilots.

The Allied Pilots Association demanded negotiations of those rules, and offered to accept the longer day in exchange for other considerations, such as guaranteed pay for cancelled flights and other perks. The airline and union reached an agreement in a similar situation in 2005, when American started service to New Delhi.

This time around, however, American management stuck to their guns, assuming the pilots would come around. Trouble was, the pilots stuck to their guns as well -- demanding American consider its requests.

Neither side budged... and in the end, American was forced to amend the outbound DFW leg to include a stopover in Chicago to swap pilots, thus keeping total time for flight crews under the contract-mandated 16 hours.

APA noted the cost of American's revised proposal was more than it would cost the airline to meet the union's stipulations. "We do not understand why management chose to jeopardize its prospects for new China service by rejecting APA’s reasonable proposal and opting for a more costly alternative," APA President Captain Ralph Hunter said at the time.

"Even with the modification, it bears repeating that American's route request will offer the maximum public benefits for the valuable and limited opportunity available in the US-China market and will provide much-needed competitive balance," Arpey asserted.

The Department of Transportation didn't agree, and rejected AAL's amended bid. The DOT later awarded the route to United Airlines for its direct service from Washington, DC to Beijing, leaving American to try again during the next route competition scheduled for this year.

"I made a lot of presumptions in the application process about the pilots union and what we would be able to accomplish," Arpey said last week. "That was really my failure, to not recognize the changing landscape. To do it over again, we should have sat down with the union prior to applying."

Aviation Consultant Mike Boyd expressed appreciation at Arpey's statement of contrition.

"You have to give him credit for saying that," Boyd said. "What other CEO in the airline business has said 'I made a mistake'?"

True enough -- although to be fair, JetBlue CEO David Neeleman has already locked up the "Most Apologetic Airline CEO" award for 2007, for his very public displays of regret following his airline's weather-related route collapse last month. He even went on the David Letterman show.

Perhaps Gerard Arpey could appear on Jimmy Kimmel's show, to explain the bonuses American executives are set to receive next month? Just a thought...

FMI: www.aa.com, www.alliedpilots.org