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Fleet slashed as American unveils new capacity plan

American Airlines’ parent AMR Corp will retire at least 75 mainline and regional jets as part of a newly unveiled plan to slash 2008 domestic capacity in the face of record high fuel prices, growing economic concerns and a difficult competitive environment.

Fourth quarter mainline domestic capacity will be cut by 11% to 12% over the same period last year. This compares to AMR’s previous guidance, which called for domestic mainline capacity in the fourth quarter to decline by 4.6% over the fourth quarter of 2007.

At the same time, regional affiliate capacity is expected to decline by 10% to 11%. Previously, this capacity was expected to increase by 2% from 2007 levels.

To facilitate these reductions in available seat mile capacity, AMR says it expects to retire 40 to 45 mainline aircraft from American’s fleet, the majority of which will consist of Boeing MD-80s “but will also include some Airbus A300 aircraft”.

The capacity reductions will also result in the retirement of 35 to 40 regional jets, as well as a number of turboprop aircraft, from AMR’s regional affiliate, American Eagle Airlines.

This will result in workforce reductions at both American and American Eagle “and could result in facility closures or facility consolidation”, says AMR, which is “assessing the scope and location-specific impact of any workforce reductions resulting from the capacity reductions”.

The impact on specific routes and markets is still being studied.

“The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak US economy,” says AMR chairman and CEO Gerard Arpey.

“Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve. We must work to overcome our near-term challenges and to secure our company’s long-term future for the benefit of our shareholders, customers and employees.”


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