American Airlines plans to cut more U.S. flights

By Mary Schlangenstein
Bloomberg News Service

FORT WORTH, Texas — AMR Corp.'s American Airlines, the world's largest carrier, will eliminate more U.S. flights in the first quarter to better match demand and may cut more jobs as a result.

Flight and seat capacity in the United States and Canada by March will be 3.3 percent lower than a year earlier, American said. Its earlier plan called for a 0.1 percent reduction. The airline will cut flight frequencies on slower days in some markets, spokesman Al Becker said.

AMR lost $2.98 billion in this year's first nine months as the Sept. 11 attacks and the weak U.S. economy reduced air-travel demand and as airlines lowered fares to lure passengers. American is trying to reduce annual costs by as much as $4 billion and has identified ways to produce about half of that amount, including eliminating 7,000 jobs, cutting flights and grounding planes.

"Although the airlines have cut capacity as an industry back to '98 levels, revenues are back to '95 levels," said Goldman, Sachs & Co. analyst Glenn Engel, who rates AMR an "underperform" and doesn't own the stock. "You still have this gap and until demand improves, you're going to see airlines nickel and dime their way out of supply to get it back into balance."

The Fort Worth, Texas-based airline is reviewing the impact of the latest capacity reductions on jobs, and "we don't know yet, but there may be a need for more layoffs," said Jeff Brundage, vice president for employee relations.

American said domestic capacity for all of 2003 will be down about 5 percent from this year as a result of the first-quarter reduction. International capacity isn't being reduced because demand is higher for those flights.

American declined to say how many flights will be cut or identify cities where the reductions will occur. They will occur across the domestic system in cities of varying size, and the airline won't pull out of any markets it now serves, Becker said.