Friday, 22 April 2011

Cuts To Airline Capacity As Fuel Prices Rise


US carriers are continuing to cut capacity as they try to cope with the effects of higher fuel prices.

Both United Continental and American Airlines are trimming planned capacity over the next few months after being hit by rising oil costs.


United Continental said that fuel had cost an extra 34.5% or $725 million for the first quarter of 2011 compared to the same period last year.

While American saw a 24% rise in its fuel costs adding an extra $351 million to its quarterly bill compared to 2010.
Jeff Smisek, United Continental’s chief executive officer, said: “United and Continental are much better positioned to manage through the current high-cost fuel environment as a combined carrier than either would have been as stand-alone carriers.”
United and Continental officially merged in October 2010 and the combined company recorded a net loss of $213 million for the quarter including $77 million of costs from the integration of the two airlines.
The airline is cutting capacity by one percentage point from May with a further four point reduction from September. Despite the cuts, capacity will be roughly the same as last year.
American’s parent company AMR Corporation reduced its net loss for the first three months of 2011 to $436 million compared to a deficit of $505 million on the same period in 2010.
AMR chief executive Gerard Arpey said: “High fuel prices remain one of the biggest challenges to our industry and our company. 
“We believe our steps to aggressively increase revenues, reduce capacity, control non-fuel operating costs, and bolster liquidity will help us to better manage the challenges we currently face.”

American is cutting capacity on its domestic routes although it will still increase seat numbers on international routes. It is now expecting an overall capacity rise of 2.8% compared to last year.

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