AMR to Pare New York Flights in Peak Travel Season
Scott Eells/Bloomberg
An American Airlines Inc. plane taxis past two others at LaGuardia airport in New York.
An American Airlines Inc. plane taxis past two others at LaGuardia airport in New York. Photographer: Scott Eells/Bloomberg
American Airlines (AMR) will pare service
in New York City, the world’s busiest aviation market, during
the peak of the U.S. travel season as parent AMR Corp. (AAMRQ)
reorganizes in bankruptcy and larger rivals expand.
Seating on June flights at the three major airports will
fall 4.7 percent from a year earlier based on current schedules,
said Jim Faulkner, a spokesman. The drop will be 6.9 percent by
July, when nonstop Kennedy airport trips end to venues such as
Aruba, based on data compiled for Bloomberg by consultant OAG.
The pullback runs counter to growth by United Continental
Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL), which are bigger than
American in the New York area. AMR hasn’t said how 2012 capacity
across its network will change beyond Chief Executive Officer
Tom Horton’s Feb. 1 forecast of “relatively modest growth.”
“AMR is wise to put its eggs in the baskets where they are
going to get the biggest return,” said George Hamlin, president
of Hamlin Transportation Consulting in Fairfax, Virginia.
“Apparently that’s no longer New York.”
Tim Smith, an airline spokesman, said the July schedule
isn’t set yet and may change as Fort Worth, Texas-based American
reshapes its fleet in bankruptcy. Capacity is measured by seats
multiplied by miles flown, so carriers make adjustments by
dropping or adding cities, changing how often they fly certain
routes or varying the sizes of the planes they use.
Annual Losses
Annual losses at AMR exceeded $6 billion in the past four
years, a period in which American tumbled from being the world’s
largest airline to No. 3 in the U.S. after sitting out mergers
that vaulted United Continental and Delta into the top spots.
A pulldown starting in June is a “reasonable strategy,”
and much of the drop may come from paring a few international
flights in New York, said Hunter Keay, a Wolfe Trahan Co.
analyst based in the city.
“They’re stopping losses by making cuts like these, and
American’s near-term charge is to stop the bleeding,” Keay
said. “American is losing a lot of money in the first quarter
and jet fuel is over $3.20 a gallon and that’s burning more
money. Applying the tourniquet is what should be happening.”
New York is among five U.S. cities where American plans to
add flights for a collective 20 percent increase in departures
by 2017. The airline hasn’t specified when or how much it will
expand in New York or the other target markets — Los Angeles,
Chicago, Miami and Dallas-Fort Worth.
Business Destinations
American remains focused on business destinations from New
York, said Faulkner, the spokesman. Its busiest routes at John
F. Kennedy International Airport, a gateway for overseas flying,
include service to London’s Heathrow airport.
“While there is a modest reduction in capacity out of New
York, we’re very careful to target reductions so that they do
not impact our corporate accounts,” Faulkner said. American is
spending $30 million on New York terminal upgrades, mostly at
LaGuardia, after paying $1.3 billion for a Kennedy terminal that
opened in 2007.
Besides Aruba, American flights being dropped in July from
Kennedy airport include those to markets such as Turks Caicos
and Halifax, Nova Scotia, current schedules show. At LaGuardia
Airport, service will end to Boston and Traverse City, Michigan,
according to OAG, a unit of Luton, England-based UBM Aviation.
A flight from Kennedy to Tokyo’s Narita airport that was
operated last summer by American shifts this year to Oneworld
alliance partner Japan Airlines Co. (9205), American has said. American
will continue flying between Kennedy and Tokyo’s Haneda airport.
‘International Opportunities’
“They’ll continue to exploit the international
opportunities from JFK as opposed to domestic,” said John
Grant, OAG executive vice president. “There’s more revenue to
be had and more potential profit than with domestic service.”
Ticket prices show the difference: International flights
cost an average of more than twice as much as domestic trips in
January, according to data compiled by Bloomberg Industries.
United, the world’s biggest airline, is increasing New York
capacity by 1.3 percent for June, July and August combined, said
Mike Trevino, a spokesman. The Chicago-based carrier flies
chiefly from New Jersey’s Newark airport.
Delta, No. 2 in the world, will add more than 100 flights
at LaGuardia by mid-July after gaining takeoff and landing slots
there to build a hub for domestic flights. Combined LaGuardia-
Kennedy capacity will rise 3 percent in June and 7 percent in
July, said the Atlanta-based carrier, which exited bankruptcy in
2007 and bought Northwest Airlines Corp. in 2008.
‘Piece of New York’
“Everybody kind of scrambles to maintain a piece of New
York,” said John Walsh, head of San Diego-based Walsh Aviation.
“It’s always going to be competitive, but Delta with its merger
is a more formidable competitor than AMR has seen before.”
American expects that kind of jockeying, Chief Commercial
Officer Virasb Vahidi said yesterday in an interview.
“It is normal that in the largest global travel market in
the world, you will have other competitors and everyone gets
their own fair share,” he said. “It’s the same for Los Angeles
and Chicago. That’s just part of being in a competitive
industry.”
Pressure isn’t just coming from bigger rivals. Smaller
carriers in New York are growing too, with expansion planned at
Southwest Airlines Co. (LUV) and JetBlue Airways Corp. (JBLU), which has the
most domestic departures from Kennedy, according to spokesmen.
American remains in the early stages of restructuring after
its Nov. 29 bankruptcy filing. The company told workers Feb. 1
it would eliminate 13,000 jobs or about 18 percent of American’s
total, as it seeks to cut costs by about $2 billion and generate
$1 billion in new revenue each year. Reductions at regional
partner American Eagle haven’t been made public yet.
Horton told employees on Jan. 12 that American will use
bankruptcy to ground older, less-efficient aircraft, shrinking a
fleet of 608 planes at the end of 2011. Growth will resume once
American emerges from bankruptcy, flying more efficient jets
ordered in July from Boeing Co. (BA) and Airbus SAS (EAD), he said.
“It’s not necessarily about being the biggest in any one
city,” said Henry Harteveldt, an analyst at Atmosphere Research
Group LLC in San Francisco. “It’s about commanding the highest
fare and having the best routes and schedule and connections on
partners.”
To contact the reporters on this story:
Mary Schlangenstein in Dallas at
maryc.s@bloomberg.net;
Mary Jane Credeur in Atlanta at
mcredeur@bloomberg.net
To contact the editor responsible for this story:
Ed Dufner at
edufner@bloomberg.net
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