American Parent AMR Cuts Seating With Fuel at Highest Since 2008

American Parent AMR Trims 2011 Capacity as Fuel Prices Rise
American Airlines jets sit on the tarmac at Reagan International Airport in Arlington, Virginia. Photographer: Andrew Harrer/Bloomberg

American Airlines parent AMR Corp. trimmed full-year capacity growth this year to blunt the effect of jet-fuel prices at the highest level since 2008.

Available seats on American and regional carrier American Eagle will rise 3 percent, down from an earlier plan of 4.3 percent, AMR said today in a U.S. regulatory filing. The Fort Worth, Texas-based company fell 2.7 percent as an index of U.S. airline stocks tumbled to a five-month low.

AMR follows Atlanta-based Delta Air Lines Inc. in cutting growth plans as crude and jet fuel climb on concern that Middle East oil supplies may be interrupted. U.S. carriers also have raised fares across most of their networks five times in 2011 to help offset the additional expense.

“If you boost prices to cover higher fuel costs, that is almost certainly going to reduce the level of demand,” David Swierenga, president of aviation consultant AeroEcon in Round Rock, Texas, said in an interview. “It’s just good economics to tailor your capacity to the expected lower level of demand.”

Jet fuel for immediate delivery in New York harbor rose 13 cents, or 4.1 percent, to $3.22 a gallon today, its highest since September 2008. Fuel, which is among the two biggest expenses for airlines, has climbed 25 percent this year.

AMR slid 18 cents to $6.56 at 4 p.m. in New York Stock Exchange composite trading. The Bloomberg U.S. Airlines Index declined 3.5 percent, paced by US Airways Group Inc.’s drop of 66 cents, or 7.7 percent, to $7.95. Delta fell 63 cents, or 5.6 percent, to $10.61.

Capacity Plan

AMR originally said it would boost international capacity at American by 7.5 percent in 2011 and domestic capacity by about 1 percent, for a total increase of 3.5 percent. When combined with Eagle, the increase was 4.3 percent.

“In light of the current environment, in particular recent fuel price trends, we are trimming back our capacity plan for 2011,” said Andy Backover, an American spokesman.

Delta on Feb. 3 lowered its plans for capacity growth this quarter to no more than 5 percent, down from earlier plans to expand by as much as 7 percent. The airline said at that time it was “revising full-year plans to reflect new fuel levels,” without giving specifics.

AMR said today that winter storms in the first two months of the year reduced revenue by about $50 million. Storms forced the cancellation of 8,000 flights in the first 45 days of the year, the company said.

American also disclosed it agreed last month to acquire a third Boeing Co. 777-300ER as it expands international flying. The aircraft, to be delivered in 2013, joins two others American ordered in January.

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