American cuts planned passenger-carrying capacity

AP News
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Posted: Mar 01, 2011 4:24 PM
American cuts planned passenger-carrying capacity

Facing higher fuel prices, American Airlines says it's going to fly a little less than it expected this year. American parent AMR Corp. still plans to grow in 2011 as travel demand rebounds, but not as quickly.

If other airlines copy American and reduce or slow their growth in capacity, they could boost their ability to raise fares by making seats scarcer. The airlines have already raised fares several times this year, citing the need to offset climbing fuel prices.

American also said that winter storms in January and February cost it $50 million. The storms led to thousands of canceled flights, including many at American hubs in Dallas and Chicago.

Demand for air travel strengthened last year. American and its regional affiliate, American Eagle, originally intended to increase capacity by 4.3 percent this year. Airlines can raise capacity by adding flights, using bigger planes with more seats, or operating longer flights.

AMR said Tuesday that American and Eagle would reduce their expected flying by 1 percentage point from that earlier plan.

"In light of the current environment, in particular recent fuel price trends, we are trimming back our capacity plan for 2011," said company spokesman Andrew Backover.

Recently Delta Air Lines Inc. also curtailed growth plans in the face of rising fuel prices, saying first-quarter capacity would rise between 3 and 5 percent instead of 7 percent. Delta predicted full-year capacity would grow by just 1 percent.

Much of the reduction or slower growth in airline capacity will come on domestic routes, where demand has not been as strong as on international routes. American originally expected to raise domestic capacity just 1 percent but planned a 7.7 percent increase in international flying.

The price of jet fuel has risen by about half in the past year, to more than $3 a gallon, although most airlines have limited the increase by hedging against extremely high prices. Fuel now accounts for about one-third of most airlines' costs.

Shares of AMR fell 18 cents, or 2.7 percent, to close at $6.56. Delta shares lost 63 cents, or 5.6 percent, to close at $10.61.