American reveals details of cutbacks;
La Guardia and St. Louis will suffer most

Image: American Airlines capacity cuts
We’re off – eight airports will lose all their American Airlines/Eagle services in its just-announced capacity cuts. But as maintains: one airline’s dropped route will be good news for any airlines flying the same route …

Logo: AMR

The world’s largest airline provided more details this week of how it aims to achieve the capacity reductions it previously announced in the last quarter of 2008. A total of eight airports will lose American or American Eagle operations completely. American will withdraw from Oakland (dropping its thrice daily Dallas/Fort Worth service), London Stansted (dropping its New York JFK service for the second time in the airline’s history) and Barranquilla in Colombia.

American Eagle will terminate services from Albany, Providence, Harrisburg, Samana (in the Dominican Republic) and San Luis Obispo.

New York LGA and St Louis see biggest percentage cuts

Other airports at which there will be significant frequency cutbacks have also been identified.

Airport American reductions American Eagle reductions Total dropped daily departures Current daily departures % of departures dropped
New York LaGuardia 5 37 42 119 35.3%
St Louis 8 35 43 140 30.7%
Chicago O’Hare 28 34 62 490 12.7%
Dallas/Fort Worth 19 23 42 772 5.4%
Total of above 60 129 189 1521 12.4%
Source: American Airlines and OAG Max online for June 2008

At New York LaGuardia American is the second biggest airline after US Airways and hopes that the frequency reductions will also improve punctuality which is notoriously bad at the airport. At St Louis the airline is the largest carrier with around 43% of flights followed by Southwest with 23%.

Specific routes that are to be axed include Chicago to Buenos Aires (which only started last December), Chicago to Honolulu (good news for United) and Boston to San Diego (good news for jetBlue). A significant restructuring of the airline’s San Juan (Puerto Rico) operations is due to commence in September.

Fuel costs outstrip wages; now 35% of operating expenses

According to the airline, fuel costs rose from 27.0% of AMR’s operating expenses in 2005 to 30.4% in 2007, leaping to 34.8% in Q1 2008 as the cost of its fuel jumped 48.3% for the year, overtaking salaries as the single largest expense for the airline.

With an average age of 15 years and some 300 MD80s still flying for the airline (a further 36 have already been retired), the delivery of a further 27 new fuel-efficient 737-800s due in 2009 cannot come soon enough. Another 36 aircraft are due to be delivered from Boeing between 2010 and 2016.

Unit revenues up (except on transatlantic routes)

Increased costs have been offset to some extent by increased revenue as RASM (revenue per available seat mile) has increased in the first quarter of 2008 by 6.5% to 10.67 cents. RASM on domestic routes was up 6.9% while ASMs (available seat miles) fell 3.6%. On international flights Latin America had the highest RASM at 12.1 cents which was up 8% despite ASMs increasing 3.5%. The biggest increase in RASM came on Pacific routes where it increased 10.7% to 9.8 cents as ASMs fell 2.5%. On transatlantic flights RASM actually fell 0.5% on an ASM increase of 1.6% illustrating just how competitive the market currently is. It also helps explain the decision to drop the New York JFK to London Stansted service.


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