Bloomberg News

American to Cut Capacity, Retire 11 Jets on Weak Economy

October 12, 2011

(Updates with company comment in fourth paragraph.)

Oct. 10 (Bloomberg) -- AMR Corp.’s American Airlines will cut seating capacity 3 percent this quarter and retire as many as 11 Boeing Co. 757 jets next year because of a weak economy, an increase in pilot retirements and higher fuel costs.

The fourth-quarter reductions mean that costs for flying each seat a mile will increase “modestly” beyond the forecast provided on Sept. 21, Fort Worth, Texas-based American said today in a statement without elaborating.

American joins other airlines that cut fourth-quarter capacity earlier this year on concerns travel demand will slow with the economy. The third-largest U.S. carrier also is grappling with pilot retirements that have been running at least 10 times the normal rate in the past two months.

“We are taking these additional steps in light of the uncertain economic environment, ongoing high fuel costs and to ensure we run a reliable schedule for our customers given additional pilot retirements we anticipate throughout the fourth quarter,” Chief Commercial Officer Virasb Vahidi said in the statement. He said advance bookings are “generally in line” with 2010.

American also said it will take a $29 million noncash charge in the third quarter for contracts linked to fuel purchases and $22 million related to foreign exchange.

The airline has 124 Boeing 757s, according to its website. The twin-engine, single-aisle planes are often flown on transcontinental routes and to non-U.S. destinations such as Mexico. Boeing built the last 757 in 2004.

With the new seating cuts, full-year seating on American’s mainline jets will still rise 0.4 percent, less than the original 2011 plan, according to the company. When regional carrier American Eagle is included, full-year capacity will be up 1.2 percent.

--Editors: Ed Dufner, Donna Alvarado

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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