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Will This Nice Guy Finish First?


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WILL THIS NICE GUY FINISH FIRST?

Ask any industry observer about American Airlines President Donald J. Carty, and the first thing you hear is how nice he is. How respected. How skilled with people.

Meet Carty, and that affability is apparent: The lanky, white-haired Canadian has a strong, direct manner and a ready smile. But if everyone focuses on his style, it's because it contrasts so sharply with that of his boss, the notoriously abrasive Robert J. Crandall, who has made parent AMR Corp. and American a powerhouse. "The way Bob goes at things gives the perception of win/lose," says a former officer. But Carty "attempts to make things work out."

You can't build a career on amiability, of course; acquaintances also credit Carty with keen analytical skills. But his ability to work with others could be a key asset for American in an era when compromise and partnership have become essential in labor relations and in ever more important global alliances.

One reason CEO Crandall decided to relinquish American's presidency last March was to put a new face into the crucial and contentious talks with the pilots, for whose ire he has become a lightning rod. Carty, Crandall says, "is the most capable guy we've got."

Since becoming president, Carty has been immersed in labor negotiations, beginning with the 28,000-member Transport Workers Union. In October, the airline and union concluded a pact Carty describes as a "breakthrough" for both sides. Analysts say it could save American more than $100 million a year.

CONCESSIONS. Talks with the less tractable pilots' union are now under way. The outcome, Carty says, will determine whether and how fast American can grow. He argues that without lower costs--including some $300 million in savings per year from the pilots--American can't justify investing in new planes even as it battles lower-cost carriers.

So far, the pilots aren't persuaded. Analyst Raymond E. Neidl of Furman Selz Inc. expects AMR to earn about $580 million this year and $750 million in 1996, after preferred dividends, compared with $343 million last year. "This is not an environment conducive to concessions," says union President James G. Sovich, who nonetheless credits Carty with smoothing the way to some initial agreements.

Carty, for his part, displays a degree of diplomacy not previously evident in American's executive suite. "Our shareholders want profitability, but they also want growth," he says. "The pilots want exactly the same thing." And even if American doesn't hit its savings target, "we'll have the dialogue again."

Such forbearance helped Carty in pursuing American's alliance with Canadian Airlines International Ltd. The two sides started talks in 1991. But in July, 1992, cash-strapped Canadian began exploring a merger with Air Canada. Fearing job losses, union leaders turned to American for a deal to save the airline. They met several times with Carty, who detailed the concessions labor and creditors would need to make.

Carty's knowledge of Canadian business and politics was critical, says Canadian CEO Kevin J. Jenkins. "American drives hard bargains, and Don is as tough as anyone," he says. "But he also in the end knows how to find where the deal is." The need for government approvals held up the accord until April, 1994. But American, which invested $177 million for a 25% voting stake, expects to reap $2 billion over 20 years by selling services to Canadian.

BALANCING ACT. Many observers criticize American for not moving faster on other global alliances. But plenty of potential partners remain, says Carty, and American's dominance in the Western Hemisphere should attract European carriers. One foreign airline executive expects doing business with American to be easier once Carty is in charge.

When that will happen no one knows. Indeed, one challenge for Carty, 49, is to extend his authority without alienating his boss, who has no immediate plans to step down. Crandall, nearly 60, says only that he'll retire "sometime before I'm 65, including, like, one day before." So far, he remains enmeshed in operational details. Some friends of Carty doubt he'll stick around if Crandall does not loosen the reins.

Yet patience and political savvy have worked for Carty within, as well as outside, American. Colleagues say he knows when to push Crandall to reconsider a decision--behind closed doors, of course--and when to stop.

Carty's easygoing style has been apparent since his youth in Montreal, where he was one of six children in a close-knit family. Friends say he cared more about partying and dating than hitting the books at Queen's University. Still, he received an honors BA in economics. After working a year at Canadian Pacific Ltd., he earned an MBA at Harvard University.

He went straight to Air Canada, where he held various finance jobs before moving to Celanese Canada Inc. in 1974. Four years later, he joined a hotel company because it was owned by American Airlines. As the hotel unit's senior vice-president for finance, he helped spruce up some money-losing properties just as the real estate market strengthened. American unloaded more than 20 hotels at prime prices.

That success let him move to the airline side, where he soon became a key project coordinator for Crandall, the new president. He was in the thick of the wrenching changes necessitated by deregulation, including grounding obsolete planes and building massive hubs.

Eager to run his own show, Carty left in 1985 to head Canadian Pacific's CP Air. Two years later, CP was sold to Pacific Western Airlines Ltd., which became Canadian Airlines. Carty passed up the No.2 job to return to American as senior vice-president for planning. Crandall, he says, indicated he had a good chance of reaching the top.

And so he has. But with major decisions still hashed out jointly by top executives--and with Crandall's clearly the deciding vote--Carty remains a bit of a mystery. Says one former colleague: "We won't know what Don Carty is really like until Crandall is gone. He's had to live carefully in the shadow of this killer-whale guy." That Carty will alter American's culture is certain. The question is whether he can do so without dulling its fierce and successful edge.

DONALD CARTY'S FLIGHT PATH

BORN: Toronto, Canada, July 23, 1946

EDUCATION: Honors B.A. in economics, Queen's University, Kingston, Ont., 1968; MBA, Harvard, 1971

EMPLOYMENT: 1971-87 Various jobs at Air Canada, Celanese Canada, American Airlines, and CP Air

- 1987 Rejoins American as senior vice-president for planning

- MARCH, 1995 Elected president of AMR Airline Group and American Airlines

PERSONAL: Three adult children; divorced earlier this year

DATA: BUSINESS WEEK, COMPANY REPORTSBy Wendy Zellner in Dallas


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