Reuters Finds AMR’s Cost-Cutting Missed a Biggie

AMR's discreet $30 million house exposed in a securities filing

Back in 2006, BusinessWeek wrote a story about AMR’s “penny-pinching,” “cost-cutting culture”:

When it comes to pinching pennies, few full-fare airlines can match American. During his long tenure as American Airlines’ chief executive, Robert Crandall loved to boast that his decision to remove a single olive from passengers’ dinner salads saved $40,000 a year.

BizWeek touted then-CEO Gerard Arpey as the leader of its cost-cutting.

Five years later, Reuters gets a sweet scoop this morning on a significant something American’s axe somehow missed: Its five-story London executive house, worth as much as $30 million, which it uses for corporate functions and to house its a senior international executive.

AMR, of course, filed for Chapter 11 protection last month, largely to use the courts to slash pay and dump pension obligations on the government in order to get competitive with other airlines who have used the courts to slash pay and dump pension obligations on the government.

On its own, thirty million bucks isn’t going to make much of a dent in American’s broken business, which has lost some $5 billion in the last four years.

But as a signal of management priorities, it’s revealing. While the company has slashed billions of dollars in costs in recent years, it hasn’t seen fit to cash out this little gold mine, which it uses for corporate functions and to house a senior international executive. Reuters gets a colorful quote from the union, which also notes that executives have gotten lots of money in recent years:

However, the typical pattern for this company is workers keep it afloat through concessions, bring in outside work and boost productivity while managers pocket hundreds of millions in bonuses and live posh lifestyles. This would have been Marie Antoinette’s favorite airline.”

I’d say this news story is timed unfortunately for management, as it comes weeks after the airline filed Chapter 11, but Arpey jumped ship upon filing for bankruptcy. Not going to be too many hundred-million-dollar executive bonus pools at AMR anytime soon.

I like this quote Reuters gets here:

“This is a very discreet enclave that is ideal for high-profile residents wanting to live in relative anonymity,” said the source, who asked not to be named.

That enclave is a little less discreet now thanks to Reuters, which unearthed the details about London Residence LON6526 in AMR’s UK securities filings. That’s a gem that would have slipped by most people. Good work.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,