Robert Crandall A TALE OF 2 AIRLINES: UP & DOWN IN DALLAS

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So close and yet so far.

American Airlines and Southwest Airlines, corporate neighbors in Dallas-Fort Worth, present a striking contrast in their troubled industry.

American is fighting for profitable survival. Southwest is basking in profitability.

American blames labor unions for its cost problems. Southwest credits employees for the carrier's success.

The dramatic differences in these two airlines couldn't have been more revealing than at their recent annual meetings just one day and 15 miles apart.

American convened its shareholders meeting at the marbled Doubletree Hotel near the Dallas-Fort Worth Airport. The somber, dark-suited, mostly male crowd heard Chairman Robert Crandall report on a "far from satisfactory year." The meeting's bleak tone could hardly showcase its chairman's quick wit-except for his deft handling of corporate gadfly Evelyn Y. Davis, who would like to rack up frequent flier miles on her credit card should the Internal Revenue Service permit that form of payment.

Mr. Crandall said that he and senior managers are trying to convince employees that labor contract changes are critical to the company's ability to compete.

"It's becoming increasingly clear that the major airlines must either get their costs down or they will be unable to compete," he said after the formal meeting. "As it becomes more obvious, I hope it will become more and more obvious to our employees and their unions, and therefore they will agree with changes that will make us cost-competitive."

The day after Mr. Crandall said he wasn't optimistic about the industry's outlook, Southwest Airlines Chairman Herb Kelleher led a virtual pep rally at the company's standing-room-only annual meeting in Dallas.

Shareholders got seats while employees-clad in shorts and polo shirts-stood four deep at the headquarters' training center room to hear Mr. Kelleher's remarks about the industry and Southwest, the model for low costs and low fares.

He cranked up the crowd's enthusiasm by showing a selection of TV spots from both the airline's agencies, GSD&M, Austin, Texas, and Cramer-Krasselt, Chicago. A commercial to help open the Portland, Ore., market featured "man on the street" testimonials with one fellow laughingly saying as he holds a picture of Mr. Kelleher, "And the owner is a nut."

That drew a huge guffaw from the audience and Mr. Kelleher himself.

In his remarks though, Mr. Kelleher turned serious when he noted that 1993 was the fourth consecutive profitless year for the industry, with losses of about $1.2 billion. Total industry losses for the four years exceed $12 billion, he added.

"I believe 1990 through 1993 will long be remembered as a time of unparalleled economic holocaust for the industry-both domestically and throughout the world," he said. "Primarily, because of the excellence of our beloved people-many of whom are here today-Southwest in contrast was the only major airline that was able to report both operating and net profits for each of the years from 1990 through 1993."

He maintained that the airline's bookings and load factors have continued "unabated" since its virtual exclusion from the Apollo and System One computer reservations systems earlier this month. Still, the airline intends to offer a "permanent solution" to travel agents this fall.

"Indeed, our problem is not too few customers caused by [computer reservation system] exclusion," he said. "Our problem is not enough airline seats to meet our existing demand."

Southwest will start service to four new cities on the West Coast and eventually will enter the Florida market in several years, he said.

One shareholder who attended both meetings told Mr. Kelleher how nice it was to be at Southwest because he found the American meeting depressing.

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