US carriers brace for downturn

Source:
This story is sourced from Airline Business
Subscribe today »

Some US carriers are cutting jobs and capacity to offset rising fuel costs and an expected slowdown in demand

Southwest Airlines has again cut its capacity growth for 2008, this time from 6% to between 4% and 5%. It had initially forecast growth of 8% before it was scaled back to 6%.

The low-cost carrier had intended to expand its fleet by 34 aircraft in 2008. In June that was cut back to 19 and Southwest now says it will only expand its fleet by 5 to 10 aircraft.

"We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy ­prices," says Southwest chief ­executive Gary Kelly.

Southwest chief financial officer Laura Wright adds: "We do not plan to drop any city pairs or any markets, but we will make adjustments in our schedule that we believe will lead to a more productive and more profitable airline."

Continental Airlines has cut its growth expectations for 2008 to between 2% and 3%, down from 3% to 4% planned earlier. All of the increase will be applied to ­international routes and domestic capacity will shrink.

United Airlines also has no plans to expand its flying in the highly competitive domestic market but intends to expand about 15% internationally over the next three years. Delta is similarly looking to increase its international flying from 25% of its total capacity in 2005 to 40% in 2008.

Along with the capacity cuts, some of the majors are also ­cutting jobs. American will cut management ranks between 2% and 3% by the end of the year, eliminating 100 to 200 positions. The number of people laid off will probably be somewhat less than the number of jobs eliminated since some of the cuts will be achieved by not filling vacant positions and through attrition.

Frontier Airlines is cutting nearly 2% of its workforce or 100 people. Chief financial officer Sean Make says the Denver-based low-cost carrier will also slow mainline expansion, citing rising fuel costs. But the launch of its new turboprop subsidiary Lynx will add regional capacity.

Delta and United are also ­mulling job cuts, mostly at the management level.