American Airlines Cuts 2008 Capacity
American Airlines is cutting the U.S. capacity as close to as 12% and will be getting rid of 85 jets that will cause job cuts. They are hoping that this will help to counteract the fuel prices and slow demand.
AMR fell the most since September in New York trading. The reduction in domestic seating is more than twice what American had announced in April, and is the third cut in 2008. AMR also will add a $15 fee for the first checked bag.
American’s retrenchment went beyond steps taken by its peers, and comes as analysts predict possible bankruptcies among the biggest airlines amid an 84 percent jump in jet fuel in the past year. AMR said it would eliminate an undetermined number of jobs at both American Airlines and regional unit American Eagle.
The capacity cuts “might not be drastic enough,” said Roger King, a CreditSights Inc. debt analyst in New York. “When oil is this high and they’re bleeding this much cash, you have to shrink to a core market that is profitable.” AMR plunged $1.23, or 15 percent, to $6.97 at 11:17 a.m. in New York Stock Exchange composite trading. The shares touched $6.91 earlier for the biggest drop since Sept. 24.
“Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve,” Chief Executive Officer Gerard Arpey told shareholders today in Fort Worth, Texas, where AMR is based. The new baggage fee will take effect June 15, as the U.S. summer travel season gets under way. It excludes some members of American’s frequent-flier program, travelers buying full-fare tickets and passengers on international flights.