Posted on: Thursday, May 17, 2001

Leisure travel on American Airlines lagging

Bloomberg News Service

FORT WORTH, Texas — AMR Corp.'s American Airlines is selling fewer tickets to vacation travelers since a decline in business passengers led to a first-quarter loss for the largest carrier, Chief Executive Donald Carty said.

"Leisure traffic now is softer than it was a year ago," Carty said after AMR's annual meeting. "Business travel has fallen more sharply. We're seeing softness everywhere."

Eight of the 10 largest U.S. airlines lost money in the first quarter as businesses responded to a slowing economy by reducing employee travel.

Airlines initially said sales of leisure-class tickets, which cost less than business-class seats because they are sold in advance, were about the same as a year earlier. Carriers have since lowered fares to sell more tickets.

Summer travel has declined in Europe, where an outbreak of foot-and-mouth disease in livestock cut into tourism, Carty said. The company doesn't expect much improvement in the U.S. economy in the next three months.

"We haven't really seen anything that would indicate a turnaround," he said. "As far out as we can see, we see a substantially weaker environment than a year ago."

The Fort Worth-based company can more easily reduce or increase capacity on certain routes to respond to demand than other airlines, Carty said. AMR had a first-quarter loss of $43 million, or 28 cents a share, on sales of $4.76 billion.

"It is, for the entire industry, a very difficult time," he said.

Compounding the decline in passenger traffic are higher prices for jet fuel in the past two years, Carty said. American hasn't hedged as much of its fuel as a year ago through the purchase of contracts to flatten peaks in fuel prices.

Jet-fuel prices for delivery in New York Harbor have averaged 82.5 cents a gallon this year, more than double the 38.9 cents in early 1999.

American, which completed the $2.8 billion acquisition of Trans World Airlines Inc. last month, froze management hiring and took other steps to reduce expenses.