American Airlines will slash capacity, jobs on soaring fuel costs

American Will Slash 2008 Capacity, Cut Jobs on Fuel (Update2)

By Mary Jane Credeur and Mary Schlangenstein

May 21 (Bloomberg) -- AMR Corp.'s American Airlines, the world's largest carrier, will slash U.S. capacity as much as 12 percent, retire as many as 85 jets and cut jobs to blunt surging fuel prices and slowing demand.

AMR fell the most since September in New York trading. The reduction in domestic seating is more than twice what American had announced in April, and represents the third cut in 2008. AMR also said it will add a $15 fee for the first checked bag.

``Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve,'' Chief Executive Officer Gerard Arpey told shareholders today in Fort Worth, Texas, where AMR is based.

American's response to an 84 percent jump in jet fuel in the past year went beyond steps taken by its peers, and comes as analysts predict possible bankruptcies among the biggest airlines. The changes will force an undetermined number of job cuts at both American Airlines and regional unit American Eagle.

AMR plunged 92 cents, or 11 percent, to $7.28 at 10:26 a.m. in New York Stock Exchange composite trading. The shares touched $6.93 earlier for the biggest drop since Sept. 24.

The new baggage fee will take effect June 15, as the U.S. summer travel season gets under way. It excludes some members of American's frequent-flier program, travelers buying full-fare tickets and passengers on international flights. The capacity cuts will be in place by the fourth quarter.

Parking Planes

As many as 45 planes will be dropped from American's fleet, most of them aging Boeing Co. MD-80s, and as many as 40 regional jets at Eagle, where fourth-quarter capacity will fall as much as 11 percent, the company said. Previous plans called for a 2 percent increase in Eagle capacity. American said some Eagle turboprops also may be parked, without giving details.

As of this month, American had 655 jets in its mainline fleet, and Eagle had 305 planes, according to AMR's Web site. .....(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aoFvU_iYOMbc&refer=home

That's how we're going to travel this summer. It's cheaper and they've got sleeper cars.