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CNBC reports AMR to cut domestic capacity 10-12%.
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BigMotorToter
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Press ReleaseSource: AMR Corporation
AMR Corporation Announces Significant Capacity Reductions, Aircraft Retirements and Additional Revenue Growth Efforts
Wednesday May 21, 9:37 am ET Actions Taken in Response to Record Fuel Prices, Economic Concerns and a Difficult Competitive Environment
FORT WORTH, Texas, May 21 /PRNewswire-FirstCall/ -- AMR Corporation, the parent company of American Airlines, Inc., today announced significant reductions to its 2008 domestic flight schedule, including a fourth quarter mainline domestic capacity reduction of 11 percent to 12 percent from the previous year. It also outlined plans to retire at least 75 mainline and regional aircraft and unveiled several revenue growth initiatives, as the company responds to record fuel prices, growing concerns about the economy and a difficult competitive environment.
[SIZE=-2][/SIZE]
"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 AMR Chairman and CEO Gerard Arpey. "Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve. We must work to overcome our near-term challenges and to secure our company's long-term future for the benefit of our shareholders, customers and employees. We 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. Those goals are central to the actions we are outlining today."
Additional 2008 Capacity Reductions
AMR, which is holding its Annual Meeting of Shareholders today, said it will reduce American Airlines domestic capacity -- or available seat miles flown -- in the fourth quarter of 2008 by 11 percent to 12 percent, compared to the fourth quarter of 2007. According to its April 16 guidance, AMR previously expected domestic mainline capacity in the fourth quarter to decline by 4.6 percent compared to the same period in 2007.
In addition, AMR regional affiliate capacity is expected to decline by 10 percent to 11 percent in the fourth quarter compared to fourth quarter 2007 levels. Previously, regional affiliate capacity in the fourth quarter was expected to increase by 2.0 percent from 2007 levels.
AMR continues to assess the impact of the capacity reductions on specific routes and markets. (For additional information regarding AMR capacity changes for 2008, refer to the table at the end of the release.)
Arpey said the capacity reductions aim to significantly reduce costs as well as create a more sustainable supply-and-demand balance in the market. In recent years, Arpey added, the industry has been hurt by some airlines growing faster than conditions warranted, and that impact has worsened in light of recent economic trends and soaring fuel prices.
As a result of significantly reduced flying, AMR expects to retire 40 to 45 mainline aircraft from American's fleet, the majority of which will consist of MD-80s but will also include some Airbus A300 aircraft. The capacity reductions will also result in the retirement of 35 to 40 regional jets, as well as a number of turbo-prop aircraft from AMR's regional affiliate fleet.
The capacity changes will result in workforce reductions at both American Airlines and American Eagle Airlines and could result in facility closures or facility consolidation. AMR is assessing the scope and location-specific impact of any workforce reductions resulting from the capacity reductions. In addition, AMR is assessing the impact of these capacity reductions on its overall cost outlook.
Additional Revenue Initiatives
Beyond the company's ongoing cost-containment efforts, Arpey noted that AMR has consistently sought revenue improvements through fare increases and fuel surcharges. Since AMR released its first quarter 2008 financial results on April 16, American has participated in or led 15 fare increases, 14 of which were at least partially successful.
Today, American introduced a $15 fee for the first checked bag, given the increasing costs of transporting checked baggage. This fee, which is effective for tickets purchased on or after June 15, does not apply to: American's AAdvantage program members who have achieved AAdvantage Gold, AAdvantage Platinum and AAdvantage Executive Platinum level; those who have purchased full-fare tickets in the Economy, Business and First Class cabins; and those with international itineraries (except to and from Canada and U.S. territories, such as Puerto Rico and the U.S. Virgin Islands).
American also said today that it has increased its fees for certain other services, ranging from reservation service fees to pet and oversized bag fees. The increases mostly range from $5 to $50 per service. The company estimates that new and increased fees announced this month will generate several hundred million dollars in incremental annual revenue.
"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," Arpey said. "The bottom line is that our revenues, which include ticket sales and fees, must keep pace with our increasing costs."
As evidence of the crisis caused by soaring fuel prices, Arpey cited the U.S. airline industry's first quarter 2008 pre-tax loss of nearly $2 billion excluding special items and the fact that eight U.S. airlines that have filed for bankruptcy protection this year, including five that have ceased service. AMR paid $665 million more for fuel in the first quarter than it would have paid at prices from the year-ago period. Its first quarter fuel expense increased by 45 percent year over year, while its total revenue increased by 5 percent. The price of jet fuel has increased by more than 10 percent since April 16, when AMR expected its 2008 fuel bill would be well over $6 billion higher than in 2003.
However, Arpey also noted that AMR has made much progress in recent years to better prepare it for the current uncertainty. At the end of the first quarter of 2008, the company's Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $15.2 billion, down more than 25 percent from the end of 2002. AMR's Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $10.7 billion at the end of the first quarter of 2008, down more than 40 percent from the end of 2002. AMR also ended the first quarter with $4.9 billion in cash and short-term investments, including a restricted balance of $426 million. It had about $2.7 billion in total cash and short-term investments, including a restricted balance of $783 million, at the end of 2002.
"Clearly, we have a lot of hard work ahead of us given the economicrealities we face," Arpey said. "But we have battled through many challengesthroughout our long history, and, with the continued dedication of ourleadership team and our people, I believe we have the fortitude to continue todo so."
2008 Expected April 16 Capacity May 21 Guidance Guidance/ (year over (expected range) Expectations year change)
4Q08 FY2008 4Q08 FY2008 System -8% to -7% -3.5% to -2.5% -1.9% -1.4% Mainline Domestic -12% to -11% -6% to -5% -4.6% -3.6% International -0.5% to 0.5% 1% to 2% 3.0% 2.5% Regional System -11% to -10% -6.5% to -5.5% 2.0% -2.1% Consolidated System -8% to -7% -4% to -3% -1.6% -1.5%
AMR Corporation Announces Significant Capacity Reductions, Aircraft Retirements and Additional Revenue Growth Efforts
Wednesday May 21, 9:37 am ET Actions Taken in Response to Record Fuel Prices, Economic Concerns and a Difficult Competitive Environment
FORT WORTH, Texas, May 21 /PRNewswire-FirstCall/ -- AMR Corporation, the parent company of American Airlines, Inc., today announced significant reductions to its 2008 domestic flight schedule, including a fourth quarter mainline domestic capacity reduction of 11 percent to 12 percent from the previous year. It also outlined plans to retire at least 75 mainline and regional aircraft and unveiled several revenue growth initiatives, as the company responds to record fuel prices, growing concerns about the economy and a difficult competitive environment.
[SIZE=-2][/SIZE]
"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 AMR Chairman and CEO Gerard Arpey. "Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve. We must work to overcome our near-term challenges and to secure our company's long-term future for the benefit of our shareholders, customers and employees. We 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. Those goals are central to the actions we are outlining today."
Additional 2008 Capacity Reductions
AMR, which is holding its Annual Meeting of Shareholders today, said it will reduce American Airlines domestic capacity -- or available seat miles flown -- in the fourth quarter of 2008 by 11 percent to 12 percent, compared to the fourth quarter of 2007. According to its April 16 guidance, AMR previously expected domestic mainline capacity in the fourth quarter to decline by 4.6 percent compared to the same period in 2007.
In addition, AMR regional affiliate capacity is expected to decline by 10 percent to 11 percent in the fourth quarter compared to fourth quarter 2007 levels. Previously, regional affiliate capacity in the fourth quarter was expected to increase by 2.0 percent from 2007 levels.
AMR continues to assess the impact of the capacity reductions on specific routes and markets. (For additional information regarding AMR capacity changes for 2008, refer to the table at the end of the release.)
Arpey said the capacity reductions aim to significantly reduce costs as well as create a more sustainable supply-and-demand balance in the market. In recent years, Arpey added, the industry has been hurt by some airlines growing faster than conditions warranted, and that impact has worsened in light of recent economic trends and soaring fuel prices.
As a result of significantly reduced flying, AMR expects to retire 40 to 45 mainline aircraft from American's fleet, the majority of which will consist of MD-80s but will also include some Airbus A300 aircraft. The capacity reductions will also result in the retirement of 35 to 40 regional jets, as well as a number of turbo-prop aircraft from AMR's regional affiliate fleet.
The capacity changes will result in workforce reductions at both American Airlines and American Eagle Airlines and could result in facility closures or facility consolidation. AMR is assessing the scope and location-specific impact of any workforce reductions resulting from the capacity reductions. In addition, AMR is assessing the impact of these capacity reductions on its overall cost outlook.
Additional Revenue Initiatives
Beyond the company's ongoing cost-containment efforts, Arpey noted that AMR has consistently sought revenue improvements through fare increases and fuel surcharges. Since AMR released its first quarter 2008 financial results on April 16, American has participated in or led 15 fare increases, 14 of which were at least partially successful.
Today, American introduced a $15 fee for the first checked bag, given the increasing costs of transporting checked baggage. This fee, which is effective for tickets purchased on or after June 15, does not apply to: American's AAdvantage program members who have achieved AAdvantage Gold, AAdvantage Platinum and AAdvantage Executive Platinum level; those who have purchased full-fare tickets in the Economy, Business and First Class cabins; and those with international itineraries (except to and from Canada and U.S. territories, such as Puerto Rico and the U.S. Virgin Islands).
American also said today that it has increased its fees for certain other services, ranging from reservation service fees to pet and oversized bag fees. The increases mostly range from $5 to $50 per service. The company estimates that new and increased fees announced this month will generate several hundred million dollars in incremental annual revenue.
"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," Arpey said. "The bottom line is that our revenues, which include ticket sales and fees, must keep pace with our increasing costs."
As evidence of the crisis caused by soaring fuel prices, Arpey cited the U.S. airline industry's first quarter 2008 pre-tax loss of nearly $2 billion excluding special items and the fact that eight U.S. airlines that have filed for bankruptcy protection this year, including five that have ceased service. AMR paid $665 million more for fuel in the first quarter than it would have paid at prices from the year-ago period. Its first quarter fuel expense increased by 45 percent year over year, while its total revenue increased by 5 percent. The price of jet fuel has increased by more than 10 percent since April 16, when AMR expected its 2008 fuel bill would be well over $6 billion higher than in 2003.
However, Arpey also noted that AMR has made much progress in recent years to better prepare it for the current uncertainty. At the end of the first quarter of 2008, the company's Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $15.2 billion, down more than 25 percent from the end of 2002. AMR's Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $10.7 billion at the end of the first quarter of 2008, down more than 40 percent from the end of 2002. AMR also ended the first quarter with $4.9 billion in cash and short-term investments, including a restricted balance of $426 million. It had about $2.7 billion in total cash and short-term investments, including a restricted balance of $783 million, at the end of 2002.
"Clearly, we have a lot of hard work ahead of us given the economicrealities we face," Arpey said. "But we have battled through many challengesthroughout our long history, and, with the continued dedication of ourleadership team and our people, I believe we have the fortitude to continue todo so."
2008 Expected April 16 Capacity May 21 Guidance Guidance/ (year over (expected range) Expectations year change)
4Q08 FY2008 4Q08 FY2008 System -8% to -7% -3.5% to -2.5% -1.9% -1.4% Mainline Domestic -12% to -11% -6% to -5% -4.6% -3.6% International -0.5% to 0.5% 1% to 2% 3.0% 2.5% Regional System -11% to -10% -6.5% to -5.5% 2.0% -2.1% Consolidated System -8% to -7% -4% to -3% -1.6% -1.5%
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Max Powers
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http://www.kbb.com/kbb/OtherVehicle...iceType=Retail&ManufacturerId=213&YearId=2001
By Kyle Peterson
FORT WORTH, Texas (Reuters) - American Airlines said on Wednesday it plans to cut jobs, retire old planes and slash domestic capacity by 11 percent to 12 percent in the fourth quarter as fuel prices reach record highs and the weak U.S. economy saps air travel demand.
The world's largest airline, owned by AMR Corp, also said it would charge $15 for passengers' first checked bag starting in mid-June, an unprecedented move by a major U.S. airline as it tries to claw back more of its extra fuel costs.
American said it would take at least 75 mainline and regional aircraft out of its aging fleet, the biggest scaling back of the carrier's services since the attacks of September 11, 2001. It did not say how many jobs would be cut.
In the last two years, most U.S. carriers have removed capacity from less profitable domestic routes and introduced charges for checking extra bags as they try to keep up with rising fuel costs and fierce competition.
In March, Delta Air Lines Inc said it would cut 2,000 jobs and reduce domestic capacity by 5 percent, on top of a 5 percent cut already planned, for a year-on-year decrease of about 10 percent.
In April, Northwest Airlines Corp -- which has agreed to be bought by Delta -- announced its own plan to take some older planes out of service and cut domestic capacity by about 5 percent.
(Reporting by Kyle Peterson; writing by Bill Rigby, editing by Gerald E. McCormick and John Wallace)
By Kyle Peterson
FORT WORTH, Texas (Reuters) - American Airlines said on Wednesday it plans to cut jobs, retire old planes and slash domestic capacity by 11 percent to 12 percent in the fourth quarter as fuel prices reach record highs and the weak U.S. economy saps air travel demand.
The world's largest airline, owned by AMR Corp, also said it would charge $15 for passengers' first checked bag starting in mid-June, an unprecedented move by a major U.S. airline as it tries to claw back more of its extra fuel costs.
American said it would take at least 75 mainline and regional aircraft out of its aging fleet, the biggest scaling back of the carrier's services since the attacks of September 11, 2001. It did not say how many jobs would be cut.
In the last two years, most U.S. carriers have removed capacity from less profitable domestic routes and introduced charges for checking extra bags as they try to keep up with rising fuel costs and fierce competition.
In March, Delta Air Lines Inc said it would cut 2,000 jobs and reduce domestic capacity by 5 percent, on top of a 5 percent cut already planned, for a year-on-year decrease of about 10 percent.
In April, Northwest Airlines Corp -- which has agreed to be bought by Delta -- announced its own plan to take some older planes out of service and cut domestic capacity by about 5 percent.
(Reporting by Kyle Peterson; writing by Bill Rigby, editing by Gerald E. McCormick and John Wallace)
AA717driver
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TC
I think the 1st checked bagg should be a freebie. That is a little rediculous to charge someone for traveling with luggage. maybe they should have an option of a carry on OR checked bag. Most of those carry on bags should be down below as it is, this will only make it worse. I would think it may hurt on time performace as well...now your going to have everybody looking for an overhead bin. Thats almost like a car salesman saying to you you can have the car for this price but the first wheel is x amount and each additional wheel is xx amount. Seems like a desperate attempt by management to make money.
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GOULET!
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Big Slick
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American Cuts US Flights; Airline Stocks Plummet
American Airlines said it plans to cut domestic capacity by 11 percent to 12 percent this year as fuel prices reach record highs and the weak U.S. economy casts a shadow over the summer travel season.
The cut would be the largest for American Airlines, owned by AMR Corp since the drastic scaling back of air travel after the attacks of September 11, 2001. AMR stock was briefly halted before the announcement. When trading resumed, it plunged 10%. Other airline stocks, including United Airlines also fell sharply American had previously expected fourth-quarter capacity to fall 4.6 percent from the same period in 2007.
The carrier also said it expects to retire 45 to 50 planes from its fleet, most of them gas-guzzling MD-80 aircraft. Those were the plane grounded for faulty wiring last month.
American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year.
American Airlines said it plans to cut domestic capacity by 11 percent to 12 percent this year as fuel prices reach record highs and the weak U.S. economy casts a shadow over the summer travel season.
The cut would be the largest for American Airlines, owned by AMR Corp since the drastic scaling back of air travel after the attacks of September 11, 2001. AMR stock was briefly halted before the announcement. When trading resumed, it plunged 10%. Other airline stocks, including United Airlines also fell sharply American had previously expected fourth-quarter capacity to fall 4.6 percent from the same period in 2007.
The carrier also said it expects to retire 45 to 50 planes from its fleet, most of them gas-guzzling MD-80 aircraft. Those were the plane grounded for faulty wiring last month.
American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year.
JumpJetter
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Agree with wahoo2. I wonder if AMR figures they can "sneak" the price in on people. What I mean is, when you raise ticket prices, the revenue guys at the airline will tell you you can see the impact on bookings almost immediately. If you have already bought the ticket and show up and AA says "that'll be $15 for the bag". What are you gonna do, say no? You are kinda stuck. I think that's the strategy. IMHO
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jj
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Max Powers
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checking a bag is a service which has a cost. European's charge for checked bags. They also have a 4 dollar plus gas tax compared to our .26 cents. And guess what they don't waste gas in their Yukons or F-150s and because of that their airlines are all profitable. Just think if we put a gas tax out there to change peoples behaviors, the demand for gas would plummet in 10 years and the airlines would be fat on cash.
regionalcap
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Today, American introduced a $15 fee for the first checked bag, given the increasing costs of transporting checked baggage. This fee, which is effective for tickets purchased on or after June 15,
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