AMR Plans More Flight Cutbacks
Amid Soaring Fuel Costs
American to Charge $15 for First Checked Bag
By KEVIN KINGSBURY
May 21, 2008 10:19 a.m.

AMR Corp. announced further flight reductions at American Airlines to cope with surging fuel costs, saying fourth-quarter domestic capacity at American is now seen falling 11% to 12% from a year earlier.

The company also plans to retire at least 75 aircraft and unveiled several fees to bring in more revenue, including a $15 fee for the first checked bag on domestic flights for low-fare customers and non-frequent fliers.

The news sent shares of AMR tumbling, recently falling 14% to $7.01.

"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 U.S. economy," said Chairman and Chief Executive Gerard Arpey. "Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve."

As such, Mr. Arpey said the company "must find ways to cover the cost of providing our services so that we can remain viable and have the resources to reinvest in our company for the future."

In April, AMR said it planned domestic mainline capacity to be down 4.6% in the fourth quarter from a year earlier. Regional capacity is now seen falling 10% to 11%, not the 2% increase foreseen last month.

Mr. Arpey said the reductions aim to "significantly" cut costs "as well as create a more sustainable supply-and-demand balance." Jobs cuts will result, as might facility closures and consolidation. He added American has participated in or led 15 fare increases the past five weeks, with 14 of them being at least partially successful.

AMR plans to cut 40 to 45 jets from American, primarily MD-80s but also Airbus A300s. The regional planes to be retired include both jets and turboprops.

Being becoming the first carrier to start charging some customers for the first checked bag -- just several months after carriers began hitting some with fees on a second checked bag for the first time -- American is raising a host of other fees by $5 to $50. They are estimated to generate several hundred million dollars a year.

"While we understand that these fees affect customers, we also believe that our pricing for the services we provide remains extremely competitive in the industry and continues to offer our customers ample choice and value," said Mr. Arpey. "The bottom line is that our revenues, which include ticket sales and fees, must keep pace with our increasing costs."


http://online.wsj.com/article/SB121137763935210567.html

 

What's the old adage, you can feel safe when 10% of the employee group is behind you? Now it begins. NWA just had nearly 70 displacements for August.

 

To think that AA was making progress through the Furlough list too. This just sucks. Will this cause furloughs at AA or will retirements cover this?

Good luck to all

 

Sadly, IMO unless oil prices retreat, I think it's going to get much worse.

I'd love to be wrong.

 

Makes me think back to the millions and millions of dollars in bonuses management took just a few years ago. Now they keep their salaries while cutting the work force or pay or god only knows.

 

Well, not good news at all. But let's take a look at the numbers. The latest status 15 report (AMR lingo for seniority list) shows 10.35 pilots for every MD-80. The press release indicated a fleet reduction of 40-45 MD-80's, or 465 pilot jobs at risk. What the press release fails to mention, is that AMR is still planning to take delivery of 34 737's in 2009 and 36 in 2010. The plan still remains to swap those out 1 for 1 (mostly) with MD-80's. What remains to be seen is whether these aircraft groundings are an acceleration of the MD-fleet retirement, or a permanent reduction. Remember, the 11-12% is for the FOURTH QUARTER, overall annual mainline reduction is 3-4 %.

The plan before this announcement was to have a net gain in aircraft by the end of 2009, all they are really doing is flattening out the growth and using large numbers in a single quarter to increase the physiological effect. It's an old AMR trick.

My guess is that furlough recalls will be stop for a while, but I doubt we will see outright furloughs this year. JMHO.

 

A very strategic omission...must be contract negotiation time...bastards.

 

Thanks for the reply!

 

a few years ago and
a couple years ago and
last year and
this year

7576FO

 

and next year and