Despite tough financial times, the word at American Airlines is that they’re coping just fine.

Few environments are as brutal these days as the airline industry. Executive Travel editor Janet Libert recently sat down with Daniel Garton, American Airlines executive vice president of marketing, to hear what American is doing to stay strong in an industry fraught with bankruptcies.

Airlines have been so hard-hit since 9/11. What is your strategy for growth this year?
As we look at 2006, we want to make sure we are attracting every segment of the traveling public, because we are not a niche player. We’re the largest airline in the world, so it’s very difficult to be a niche player! We can’t exclude the leisure traveler or the person buying their ticket on Priceline or Travelocity or, hopefully, AA.com. It’s very important to us to have that volume of travel. We are essentially a price-taker—we don’t set prices, we sort of accept what the market is offering. We have to be cost-effective. We need a product and service mix that is competitive.

As we go up the scale, in terms of the service level we’re offering, we need to be more competitive, closer to best in the industry. We need to spend more money, and we need to be able to generate a premium revenue. For our first-class product in the U.S., we try to be at least competitive with the best legacy carriers. When we get international, it’s an even higher benchmark. In 2006, we will roll out, for example, our new lie-flat seat for international business class. So, we definitely are not turning our backs on that area of customer. We are investing in making sure all our 777s have a common and real high-end first class.

How can an airline differentiate itself in this intensely competitive environment?The reality of this business is that there are five principal drivers. They are price, network, frequent flier program, product/service and corporate travel policy. So, before you spend an incredible amount of money, you have to be aware of that. You might have differentiated yourself, but to what end? We try to make sure we have a network that is so appealing to our business customers that it is a big draw. We try to make sure our prices are competitive. When you combine the best frequent flier program with the best network, it’s a great one-two combo. We have to have products and services that are appropriately sized to what the customers are willing to pay.

At what point do you determine that there’s been customer pushback in response to service cutbacks?
The problem we have is that the industry started as very high-end, all first-class—for the rich. So, we grew up in this environment where you provided a bunch of things to customers free of charge. Now everyone flies, and ticket prices have come down. So, it simply does not make sense to be providing the bundle of services you used to provide for free. I believe most movie theaters make the majority of their profit selling popcorn. So, the model of giving all these things free is unique to the airline industry. Unwinding that subjects us to some criticism. Each change is difficult, so we try to be a little cautious, so we never get out of synch. We’re very sensitive to that issue.

This is the 25th anniversary of your AAdvantage program. Congratulations!
Thanks. The power of the mile is, we think, very significant. I understand people check their mileage accounts more than they check their bank accounts. It’s a little bit of payback from their airline and business. The partner business [for AAdvantage] continues to grow. We have 1,500 partners. If anything, I think we have not adequately communicated that.

I know you’ve introduced service to Shanghai. What is your international strategy?
For our airline, strategically, international growth remains very appealing. Financially, all the airlines have talked about this, which guarantees the rewards will be diluted. But that won’t reduce our interest, strategically. Today, 35 percent of our revenue is international, up from 25 percent just a few years ago. We see it as an area where we are able to use our strengths better. Shanghai is extremely exciting for us; India is doing great; we’ve also launched Osaka, which is doing well. The only airplanes being delivered this year are two 777s dedicated to Shanghai.

What do you think will happen with the registered traveler program?
I don’t know what’s going to happen. I read that the government is going to get this done by June. I’m surprised that, in their current situation—in terms of resources, capacity and capability—they’re going to take this on. If you ask me right now, today, what I’d prefer, I would just want to have a premium line in every single checkpoint. We have them in a number of airports, but not in all. I’d want them in every airport. If the registered traveler is the path home, then obviously we are supportive. I am just surprised that they can—by June 20—make this happen. At least between now and then, I’d want them committed to allowing us to have the premium lines.

Do you have any concerns about security and safety with the program?
No. I don’t believe there will be any dilution of security [with registered travelers]. I’m not worried about safety issues. I’m worried about whether this will be an enhancement.

How often do you travel?
Between business and pleasure, more than once a week. I would be Executive Platinum, I know that! On business, I travel probably 40 times a year; [for] pleasure, I travel 20 to 30 times a year.

What are your business travel tricks?
I usually go to the airport with a boarding pass in hand. And I’m now on my third Rollaboard. I’m tired of squeezing them in, so I keep buying smaller ones. If I’m going to check a bag, I check absolutely everything. It’s delightful not to be loaded with stuff. I sit on the aisle, because I often get up and chat with our people on board. I usually work on the flight to a business meeting; I read on the way back.

You always fly American?
Yes, we don’t have any corporate jets. Everyone thinks we do, but we don’t. Why do I need a private jet when we have 1,000 jets? I get to fly on a corporate jet every couple years, and then I’m like a kid in a candy store.

Who’s the most interesting person you have sat next to?
I sat next to Cyndi Lauper once between Nashville and L.A. She was very nice—I really liked sitting next to her. I love sitting next to little kids. I’m pretty quiet on the way to a meeting. On the way back, I’m pretty [conversational].

There’s always been a conversation that American will do more with British Airways.
Consolidation globally is not practical, given regulations, so our network is the way we’ve chosen to do it. Oneworld is, in my opinion, really on a strong roll right now. The number [of partners] is less than Star, but our coverage of the globe is essentially—once JAL is in—just as significant. We see it as very important. We look at the globe and think, “Where is Oneworld not covering?” Today, these alliances are important in two respects: They are important to our globetrotters (1 or 2 percent of our customer base), but also to our AAdvantage members—you can get anywhere.

What else do you want business travelers to know about American?
We are committed to having the most [extensive] distribution of tickets of any airline. We want to be sure that if you want to buy your tickets online, AA is the most convenient, compelling Web site. If you choose to buy your tickets via travel agencies, we want to be sure our product line is fully displayed, it’s convenient, etc. This goes back to not being a niche player. When you’re the biggest airline in the world, you need to be sure your tickets are available everywhere. We sold gift cards—that was another means to distribute our product. Are gift cards the next big deal? I don’t know, but if that’s the way to get your product out, we need to be there. We want to be sure all of our travelers never have trouble finding American Airlines.