In A Boston Courtroom, American Airlines CEO Robert Isom Recalls Some Scary Moments

March 2020 was a tough time in the airline industry, as the pandemic slashed traffic. At one point, American Airlines President Robert Isom called a mentor, former Delta CEO Richard Anderson, for guidance. Meanwhile, American executive Vasu Raja stepped up talks with JetBlue about an alliance.

At the time, “We were in the midst of the largest crisis I’d ever seen in the airline industry, one that was potentially threatening the viability of American Airlines,” Isom testified Monday in a Boston courtroom. “Every day we were losing tens of millions if not 100 million in a given day. We only had $8 billion in cash on hand. We could 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 (to) our future viability.”

In an email to Anderson, Isom wrote that “the industry is going to have to shed a tremendous amount of capacity — turning the dial back five years as a guide to what 2021 looks like.”

The spring of 2020 was one focus of wide-ranging Department of Justice antitrust attorneys’ questions during a trial Monday in U.S. District Court for Massachusetts in Boston. The DOJ has called the American/JetBlue alliance, known as the Northeast Alliance, a “de facto merger.” U.S. District Judge Leo Sorokin, in Boston, will decide whether it goes forward.

Besides questioning Isom on Monday, DOJ attorneys questioned Scott Laurence, the man in the middle of the Northeast Alliance and the case.

Laurence 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, Laurence negotiated some of the early steps in the alliance with Raja. Between working for the two partners, he spent a month at Delta as vice president of network planning. His departure from Delta has not been explained, but he said Monday he spoke with Raja within a day afterwards and felt he had “a standing offer” to join American.

Besides showing the sequencing of Northeast alliance discussions, the testimony indicated how small a world the airline industry is, with executives moving easily between companies. Isom and Anderson, for instance, both worked at Northwest Airlines. Isom said Anderson “is a longtime mentor of mine. We had worked together on 9/11 and the SARS crisis.”

In the spring of 2020, Isom said, American revenues fell by 90%. “I considered Covid to be a mortal threat,” he said. “My assessment was we could be looking at something that would take five years to overcome. American was going to have to do something to resize itself.

“We were flying along in January and looking forward to a good year,” he said. (Then) everything vanished. I had cash that was flying out the door. I was looking at all of this in the context of what has to happen at American so that we don’t go out of business.”

Isom first learned of the potential JetBlue partnership from Raja. “It sounded really intriguing,” he said. “As he laid it out, it was an opportunity to take a subpar performing aspect of the American network and to turn it into something that would be really interesting.

“It was a fantastic moment,” he said. “We’d been struggling for a long time figuring out how do we change our relevancy in the NY area.” American had a slot disadvantage in New York, he said: “American has 105 trips at JFK, 163 at LGA,” he said, while Delta has twice as many at JFK and 50% more at LaGuardia, while United has Delta numbers at Newark.

Laurence testified that he and Raja began discussing the NEA in November 2019. The discussion began because JetBlue wanted some of the American slots at New York Kennedy International Airport, particularly late afternoon slots. “As we were discussing that, the world turned upside down with Covid and this sort of disappeared into the ether because there was a slot waiver based on Covid,” he said.

The NEA agreement was signed in July 2022.