Record fuel prices force American Airlines to cut 300 flights a day

American Airlines, a wholly owned subsidiary of the AMR Corporation, the United States, has announced a drastic reduction in the number of flights in the face of record-high fuel prices.

The cut in the number of flights announced on May 21, 2008, is almost double what American Airlines had forecast just a month ago, according to reports in the US media.

The move would mean abolition of at least 300 flights a day from a total of 4,300 flights that American Airlines and its regional affiliates operate.

It will also result in over 6,000 people losing jobs. Taking into account part-time workers, AMR Corporation had about 95,000 employees as of May 1, 2008, according to a statement from the company.

American Airlines also plans to retire 85 mainline and regional aircraft.

In all, 45 planes will be discarded from the American Airlines’ fleet – most of them aging Boeing MD-80s. The company’s Eagle regional unit will get rid of 40 jets, resulting in the Eagle’s capacity falling by 11%.

American Airlines – headquartered in Fort Worth, Texas, adjacent to the Dallas-Fort Worth International Airport – is the world’s largest airline in total passengers-miles transported as well as passenger fleet size, the second-largest airline in terms of aircraft operated, and the second-largest airline company in the world in terms of total operating revenues.

With the cut in the number of flights taking effect, American Airlines will get smaller by 7% to 8% in the fourth quarter of 2008 than it was in the last 3 months of 2007, the website usatoday.com has reported.

And, most of the reduction will take place in the domestic market, where the mainline capacity of American Airlines’ will come down by about 12%. Further reduction in capacity are possible late in 2008 or in 2009, the website quoted a spokesman for American Airlines as saying.

The only bigger cut in capacity in the history of American Airlines occurred in the fourth quarter of 2001 in the aftermath of the September 11 terror attacks. At that time, the capacity had dropped by 13.6% as measured by available seat miles.

American Airlines had, on May 21, 2008, announced measures to reduce expenses and increase revenue, including a new charge of $15 to check a single bag.

Gerard Arpey, chief executive officer of AMR Corporation, parent company of American Airlines, was quoted by the website usatoday.com as saying: “Persistently high and rising fuel prices means that American Airlines and other carriers simply cannot afford to sit by hoping for industry and market conditions to improve. When AMR announced a first-quarter loss of $328 million on April 16, 2008, oil was about $105 a barrel. Since then, oil has soared nearly a third higher, closing at $133.17 on May 21, 2008.”

James May, president of Air Transport Association, the trade organisation representing the major airlines in the United States, had told a recent industry meeting in Washington, D.C: “Carriers in the United States are likely to cut flights this fall by as much as 20%.  We cannot continue to fly unprofitable routes and continue to lose money. We are going to lay down some planes. We are going to eliminate some unprofitable routes. The load factors will go up from even the very high 85% levels that they are at today.”

Analysts predict that bankruptcies among major airlines are possible in the face of a whopping 84% rise in the prices of jet fuel in the past year.