Thursday, May 22, 2008

Fuel costs lead American to slash schedule

American Airlines said on Wednesday it would eliminate flights, cut thousands of jobs and charge most passengers $15 to check a single piece of luggage, as surging oil prices exacerbated the crisis in the US airline industry.

American revealed a series of extraordinary measures as the spot price for crude hit a record $132.70 a barrel and the cost of a barrel of oil scheduled for delivery in December 2016 surged to an all-time high of $142.14. Gerard Arpey, chief executive and chairman, said American had been forced to act. “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.

“Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve.”


NVDL: This is the death knell for the majority of long distance carriers. Probably 90% of the world's airlines are now out of commission based on the fact that they can no longer operate profitably.

American, the only US legacy airline to have avoided bankruptcy, said rising fuel prices would add $3bn to its annual expenses. Its shares fell 16 per cent in early New York trading, leading the sector lower amid speculation that competitors would also have to raise fees.

American, the world’s largest carrier, said it would make deep cuts to its flight schedule and retire at least 75 aircraft. Facilities would close and thousands of jobs be cut, it said.

American said it had been hit with $1.9bn more in annual expenses since March when crude oil rose from an average price of $105 per barrel to $130.

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