Boz
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- Nov 25, 2001
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American cuts capacity further; brings Web fares to agents
Dateline: Thursday September 26, 2002
American Airlines expects to reduce capacity in its fall schedule by an additional 1%-2% beyond the 9% cut announced in Aug., Chairman and CEO Don Carty told a group of airline analysts in New York yesterday.
"We're narrowing the supply and demand gap, but an even more important and more difficult imbalance we need to address is between our revenues and our costs," Carty stated. Currently, American's revenue premium to the industry "is far exceeded by a substantial cost premium."
Carty also announced a new program that will permit traditional "bricks-and-mortar" travel agencies to offer Web fares now available only at www.aa.com and Orbitz, the airline-owned website. Travel agencies and GDSs have argued that Orbitiz is anticompetitive because, among other things, it offers fares that are not made available through GDSs.
Under American's EveryFare program, the airline will provide agencies in the US and Canada the option to access and sell its Web fares. In exchange, the agencies will have to absorb the GDS fees associated with those fares. Initially, AA will give travel agencies an "allowance credit of about $4 per flight coupon" to cover GDS costs, with the agencies paying American for their own GDS fees. TQ3 Maritz Travel Solutions and Corporate Travel Management Group agreed to be the launch participants in the program.
"Our expectation is that EveryFare will inject some much-needed price competition among the handful of large GDS suppliers who have a stranglehold on the market right now," Carty said. "Previously, travel agencies had no incentive to shop around, as airlines bore the full brunt of the ever-escalating GDS fees." With agencies now responsible for covering this cost, they will have "every reason to seek out the GDS that provides them the best value." American paid roughly $400 million in GDS fees last year, and "our expectation is that over the next five years, this program will cut those fees in half."
Separately, American announced it raised $627 million through the sale of enhanced equipment trust certificates. The EETCs are credit-wrapped by MBIA Insurance Corp.
Dateline: Thursday September 26, 2002
American Airlines expects to reduce capacity in its fall schedule by an additional 1%-2% beyond the 9% cut announced in Aug., Chairman and CEO Don Carty told a group of airline analysts in New York yesterday.
"We're narrowing the supply and demand gap, but an even more important and more difficult imbalance we need to address is between our revenues and our costs," Carty stated. Currently, American's revenue premium to the industry "is far exceeded by a substantial cost premium."
Carty also announced a new program that will permit traditional "bricks-and-mortar" travel agencies to offer Web fares now available only at www.aa.com and Orbitz, the airline-owned website. Travel agencies and GDSs have argued that Orbitiz is anticompetitive because, among other things, it offers fares that are not made available through GDSs.
Under American's EveryFare program, the airline will provide agencies in the US and Canada the option to access and sell its Web fares. In exchange, the agencies will have to absorb the GDS fees associated with those fares. Initially, AA will give travel agencies an "allowance credit of about $4 per flight coupon" to cover GDS costs, with the agencies paying American for their own GDS fees. TQ3 Maritz Travel Solutions and Corporate Travel Management Group agreed to be the launch participants in the program.
"Our expectation is that EveryFare will inject some much-needed price competition among the handful of large GDS suppliers who have a stranglehold on the market right now," Carty said. "Previously, travel agencies had no incentive to shop around, as airlines bore the full brunt of the ever-escalating GDS fees." With agencies now responsible for covering this cost, they will have "every reason to seek out the GDS that provides them the best value." American paid roughly $400 million in GDS fees last year, and "our expectation is that over the next five years, this program will cut those fees in half."
Separately, American announced it raised $627 million through the sale of enhanced equipment trust certificates. The EETCs are credit-wrapped by MBIA Insurance Corp.
