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AMR-huge domestic fleet capacity reduction, $15 fee first checked bag... (consol)

AMR-huge domestic fleet capacity reduction, $15 fee first checked bag... (consol)

 
Old May 21, 08, 7:40 am
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AMR-huge domestic fleet capacity reduction, $15 fee first checked bag... (consol)

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.


"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 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.

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.

Last edited by lehms; May 21, 08 at 8:09 am
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Old May 21, 08, 7:46 am
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Not surprised by the capacity cuts -- demand obviously will fall as airfares rise to cover fuel cost.

I am a bit surprised by the charge for the FIRST domestic bag. I think this makes plenty of business sense, though, and I expect all the legacy carriers to adopt it in the near future.
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Old May 21, 08, 7:47 am
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$15 Fee for 1st Checked Bag

Not like everyone didn't see this coming, but in conjunction with fleet reductions, comes this little gem. As if overheads weren't crammed enough...

http://www.tradethenews.com/stock/ne...orp/AMR/400373
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Old May 21, 08, 7:47 am
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Last edited by Thrillington; May 21, 08 at 7:51 am Reason: Original post amended
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Old May 21, 08, 7:47 am
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Link?

A 12% capacity reduction will surely result in cities being dropped, not mere reductions in frequency.
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Old May 21, 08, 7:51 am
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This certainly does not make sense based on the loads I am seeing on my flights. Some recent routes for me have been SNA-DFW-JAX, JAX-STL-SNA, JAX-ORD-SNA, SNA-DFW-OMA, OMA-STL-SNA.

Every single one of these flights had at most 1-2 empty seats on the entire plane!
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Old May 21, 08, 7:53 am
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Originally Posted by riteshraja View Post
This certainly does not make sense based on the loads I am seeing on my flights. Some recent routes for me have been SNA-DFW-JAX, JAX-STL-SNA, JAX-ORD-SNA, SNA-DFW-OMA, OMA-STL-SNA.

Every single one of these flights had at most 1-2 empty seats on the entire plane!
Doesn't mean anything. Many routes at $130 per barrel fuel are not profitable at current fare levels even if 150% full, much less 95%.
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Old May 21, 08, 7:56 am
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Originally Posted by 3Cforme View Post
Link?

A 12% capacity reduction will surely result in cities being dropped, not mere reductions in frequency.
I wonder exactly what kind of fare increases this means -- I wonder how much higher will they go.
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Old May 21, 08, 7:57 am
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Originally Posted by riteshraja View Post
This certainly does not make sense based on the loads I am seeing on my flights. Some recent routes for me have been SNA-DFW-JAX, JAX-STL-SNA, JAX-ORD-SNA, SNA-DFW-OMA, OMA-STL-SNA.

Every single one of these flights had at most 1-2 empty seats on the entire plane!
Routes like DFW-SNA, ORD-SNA, etc will probably not see reduction. It will probably have more of an effect on routes that are typically light. You'll also see a downgrade in service on many routes to Eagle from Mainline. It also means that certain routes upgrades will be harder to come by or just disappear altogether.

Does anyone know which type of planes will be retired?
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Old May 21, 08, 7:58 am
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On AA.com it says the first bag is free and the second is $25 (usual GOLD, PLT, EXP and full Y exclusions apply). Anyone know which it is, $15 for the first or $25 for the second?
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Old May 21, 08, 7:59 am
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Originally Posted by riteshraja View Post
This certainly does not make sense based on the loads I am seeing on my flights. Some recent routes for me have been SNA-DFW-JAX, JAX-STL-SNA, JAX-ORD-SNA, SNA-DFW-OMA, OMA-STL-SNA.

Every single one of these flights had at most 1-2 empty seats on the entire plane!
Full planes do not equate to profitablity. At current fuel prices, proably 80% of domestic flights are unprofitable. What AA is doing is deciding not fly routes that are least profitable to stem the cash flow drain.

Current estiamtes show that AA will run out of cash by the end of 09 unless drastic action is taken.
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Old May 21, 08, 8:00 am
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Originally Posted by chsb View Post
Routes like DFW-SNA, ORD-SNA, etc will probably not see reduction. It will probably have more of an effect on routes that are typically light. You'll also see a downgrade in service on many routes to Eagle from Mainline. It also means that certain routes upgrades will be harder to come by or just disappear altogether.

Does anyone know which type of planes will be retired?
MD-80s and A300s

Link
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Old May 21, 08, 8:00 am
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Originally Posted by riteshraja View Post
This certainly does not make sense based on the loads I am seeing on my flights. Some recent routes for me have been SNA-DFW-JAX, JAX-STL-SNA, JAX-ORD-SNA, SNA-DFW-OMA, OMA-STL-SNA.

Every single one of these flights had at most 1-2 empty seats on the entire plane!
Right, flights are packed. But they are not covering the cost of fuel. It now costs more than $100 in fuel alone to fly a seat across the country.

Unit revenue is going to have to rise 20% to cover these crazy fuel prices. Even if the oil bubble doesn't plunge the economy into recession, you're going to get a significant drop off in customers (particularly leisure customers) when you raise fares another 20 or 25 percent. That's what the airlines are planning for. There's really not any alternative, until the oil speculation stops.
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Old May 21, 08, 8:03 am
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Waived for elites.
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Old May 21, 08, 8:04 am
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in the "how does this impact me" department...as an elite it is waived for the first bag, but what about the second bag? that charge, which was fairly new, was (i believe) waived for elites, will it still be?
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