Carriers Speed Up Plans To Cut Flights, Ground Planes
Hoping to
staunch the bleeding now, on Thursday both Continental Airlines and
American Airlines followed up announcements of sizable first
quarter losses, with plans to drastically scale back capacity and
ground their less fuel-efficient aircraft.
American posted a $328 million loss for the period, which ended
March 31. That's the worst Q1 performance for the Fort Worth-based
carrier since 2003, reports The Dallas Morning News, and a stark
contrast to the $81 million profit American ecked out for the same
period in 2007.
"As a result of increased fuel prices and growing concerns about
the economy," American plans to cut capacity by 1.4 percent for the
year, mostly by cutting domestic routes in favor of more profitable
international flights. Not two months ago, American said it planned
to increase capacity by 0.2 percent -- another sign record high
prices for oil have shocked airlines.
Down south in Houston, Continental Airlines reported a first
quarter net loss of $80 million, which climbs to $85 million
excluding a $5 million after tax gain from the sale of
aircraft.
Both airlines plan to park their older, less fuel-efficient
planes. American will ground some McDonnell Douglas MD-80s, and
return three Airbus A300 widebodies to lessors. The airline also
plans to speed up purchases of Boeing 737-800s.
"Given that the 737-800 is about 25 percent more fuel-efficient
than the MD-80, and in light of high fuel prices, it make sense to
accelerate the replacement of our MD-80s," Tom Horton, chief
financial officer at American-parent company AMR Corp.
Continental plans to remove from service an additional 14 older
Boeing 737-300s as leases expire on those aircraft from September
2008 to April 2009. These 14 737-300s are in addition to the 34
737-300s and -500s that were already planned to be removed from
service in 2008 and 2009.
Continental also expects to reduce regional jet capacity
beginning in the fall 2008, citing the higher
cost-per-available-seat-mile (CASM) of those smaller,
turbofan-equipped planes. The airline notes, however, its plans are
"fluid," as Continental works to negotiate better contracts with
ExpressJet, and as CRJs flown for Continental by Chautauqua
Airlines come off lease.
In a message to employees, Continental CEO Larry Kellner praised
workers for their efforts, which kept the airline's Q1 losses from
being far worse.
"Thanks to the continued hard work and dedication of my
co-workers, we ran a solid operation despite extremely challenging
times," said Kellner. "In this rapidly changing competitive
environment, we will stay focused on running a clean, safe and
reliable airline with the best customer service in the
industry."
Those sentiments come as Continental is rumored to be close to
announcing a merger with United Airlines, a union that would
produce the world's largest airline -- surpassing even the "new
global airline" proposed earlier this week, through the joining of
Delta and Northwest.
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