American Airlines amr bowed even more deeply Wednesday to the reality of record high fuel prices by announcing steep cuts in flying this fall.
The reductions — almost double what American forecast only a month ago — will likely mean elimination of at least 300 flights a day from the 4,300 that it and its regional affiliates offer. That will also likely lead to elimination of more than 6,000 jobs. The company plans to retire at least 75 mainline and regional aircraft.
The world's largest airline will be 7% to 8% smaller in the fourth quarter than it was in the last three months of 2007. Most of that reduction will come in the domestic market, where American's mainline capacity will be down 11% to 12%. Further capacity cuts are possible late this year or in 2009.
The only bigger capacity cut in American's history came in 2001's fourth quarter in the aftermath of the Sept. 11 terror attacks. Capacity fell 13.6% as measured by available seat miles.
American also announced steps Wednesday to boost revenue, including a new charge of $15 to check a single bag.
CEO Gerard Arpey said persistently high and rising fuel prices means that American and other carriers "simply cannot afford to sit by hoping for industry and market conditions to improve." When AMR, American's parent, announced a first-quarter loss of $328 million on April 16, oil was about $105 a barrel, Arpey said. Since then, oil has soared nearly a third higher, closing Wednesday at $133.17.
American, he said, isn't the only carrier that will continue to make major changes, as a result. "The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak economy," Arpey said.
James May, president of the industry's trade group, the Air Transport Association, said at an industry gathering in Washington, D.C., that other U.S. carriers are likely to cut flights this fall by as much as 20%.
"We cannot continue to fly unprofitable routes and continue to lose money," May said. "We are going to lay down some planes. We are going to eliminate some unprofitable routes. The load factors will go up from even the very high 85% levels that they are at today."
AMR shares lost 24% of their value to close at $6.22. UAL uaua, parent of United, lost 29.5% of its value to close at $8.15, down from its October peak of $51.60. Continental Airlines cal fell 13% to $14.20, and Delta Air Lines dal fell 16.4% to $5.77. Southwest luv shares lost 4.4% to close at $12.43.
Contributing: Alan Levin in Washington, D.C.