Could AA Go Low-Cost?

It's not often you hear this kind of praise from one airline executive about another airline:

"One of the reasons Southwest is so successful and has such high customer service ratings is that they promise a product that is very simple and deliver on that promise very consistently. It's a better paradigm... and that's where we need to move."

But that's just what American Airlines CEO Gerard Arpey had to say at the Goldman Sachs Transportation Conference in New York last week.

Southwest, based at Love Field in Dallas, has a lot to envy, said Arpey. The low-cost carrier flies just one type of aircraft -- the Boeing 737. Up until a few years ago, American flew 14 different types of aircraft in a total of 35 configurations. By September, Arpey says American will be flying just five different types of aircraft.

It's that kind of streamlining Arpey hopes will reshape the world's biggest airline into a leaner, more cost-efficient operation. But while Arpey says American has a lot to learn from the likes of Southwest, there are some things that will remain the same. For instance, he says, American will not go to a single-class configuration, as is the model at Southwest. Arpey figures passengers want the extra leg-room and extra service that come with sitting up front.

But Arpey called American's frequent flyer program "too liberal," saying he wants to "tighten" it up -- if the industry permits.

How's it working? Arpey says American's cost-per-passenger-mile during the first quarter of this year should be 17-percent lower than in Q1 of 2003.

FMI: www.aa.com