AA and AE to park planes....

stillageek

stillageek

Well-Known Member
Guess I will hold off on buying some new uniform slacks.

http://biz.yahoo.com/prnews/080521/law515.html?.v=7

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]ADVERTISEMENT[/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.
 
yeah my local grocery store decided because the cost of doing business was too high they are going to stop selling food! :banghead::banghead::banghead:
here is a novel idea maybe CHARGE MORE for the tickets! These people never cease to amaze me!
Ok so maybe you loose a little business to JB or SWA if you raise the ticket price, you dont think you will loose business if you stop carrying PAYING customers?

Then again, the funny thing is every one talks about SWA as a low cost carrier. I have not flown SWA for some time now, because they always cost more then the others!

I just flew AA and they were way cheaper then SWA!:confused:
 
It's lose, not loose.

And by flying the cheapest airline, you're proving exactly what the airlines are saying. So congratulations, Mr. Bar-lowerer.

The solution is not "raise prices" and everyone who thinks so must have failed economics.
 
Chris_Ford said:
It's lose, not loose.

And by flying the cheapest airline, you're proving exactly what the airlines are saying. So congratulations, Mr. Bar-lowerer.

The solution is not "raise prices" and everyone who thinks so must have failed economics.
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man take it easy chris! bar lowerer and all. come on man
 
Chris_Ford said:
It's lose, not loose.

And by flying the cheapest airline, you're proving exactly what the airlines are saying. So congratulations, Mr. Bar-lowerer.

The solution is not "raise prices" and everyone who thinks so must have failed economics.
Click to expand...

Same could be said for those who fail to realize that the cost of your raw goods has increased significantly YTD, yet the price you're selling your services to has sat still. $130/bbl today.

No wonder you're not making money.
 
http://online.wsj.com/article/SB121138491732610943.html?mod=googlenews_wsj

After AMR, the Deluge
What to Expect as Airlines Cope With Soaring Fuel Costs

By SCOTT MCCARTNEY

Before you get too upset about airlines slapping a $15 fee to check just one piece of luggage one way, know this: Oil prices are just killing airlines.

AMR Corp.'s American Airlines today said it will begin charging $15 for the first bag checked beginning June 15. Elite-level members of its frequent-flier program, full-fare passengers and international travelers are exempt, but that leaves yet another shock at the check-in counter for summer travelers.

You can expect other airlines to follow suit – they are paying billions, yes billions, of added dollars in higher fuel prices. The change in oil prices from a year ago to today translates into $24.6 billion in added fuel costs for passengers and cargo airlines on an annualized basis, according to the Air Transport Association. That's more than the industry has ever earned; the best year for profits at U.S. passenger and cargo airlines was 1999, with net earnings of $5.3 billion.

So it's little surprise that airlines are anxious to try anything to raise additional dollars. We saw the same parade earlier this year when UAL Corp.'s United Airlines announced a fee to charge a second bag -- $25 each way -- and US Airways Group Inc. quickly followed suit, followed by most other big carriers.

The notable exception are some of the big discount airlines, further creating a divide between how big network airlines are trying to cover fuel costs without raising ticket prices to the levels needed (and risking a huge drop in ticket-buying), and how some of the discounters are faring.

Southwest Airlines Co. has the luxury of extensive hedges on the price of oil bought when prices were much lower. Southwest had the cash and good credit to make big bets on oil, and Chief Executive Gary Kelly was smart enough to figure there was a good chance oil prices were going higher. So Southwest isn't charging fees on a first or a second checked bag.

But Southwest may end up being the lone exception, because the airline industry is going to have to make massive change if oil prices stay this high. Today, airlines are living off the cash reserves they built up over the past several years, and any additional capital they can raise by selling off assets or borrowing more against aircraft. That can only last so long. Many analysts don't expect big bankruptcies this year, though there may be more small carriers succumbing. Instead, next year may be when the cash really starts running out.

It's very difficult for airlines to simply raise prices to levels that cover their higher fuel costs. Raising prices chokes demand: If tickets get too expensive, business travelers make alternate plans, pick cheaper airlines or buy discounted tickets further in advance. For vacationers, if prices get too high, they don't buy or they switch to cheaper destinations. Airlines can price themselves right out of a sale.

So to avoid that, carriers have been slap-happy with fees added at the airport, not at the ticket purchase point. A family heads off to Disney because they got a good fare – then find themselves paying $300 extra at the airport in baggage fees. Fees are essentially fare increases that airlines hope won't choke demand.

But slapping fees on customers here, there and everywhere won't solve the problem. Airlines will have to make big cuts in capacity, eliminating flights that just aren't profitable with oil at $130 a barrel (as of Wednesday morning). Fewer flights means skimpier schedules for many travelers. More important, it means higher fares. The price of flying has to go up if airlines are to survive.

Some may not survive, and instead of reorganizing in bankruptcy court, they may have to liquidate. That would actually be healthy for the industry – take the weakest competitor out and the survivors can raise prices back to where they may be able to make a profit or two.

For now, we'll see more capacity-cut announcements. American said it will shrink its mainline domestic schedule in the fourth quarter this year by 11% to 12%. It had previously planned a 4.6% domestic reduction in the fourth quarter. American said it will retire about 75 jets – some regional jets, plus some wide-body A300s and some aging MD-80s narrow-body planes, the workhorse of its domestic fleet.

That reduction means layoffs for pilots, flight attendants and others at American. It also sends a signal to other airlines to shrink their fleets as well. More announcements are likely. And at the same time, we may see opportunistic airlines with lower cost structures increase capacity, accelerating the long-term shift in the airline business from higher-cost carriers to lower-cost carriers. For the benefit of consumers and the U.S. economy, the industry has to get more efficient.

Eventually, we'll get closer to the point where the industry can make money even at higher prices because it has raised prices, shrunk capacity and shifted more service to lower-cost airlines. But the airline industry historically has always flown more capacity than can sustain healthy profits. Established airlines do much better when they grow; new entrants can always find new money and airplanes to fly and routes where they think they can make money. Airlines have to make huge long-term investments, and yet ticket-buying and travel trends are relatively short-term. It's a very, very difficult business. Its problems may never be "solved."

This much is true: There will always be airlines. They just may have different names. (And for now, higher fares and fees.)

Write to Scott McCartney at middleseat@wsj.com
Click to expand...
 
Chris_Ford said:
The solution is not "raise prices" and everyone who thinks so must have failed economics.
Click to expand...
Ok, Mr. Economist, what then do you think Arpey had in mind when he said the capacity cuts were partly to "...create a more sustainable supply-and-demand balance...", hmmm?

They're all going to restrict supply of seats til they equal (or perhaps even fall short of) demand. Clearly, the intent is to de-commoditize air travel, the logic being that when airline seats are no longer freely available, pax will have to pay more or book wayyy in advance. It's Econ 101.
 
aloft said:
Ok, Mr. Economist, what then do you think Arpey had in mind when he said the capacity cuts were partly to "...create a more sustainable supply-and-demand balance...", hmmm?

They're all going to restrict supply of seats til they equal (or perhaps even fall short of) demand. Clearly, the intent is to de-commoditize air travel, the logic being that when airline seats are no longer freely available, pax will have to pay more or book wayyy in advance. It's Econ 101.
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So much for me being on your ignore list, huh.

I was responding to the comment that basically said "instead of parking airplanes, just raise prices"

Parking airplanes will, like you said, decrease supply and thus redistribute price equilibrium.

However, what you're saying right now is that supply exceeds demand. It clearly does not. Airplanes are going out 90+% full, and I'd venture to say that last 10% in unattainable, so right now supply meets demand. What the airlines need to do to remain solvent is basically the same as what OPEC does. Cut supply to increase price, which is what AA is doing.
 
Letter 3 has expired so American pilots will be furloughed vice flowing back to Eagle. Eagle has nearly 3000 pilots and if we do a 10% reduction that could be apprx 300 pilots on the street; however, Eagle said only a week ago that we were still 200 pilots short. Perhaps we will not have to furlough anyone and we will just reduce ourselves to proper staffing levels. I wonder how long until the details are revealed to us on how this is going to play out system wide. Good luck all my brothers and sisters... rough air ahead!
 
Thank you for pointing out the typo, by the way lowerer is NOT a word!

A consumer obviously looks for the best deal, how is that a bar "lowerer"?


I guess you go to the highest cost providers for all your needs?
 
mooneyguy said:
Thank you for pointing out the typo, by the way lowerer is NOT a word!

A consumer obviously looks for the best deal, how is that a bar "lowerer"?
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Then what is the proper name for one who lowers a bar? There isn't one. So I made one using a logical format. Lose vs loose is a lack of grammatical knowledge on your part

I guess you go to the highest cost providers for all your needs?
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You're speaking out of both sides of your mouth. You're saying "Raise prices!" but then "I go with the lowest price!"

Your loyalty is nonexistent. You'd fly Mexicana if it were $1 cheaper than AA or SWA.
 
I agree....seats will go down, fares up, delays down, pissed off passengers down, regional mins up........

Might not be a bad thing in the long run. Too bad its going to hurt in the short run though.
 
Might not be a bad thing in the long run. Too bad its going to hurt in the short run though.
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It is a bad thing in the long and short run however you put it for those of us who are on the possible furlough list...
 
Ha, sweet! Looks like I picked a great time to get into aviation. Learning costs increasing, pilot jobs decreasing and pilot salaries decreasing. WOOOO HOOOOOO!! :banghead:

Best part, the industry I was working in is also laying people off!

Oh well. Can't change the past, can only work towards the future!

I wish all those who are faced with possible furlough the best.
 
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