AMR’s American Airlines could shrink further
American Airlines parent AMR Corp. is continuing to raise cash in the face of “significant” deterioration in travel demand and the airline could again shrink in size, a company executive said Tuesday.
American cut domestic capacity this fall, but traffic fell even more sharply — down 11.6 percent in October and November.
American and American Eagle expect to cut 2009 capacity about 6 percent from this year’s levels, with most of the reductions falling on U.S. routes.
Treasurer Beverly Goulet said American “has a strong track record for dialing back capacity when we’ve thought it’s been needed, and we’ll continue to take a close look at how the revenue picture unfolds in the coming months to see if more must be done.”
Goulet and executives from other airlines spoke at a Credit Suisse investor conference in New York.
AMR, which raised more than $700 million in the second and third quarters through aircraft-backed financings, reached a sale-leaseback deal involving American Eagle’s turboprop fleet that is expected to raise another $200 million, Goulet said.
Like other airlines, AMR tried to protect itself against a spike in oil prices by hedging. AMR bought options to get 38 percent of its fourth-quarter fuel at about $92 a barrel — twice Tuesday’s price of oil. For 2009, AMR is 34 percent hedged at $99 a barrel.
As oil prices fall, AMR must post collateral against those bad hedges. Goulet said AMR has posted $480 million cash to cover the amount it will spend to settle the hedging trades if oil prices don’t change much.
But even including the cost of the hedges, Goulet said lower oil prices would help AMR cut its fuel spending about $3.5 billion next year.
Separately, Fort Worth, Texas-based American said Tuesday that negotiators for its pilots union walked out of a contract-bargaining session on Monday. The company said it had just begun a presentation to two federal mediators when the union representatives left.
Gregg Overman, spokesman for the Allied Pilots Association, said the day’s meeting was intended to be a bargaining session but AMR officials instead began reciting for mediators “all of APA’s supposed transgressions.”
“We’ll negotiate anytime, anyplace with management,” he said.
The two sides were back at the bargaining table Tuesday afternoon.
AMR shares rose 42 cents, or 5.2 percent, to $8.45 Tuesday.
Airlines at RIC To Increase Flights to New York, Chicago
Airlines are increasing Richmond International Airport service to some of regional travelers’ most popular destinations.
American Airlines will add two daily trips to Chicago O’Hare International Airport starting April 6, bringing its daily weekday count to five, said RIC’s Troy Bell.
United Airlines also serves that route, he noted, so that the two air-carrier groups combined will offer 11 daily roundtrips between Richmond and Chicago. The American flights will use 50-seat regional jets for the nonstop service.
“The fact that we have meaningful competition to one of our largest markets is significant,” Bell said. “United and American, two major carriers, are competing for the business of Richmond regional travelers.”
And Delta Air Lines will restart its Richmond-Minneapolis service June 11, he said, restoring — at least on a seasonal basis — a route that was cut in August. The flights, with a single frequency each day, will be flown using 76-seat, two-class Embraer 175 aircraft.
“That flight’s for me,” said national commercial real estate consultant John Jay Schwartz, who frequently makes business and personal flights to Minneapolis. Schwartz said it will encourage others to travel between Richmond and Minneapolis.
Delta also will begin flying again from Richmond International to New York’s LaGuardia Airport on April 6, Bell noted.
Three daily Delta flights that now serve New York’s John F. Kennedy International Airport will be shifted to LaGuardia.
“We think it’s a good indicator of strengthening passenger demand, [and] of business demand,” Bell said.
He noted that area companies are reporting more air travel this year than last, use of RIC’s valet parking is rebounding and the airport’s garages are seeing healthy traffic levels.
Richmond International serves 3.3 million air travelers annually.
Delta will continue to provide a single RIC-JFK daily flight, which will tie into JFK’s afternoon international departures.
US Airways is now RIC’s only carrier flying nonstop to LaGuardia; Delta dropped its service last March.
Four airlines provide 18 flights daily from Richmond International to the three New York metropolitan airports: LaGuardia, JFK and Newark Liberty International.
American Airlines, Delta Airlines No Longer in FAA Safety Program
The nation’s two largest airlines have dropped out of a federal safety program that was designed to encourage voluntary reporting of pilot errors before they resulted in crashes.
Delta Air Lines Inc. and American Airlines cited an inability to reach agreements with pilot groups in suspending their Aviation Safety Action Programs, or ASAPs, which allow pilots to admit mistakes without fear of being punished.
The acting chief of the Federal Aviation Administration said it was “disheartening” to see the programs end, which a leading safety expert blamed on lack of trust between labor and management.
American had taken part for 14 years, and its program was used as a model at other carriers in the U.S. and abroad.
The pilots’ union at American, the Allied Pilots Association, charged that American was using the program to discipline captains for inadvertent safety lapses, putting their jobs at risk. The union sought language to strengthen job protections for pilots who reported errors.
“We will not accept any process that labels our pilots as reckless, and discipline for inadvertent safety events must stop,” union official Kevin Cornwell said at the time.
Tim Wagner, a spokesman for AMR Corp.’s American Airlines, said Friday the company preferred not to change provisions of the program but that the union balked and refused to extend the agreement. He said a self-reporting system from NASA is still in place.
Wagner said ASAP doesn’t have the day-to-day safety impact of such things as inspections and maintenance, “but it allows us to look at situations that have happened and make changes. We would love to see it renewed.”
A similar dispute led Delta Air Lines Inc., the nation’s largest carrier, to end its ASAP program in 2006, and subsidiary Comair also recently dropped out. Pilots at Delta and Comair are represented by the Air Line Pilots Association.
William R. Voss, president of the Flight Safety Foundation in Alexandria, Va., said Friday that ASAP is vital to maintain the improvement in airline safety over the past several years.
“These programs catch little problems before they become big problems,” he said.
While the pilots’ reports are confidential, Voss, a former FAA official, said ASAP helped identify certain runway configurations that can be confusing, which was a factor cited in the 2006 crash of a Comair jet in Kentucky. The accident killed 49 people.
Voss said he didn’t want to blame the unions or the airlines for the demise of the programs, but attributed it to deteriorating labor-management relations in the industry.
Acting FAA chief Robert A. Sturgell said in a speech last month that voluntary disclosure programs such as ASAP are critical for improving safety.
“It is disheartening to see some of our carriers and pilot unions abandoning these programs at a time when we need them the most,” Sturgell said. “I encourage you to separate safety from the labor issues and put these programs back in place.”
FAA Widens Probe of American Airlines’ Repairs
AMR Corp.’s American Airlines operated jets later found to have substandard repairs, and federal regulators are probing allegations that at least one plane was considered unsafe to fly at normal cruise altitude, according to people familiar with the matter.
The Federal Aviation Administration’s latest moves, these people said, indicate the agency is expanding its probe into suspected structural problems with rear bulkheads on a small portion of American’s fleet of McDonnell Douglas MD-80 jets.
Earlier this year, American took more than a dozen planes out of passenger service, retiring several of them, after finding they had improper bulkhead repairs.
Air Europa Increase Flights and Add New Routes Flight
While other low-cost airlines cut services, Air Europa is bucking the trend with increased flights and new routes for its Winter 2009 schedule.
The Spanish airline announced scheduled flights to winter sun favourites the Canary Islands of Las Palmas, Tenerife, Gran Canaria, Lanzarote and Fuerteventura, as well as Palma de Mallorca, Ibiza and Minorca in the Balearic Islands.
These destinations have short connection times in Madrid and the airline is also launching three daily flights to Lisbon via Madrid.
Air Europa’s London Gatwick to Madrid route provides regular connections to a host of exciting destinations in South America and the Caribbean including Cuba, Argentina, Brazil, Venezuela, Mexico and the Dominican Republic.
Three-times-weekly flights from London to Brazil’s Salvador de Bahia via Madrid are to be reintroduced from November 3rd 2009.
Air Europa’s service to Argentina has proved so successful that the winter schedule will see flights increase to once a day from Buenos Aires.
“Following the success of the new London Gatwick to Madrid route, Air Europa is fast becoming known as a South American specialist airline.
“We are proud to offer our customers even more new routes and an expanded winter schedule,” says Colin Stewart, UK general manager.
Looking ahead, Air Europa is also announcing a weekly transatlantic flight between Tenerife North and Miami, securing its position as the only carrier to offer a non-stop service to the US from either of Tenerife’s airports.
