American Airlines aims to slash annual expenses by $1 billion - rejigging its key Dallas-Fort Worth hub operation, cutting 7,000 jobs and retiring 74 more aircraft than planned.
The 9% capacity cut will be in place by November in what chief executive Don Carty calls a "resizing". American also plans to "de-peak" schedules at Dallas-Fort Worth to distribute flight times more evenly - some connections will now take up to 90 minutes. A similar move at its Chicago O'Hare hub earlier this year allowed dedicated aircraft there to be cut by five.
The airline will change seating plans on nearly 100 Boeing 777s and 767-300s, enlarging business and coach sections to match demand. Deutsche Bank's Susan Donofrio calls this is a major step toward recognising the primacy of price over connection convenience. American will also accelerate retirement of nine 767-300s it acquired when it bought TWA, remove its Fokker 100 fleet and delay deliveries of 35 new airliners. Chief financial officer Jeffrey Campbell said: "Fleet changes mean writing off up to $500 million in the third quarter," with as much as $100 million stemming from 767 retirements and $200-400 million from retiring the Fokker 100s.
Allied Pilots Association spokesman Sam Mayer says pilots were disappointed because Carty had often criticised fare structures and called for fundamental change, "but the first thing they do is go back to the old tried-and-true of: We're going to cut jobs and downsize. You don't get back into profit by shrinking."
Standard & Poor's Phil Baggely adds that the liquidity of the American parent AMR Corp remains satisfactory, with $2.6 billion of cash at 30 June, a $1 billion secured credit facility due in September, and $6 billion of aircraft available for secured borrowing.
Source: Airline Business
