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Books

A New Book Exposes American Airlines’ Choppy Flight Through Bankruptcy

Former general counsel Gary Kennedy reveals what it took for the airline to survive 9/11 and beyond.
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Gary Kennedy, former general counsel for American Airlines, has a new book coming out February 6. Written with former Dallas Morning News aviation reporter Terry Maxon, Twelve Years of Turbulence provides an insider perspective on how the airline was able to survive the toughest decade of its existence, from 9/11 through bankruptcy and the ultimate merger with US Airways. I sat down to talk with Kennedy about his lessons learned and his thoughts on the airline’s future. You can catch Kennedy at two upcoming book signings: Monday February 5 at 5 p.m. at the C.R. Smith Museum or Tuesday February 6 at 7 p.m. at the Lincoln Park Barnes & Noble on Northwest Highway.  Full disclosure: my wife used to work in the legal department at American Airlines with Kennedy, and I occasionally run into his wife on the tennis courts. 

Why write a book? You could have just gone fishing in Argentina. When I think about what happened from 9/11 forward to 2013—I was there at American Airlines for 30 years—I think it was the 12 most difficult years in the company’s history. Particularly starting with 9/11, and then the crash of flight 587 in New York, the company was absolutely at its worst. It was insolvent and in such difficult straights, and it slowly tried to pull itself off the edge of a cliff. I just thought it’s a fascinating story.

You open the book on November 29, 2011, as you electronically file for bankruptcy on behalf of the airline from the Weil, Gotshal & Manges offices in Manhattan. At that moment, what did you think the future of the airline was going to look like? I was a strong proponent of filing for bankruptcy, and I thought, wrongly, that we’d be able to go into bankruptcy, fix the problems, come out quickly, and things would look good. We ended up spending a lot more time in bankruptcy than what we anticipated, and it did not go as planned. The ultimate result was fantastic, but getting there was a very difficult road.

There was a fair amount of cloak and dagger involved. My wife didn’t hear about the filing until she turned on the news that morning. Only the Dallas Morning News learned about the story in advance. How did Terry Maxon get the scoop? Terry was a long-time aviation reporter, and he had heard through a source that something important was happening in the company. So, as a dogged reporter, he kept calling the office. He figured that if he got a hold of people late at night, that would be an indication that something was brewing. So he called the office of Gerard Arpey, the CEO, and Gerard’s assistant answered the phone at 8:30 at night. So he said, “Okay, I definitely have a story here. I just don’t know exactly what it is.” He started putting it together, and he finally said, “Look guys, I’m going to run a story, because now I have belief that you’re filing for bankruptcy.” I was in New York, and they finally called me and said, “Okay, what do we do here?” I said, “Give him the story, because he’s going to run it. We’d rather him run it with our spin on it than just doing it on his own.” He was the only one who figured it out.

How did you decide to partner with Terry? I went to Terry and I said, “Terry I’ve got this idea, I want to write this book.” He didn’t hesitate at all. He said, “I’m all in. It sounds fantastic.” He had retired from the Morning News, but he wanted to know what went on on the inside that he didn’t know about as a reporter. Working with him was terrific because he was an aviation reporter, he had the aviation blog, he had so much information, historically, that we were able to use and find to put this together. It wouldn’t have happened without him.

Where were you on September 11? In the book you talk about what was happening in the command center, but you don’t talk about yourself. It’s interesting. I had taken a leave from the legal department, and I was running our construction and real estate department. I was in a conference room, and that’s how I first learned about the potential hijacking and then, of course, the aircraft that crashed through the World Trade Center. What most people don’t know about is how American first learned about the potential hijacking, which we describe in the book. A flight attendant who was in the back of the cabin used her cellphone to call into our reservation center, which then patched her into our operation control center. She indicated that men had barged into the cockpit, had stabbed flight attendants, and had killed a first class passenger.

I didn’t realize before I read the book that Don Carty and Gerard Arpey were the first ones to make the decision to ground all American Airlines and American Eagle flights, and that the FAA actually asked them what they thought the FAA should do. Yes. Jane Garvey, the FAA administrator, was on a call with Don Carty, and she actually asked Don,” What do you think we should do?” He said, “It’s obviously your call, but if it were me, I would ground the entire air transportation network in the country,” and that’s exactly what they did.

I also had completely forgotten that the crash of flight 587 happened just a few months later. Because it was in such close proximity to 9/11, the first thing people believed was that it was another terrorist attack. We quickly learned that was not the case. What’s interesting, when it happened, Mayor Giuliani shut down all of the bridges and tunnels leading into the city, and he got in a helicopter and was flying over Jamaica Bay, and he saw a piece of the aircraft, which he thought was the wing. He called Don Carty and said, “Look, I’m in this helicopter and I’m flying over Jamaica Bay, and I see the wing of the aircraft.” And Don said, “No, mayor, that’s not the wing, it’s the tail of the aircraft,” because we knew at that point that the tail of the aircraft had sheered off as a result of the circumstances that took place after the aircraft took off. The sad thing about it is that it was another tragedy for American that really brought American almost to its knees. When I talked with Don Carty about what he was feeling that day, he described to me that he did not believe that the company could survive this second event. Then, a relatively short period of time after that, after the company loses billions of dollars, I’m named as general counsel in January 2003, and my first task is to prepare to put the company into bankruptcy. It was a very difficult time.

Over the next couple of years following September 11th, at least six airlines filed bankruptcy, including Delta, United, and US Airways. Looking back, do you think it would have been better for American to file when you were originally considering it in 2003? You know, that is a million dollar question that so many people have strong views about. We tried to save the company by doing it through voluntary concessions, which we achieved, but those cuts did not go deep enough. So in retrospect, in my view, we would have been better to go through what I call the “bankruptcy car wash” at that time and put our house in order and then go forward. But even those airlines who filed, they struggled for many years thereafter. But I wish that we had done it at that time rather than waiting until 2011.

What do you think was the pivotal point in American’s survival? The moment that sticks with me is the moment when we were working with the Department of Justice after they sued us to enjoin the merger and we were able to reach a settlement with them. When we finally were able to resolve that, I knew that this merger was going to go forward. The consequence of it going forward is that all creditors were paid 100 cents on the dollar, employees received wage increases, most employees kept their jobs, and equity holders received billions of dollars. The bankruptcy was, if not the most successful, one of the most successful bankruptcies in U.S. history. So I feel really good about leaving the company in that condition.

What do you see as some of the biggest challenges for American going forward? When we decided to merge with US Airways, one of the reasons we did that is because we needed to find a way to strengthen our company, and that ended up being a good thing. There are those who argue that there are too few airlines now and that leads to potential issues on prices for consumers, but I would argue that a consolidated industry in the condition it’s in today is a stronger, healthier industry. Airlines require tremendous amounts of capital and tremendous amounts of continued investment into the business to do well, and you must have a strong balance sheet to do that. So, they’ve got the fundamentals in place, and I think the principal issue going forward is to make sure that they continue to invest planes, in product, and in services. Because the international airlines that American and others are competing against produce a tremendously great product, and the U.S. airline industry needs to do the same. It is such an ultra-competitive industry, and, as a consequence, you can’t afford to let your game down for just even a minute or others are going to pass you by.

President Trump recently took credit for the U.S. airline safety record, but in fact there haven’t been any deaths on a U.S. commercial airline since 2009. In the book, you place the credit outside of the Oval Office. I attribute it to airline employees, to the FAA, the Department of Transportation. We have in place such a fantastic system that assures the safety of our passengers. When I think about the airline industry and the idea of taking 200 to 300 people and packing them into a small, narrow tube, and to hurtle that tube down a runway, and that plane then goes to an elevation of 5 or 6 miles above the surface of the earth while people enjoy a movie, the internet, a good meal, and then we gently glide that plane back safely down to the surface of the earth, tens of thousands of times a day. It really is like magic. It is a miracle. I mean, Orville and Wilbur Wright would just be astonished. I’m astonished every time I get on a plane.

What’s next? There’s definitely not a sequel. This is one and done. I’m not John Grisham. You know, you had asked me in the front end about why I wrote the book. To me, this book is filled with stories about success; it’s filled with stories about failure; it’s filled with stories about great drama and great passion. A fair bit of profanity because we were so passionate about what was going on. It is filled with lots of different aspects that we hope tell a story about what really went on behind the scenes during these extraordinary days of the company. You know, I think it’s interesting to sort of take a look at a major company, a company that was basically insolvent in 2003, and how it marched forward, and then finally, I think at the end, how it succeeds as a company going forward. We’ll see if it works.

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