In a Boston courtroom, American Airlines CEO Robert Isom recalls some frightening moments

March 2020 was a tough time for the airline industry, as the pandemic slashed traffic. At one point, American Airlines president Robert Isom called a mentor, Richard Anderson, the former CEO of Delta, for guidance. Meanwhile, US CEO Vasu Raja has intensified his talks with JetBlue about the alliance.

At the time, Isom said in his testimony Monday in a Boston courtroom, “We were in the midst of the biggest crisis I’ve ever seen in the airline industry, a crisis that potentially threatened the very survival of American Airlines.” Tens of millions if not 100 million on a given day. We only had $8 billion in cash on hand, and we might run out of cash.

“We didn’t have time to wait and think,” he said. “Every day was a day that could be a critical event (for) our future viability.”

In an email to Anderson, Isom wrote that “the industry will have to dump a massive amount of capacity — putting the dial back five years as a guide to what 2021 looks like.”

The spring of 2020 was one of the focus of questions from the Justice Department’s antitrust attorney during Monday’s trial in US Massachusetts District Court in Boston. The Department of Justice called the US/JetBlue alliance, better known as the Northeast Alliance, an “actual merger.” US District Judge Leo Sorokin, in Boston, will decide whether to proceed.

Besides questioning Isom on Monday, Justice Department attorneys questioned Scott Lawrence, the man at the center of the Northeast Alliance and the case.

Lawrence worked for JetBlue, as Head of Revenue and Planning, then moved to American in March 2022 as Senior Vice President of Partnership Strategy. At JetBlue, Lawrence negotiated some early steps for an alliance with Raja. Between working for the two partners, he spent a month in Delta as Vice President of Network Planning. His departure from Delta was not made clear, but on Monday he said he spoke with Raja within a day after that and felt he had a “permanent offer” to join America.

Besides showing the sequencing of the Northeast Alliance’s discussions, the testimony indicated how small the world of the airline industry is, with executives moving easily between companies. For example, Isom and Anderson both worked for Northwest Airlines. Isom said Anderson is “my long-time teacher. We worked together on 9/11 and the SARS crisis.”

Isom said US revenue fell in the spring of 2020 by 90%. “I considered Covid to be a mortal threat,” he said. “My assessment was that we could look at something that would take five years to overcome. America had to do something to change its size.

“We were flying in January and looking forward to a good year,” he said. (Then) it all disappeared. I had money flying out the door. I was looking at all of this in the context of what needs to happen in America so that we don’t stop working.”

Isom first learned of a potential JetBlue partnership from Raja. “It looked really interesting,” he said. “As he explained it, it was an opportunity to take the poor performance aspect of the American network and turn it into something that would be really interesting.

“It was an amazing moment,” he said. “We’ve been struggling for a long time figuring out how we can change our fit in the New York area.” The American had a slot in New York, he said, “The Americans have 105 rides in JFK, 163 in LGA,” while Delta has twice that in JFK and 50% more in LaGuardia, while United has Delta numbers in Newark.

Lawrence testified that he and Raja began discussing the NEA in November 2019. The discussion started because JetBlue wanted some US slots at New York Kennedy International Airport, especially in the late afternoon. “While we were discussing it, the world turned upside down with Covid and that kind of disappeared into the ether because there was a slot concession based on COVID,” he said.

The NEA agreement was signed on Ju8ly 2022.

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