Airlines not made for $125 a barrel oil
[The following comments are from Rick Harnish, of the High Speed Rail Coalition]
Yesterday, American Airlines announced that it will cut 11 - 12% of their domestic capacity this fall and begin charging for checked baggage soon.
The head of American had this to say:
-- Gerard Arpey, chairman and CEO of American and parent AMR Corp., said the industry is in a "very perilous" period, agreeing with the assessment given last week by retiring Southwest Airlines chairman Herb Kelleher.
"The U.S. airline industry as it is constituted today was not built for $125- or $130-per-barrel oil," Mr. Arpey said after the AMR annual shareholders meeting in Fort Worth.
"The industry will not and cannot continue in its current state," he said. "The fact that four more airlines have liquidated this year and one is operating in Chapter 11 is clear evidence of that fact.--
Today, the Chicago Tribune offered a solution: More runways!
They also called for Peotone Airport to be fast tracked the day that ATA shut down.
American Airlines to cut jobs and flights, add $15 bag fee
12:00 AM CDT on Thursday, May 22, 2008
By TERRY MAXON / The Dallas Morning News
American Airlines said Wednesday that it will slash its domestic flying by 11 to 12 percent
in the fourth quarter, eliminate thousands of jobs and begin charging most passengers
$15 each way to check their first bag.
MICHAEL AINSWORTH/DMN
Most passengers will be charged $15 each way to check their first bag. 'The U.S. airline
industry ... was not built for $125- or $130-per-barrel oil,' said American CEO Gerard
Arpey after the AMR Corp. annual shareholders meeting.
Soaring fuel prices prompted the drastic steps to cut costs and boost revenues, according
to the airline, and even such steps aren't likely to make American profitable in the face of
oil prices skyrocketing over $130 a barrel.
Gerard Arpey, chairman and CEO of American and parent AMR Corp., said the industry is
in a "very perilous" period, agreeing with the assessment given last week by retiring
Southwest Airlines chairman Herb Kelleher.
"The U.S. airline industry as it is constituted today was not built for $125- or $130-per-
barrel oil," Mr. Arpey said after the AMR annual shareholders meeting in Fort Worth.
"The industry will not and cannot continue in its current state," he said. "The fact that four
more airlines have liquidated this year and one is operating in Chapter 11 is clear evidence
of that fact.
"So we are moving to construct a business plan that, to the extent possible, is constructed
for the current reality of slow economic growth and high oil prices," Mr. Arpey said.
News of American's flight reductions and gloomy outlook appeared to shake investor
confidence in AMR as well as other U.S. airlines.
AMR's stock fell 24 percent to $6.22 in Wednesday trading on the New York Stock
Exchange, dropping to its lowest point since May 2003, shortly after AMR restructured its
finances and union contracts to avoid a trip to bankruptcy court.
AMR shares have dropped 56 percent since the first of the year and 77 percent since last
year's annual meeting.
For American's customers, the first noticeable impact of Wednesday's announced changes
will be the $15 charge for the first bag checked, beginning with tickets bought June 15.
Most big carriers recently implemented a $25 charge on the second bag checked by coach
customers, but American is the U.S. pioneer on charging for the first bag.
The fee will be charged to everyone except people who belong to elite levels of its frequent
flier program, those who bought full-fare tickets and those traveling overseas.
That raises the prospect of a traveler with two pieces of luggage paying $80 round trip just
to transport his or her bags; a family of four could wind up paying hundreds of dollars to
get its luggage there and back.
Airlines have been turning up new ways to increase revenues, from raising the fee for
changing a ticket or making a reservation by phone to checking bags at the curb. They're
also trying to find new things to sell on board, such as snacks, meals or consumer goods.
Mr. Arpey unveiled the bad news for American employees, hundreds of whom were
outside in a picket line complaining about American executives and their management of
the world's largest carrier.
"We're out here today because American Airlines is failing all the constituents that have a
vested interest in the success of the company," said Lloyd Hill, president of the Allied
Pilots Association, which represents American's pilots. "We're here to deliver a message to
the AMR management team: It's time to fix the problems."
Association of Professional Flight Attendants president Laura Glading said pilots and
flights attendants were picketing together "to show the company that we're completely
unified, that we're going to stand together [and] do whatever we have to do to show the
board and the leadership that changes have to be made."
The pilots' union has been negotiating a new contract with the company since September
2006, while flight attendants plan to start their talks June 10. The airline's contracts with
its unions became amendable May 1.
Meanwhile, inside the annual meeting at an American Airlines training center, Mr. Arpey
was outlining the airline's belief that things are bad and getting worse.
For employees, that means more layoffs at a time when thousands of pilots, flight
attendants and workers are already on furlough, the result of cutbacks after the Sept. 11,
2001, terrorist attacks and the 2003 financial restructuring.
With domestic flying now making up about two-thirds of American's capacity, an 11 to 12
percent reduction would mean roughly a 7 percent decline in the airline's overall capacity.
American employed 71,800 people at the end of 2007; a 7 percent cut in workforce would
eliminate about 5,000 people.
Mr. Arpey allowed that the layoffs would probably rise into the thousands, answering "I
would think so" to a reporter's question. But he avoided putting precise numbers to the
scope of the cutbacks and the impact on employees, cities and routes until the airline
firms up its plans.
"The objective would be to try to eliminate overheads and costs commensurate with the
capacity reduction," Mr. Arpey said. "In terms of what the actual layoffs will be, we don't
have a number for you today."
He said the cuts will affect managers and supervisors as well "because of the magnitude of
the reductions."
"I think I can say that every work group will be impacted," he said later.
To reduce capacity, AMR will be parking airplanes operated by both American and regional
partner American Eagle.
Although there may be adjustments in some international markets, almost all the cutbacks
will take place on domestic routes, Mr. Arpey said.
American will park 40 to 45 jets, mainly from its 300-airplane fleet of aging McDonnell
Douglas MD-80s. That narrow-bodied plane accounts for 46 percent of American's 654
total airplanes and 39 percent of its seats.
The airline also plans to return some of its 34 Airbus A300s to lessors.
American Eagle will retire 35 to 40 regional jets and an unstated number of turboprop
aircraft.
We need more passenger trains in this country, especially between smaller cities whose populations simply cannot support airline travel, and we need to fund them with our tax dollars.
Yesterday, American Airlines announced that it will cut 11 - 12% of their domestic capacity this fall and begin charging for checked baggage soon.
The head of American had this to say:
-- Gerard Arpey, chairman and CEO of American and parent AMR Corp., said the industry is in a "very perilous" period, agreeing with the assessment given last week by retiring Southwest Airlines chairman Herb Kelleher.
"The U.S. airline industry as it is constituted today was not built for $125- or $130-per-barrel oil," Mr. Arpey said after the AMR annual shareholders meeting in Fort Worth.
"The industry will not and cannot continue in its current state," he said. "The fact that four more airlines have liquidated this year and one is operating in Chapter 11 is clear evidence of that fact.--
Today, the Chicago Tribune offered a solution: More runways!
They also called for Peotone Airport to be fast tracked the day that ATA shut down.
American Airlines to cut jobs and flights, add $15 bag fee
12:00 AM CDT on Thursday, May 22, 2008
By TERRY MAXON / The Dallas Morning News
American Airlines said Wednesday that it will slash its domestic flying by 11 to 12 percent
in the fourth quarter, eliminate thousands of jobs and begin charging most passengers
$15 each way to check their first bag.
MICHAEL AINSWORTH/DMN
Most passengers will be charged $15 each way to check their first bag. 'The U.S. airline
industry ... was not built for $125- or $130-per-barrel oil,' said American CEO Gerard
Arpey after the AMR Corp. annual shareholders meeting.
Soaring fuel prices prompted the drastic steps to cut costs and boost revenues, according
to the airline, and even such steps aren't likely to make American profitable in the face of
oil prices skyrocketing over $130 a barrel.
Gerard Arpey, chairman and CEO of American and parent AMR Corp., said the industry is
in a "very perilous" period, agreeing with the assessment given last week by retiring
Southwest Airlines chairman Herb Kelleher.
"The U.S. airline industry as it is constituted today was not built for $125- or $130-per-
barrel oil," Mr. Arpey said after the AMR annual shareholders meeting in Fort Worth.
"The industry will not and cannot continue in its current state," he said. "The fact that four
more airlines have liquidated this year and one is operating in Chapter 11 is clear evidence
of that fact.
"So we are moving to construct a business plan that, to the extent possible, is constructed
for the current reality of slow economic growth and high oil prices," Mr. Arpey said.
News of American's flight reductions and gloomy outlook appeared to shake investor
confidence in AMR as well as other U.S. airlines.
AMR's stock fell 24 percent to $6.22 in Wednesday trading on the New York Stock
Exchange, dropping to its lowest point since May 2003, shortly after AMR restructured its
finances and union contracts to avoid a trip to bankruptcy court.
AMR shares have dropped 56 percent since the first of the year and 77 percent since last
year's annual meeting.
For American's customers, the first noticeable impact of Wednesday's announced changes
will be the $15 charge for the first bag checked, beginning with tickets bought June 15.
Most big carriers recently implemented a $25 charge on the second bag checked by coach
customers, but American is the U.S. pioneer on charging for the first bag.
The fee will be charged to everyone except people who belong to elite levels of its frequent
flier program, those who bought full-fare tickets and those traveling overseas.
That raises the prospect of a traveler with two pieces of luggage paying $80 round trip just
to transport his or her bags; a family of four could wind up paying hundreds of dollars to
get its luggage there and back.
Airlines have been turning up new ways to increase revenues, from raising the fee for
changing a ticket or making a reservation by phone to checking bags at the curb. They're
also trying to find new things to sell on board, such as snacks, meals or consumer goods.
Mr. Arpey unveiled the bad news for American employees, hundreds of whom were
outside in a picket line complaining about American executives and their management of
the world's largest carrier.
"We're out here today because American Airlines is failing all the constituents that have a
vested interest in the success of the company," said Lloyd Hill, president of the Allied
Pilots Association, which represents American's pilots. "We're here to deliver a message to
the AMR management team: It's time to fix the problems."
Association of Professional Flight Attendants president Laura Glading said pilots and
flights attendants were picketing together "to show the company that we're completely
unified, that we're going to stand together [and] do whatever we have to do to show the
board and the leadership that changes have to be made."
The pilots' union has been negotiating a new contract with the company since September
2006, while flight attendants plan to start their talks June 10. The airline's contracts with
its unions became amendable May 1.
Meanwhile, inside the annual meeting at an American Airlines training center, Mr. Arpey
was outlining the airline's belief that things are bad and getting worse.
For employees, that means more layoffs at a time when thousands of pilots, flight
attendants and workers are already on furlough, the result of cutbacks after the Sept. 11,
2001, terrorist attacks and the 2003 financial restructuring.
With domestic flying now making up about two-thirds of American's capacity, an 11 to 12
percent reduction would mean roughly a 7 percent decline in the airline's overall capacity.
American employed 71,800 people at the end of 2007; a 7 percent cut in workforce would
eliminate about 5,000 people.
Mr. Arpey allowed that the layoffs would probably rise into the thousands, answering "I
would think so" to a reporter's question. But he avoided putting precise numbers to the
scope of the cutbacks and the impact on employees, cities and routes until the airline
firms up its plans.
"The objective would be to try to eliminate overheads and costs commensurate with the
capacity reduction," Mr. Arpey said. "In terms of what the actual layoffs will be, we don't
have a number for you today."
He said the cuts will affect managers and supervisors as well "because of the magnitude of
the reductions."
"I think I can say that every work group will be impacted," he said later.
To reduce capacity, AMR will be parking airplanes operated by both American and regional
partner American Eagle.
Although there may be adjustments in some international markets, almost all the cutbacks
will take place on domestic routes, Mr. Arpey said.
American will park 40 to 45 jets, mainly from its 300-airplane fleet of aging McDonnell
Douglas MD-80s. That narrow-bodied plane accounts for 46 percent of American's 654
total airplanes and 39 percent of its seats.
The airline also plans to return some of its 34 Airbus A300s to lessors.
American Eagle will retire 35 to 40 regional jets and an unstated number of turboprop
aircraft.
We need more passenger trains in this country, especially between smaller cities whose populations simply cannot support airline travel, and we need to fund them with our tax dollars.