By Sholnn Freeman
Washington Post Staff Writer
Thursday, June 26, 2008
American Airlines, the largest U.S. airline, announced yesterday a deep round of service cuts that includes shrinking the number of flights from New York's LaGuardia airport and eliminating service to four smaller U.S. cities.
The cuts, which go into effect in October, end service from various airports to Albany, N.Y., Providence, R.I., Harrisburg, Pa., and San Luis Obispo, Calif. American flies to those cities under its American Eagle brand, which generally uses 37- and 50-seat jets. American also said it would cut flights from LaGuardia: 62 to Chicago, 43 to St. Louis and 42 to Dallas-Ft. Worth, on American and American Eagle.
In the Washington area, American will cease flying to Reagan National Airport from LaGuardia in November. However, the airline will add flights between National and John F. Kennedy International airports.
The cuts are in line with an announcement in May that the airline would slash its U.S. flying capacity by as much as 12 percent compared with a year ago. Other big U.S. carriers have announced similar-size cutbacks, and most, including American, have not ruled out more cuts in coming months.
American, in a statement, said the changes are being instituted to reduce costs and create a "more sustainable supply-and-demand balance" in light of high fuel costs. Analysts have said current flight cuts will make it easier for airlines to raise fares in the future.
American said part of its reason for trimming service at LaGuardia was to reduce air traffic at the chronically overcrowded airport.
Yesterday, an industry analyst said sky-high fuel prices were wreaking havoc on airlines. U.S. air carriers are projected to pay $61 billion for jet fuel this year, up $20 billion from a year ago and double what they paid in 2004. Tumbling share prices have shaved off billions of dollars in the airlines' market capitalization. Mark J. Schulte, managing director of Taurus Corporate Finance Group, said the industry is heading into a critical period that could determine the "winners and losers" in U.S. aviation.
"Over the next 18 months, the prospects look very dismal," Schulte said, speaking in Washington at an International Aviation Club luncheon. "The U.S. industry is facing its biggest challenge since the inception of commercial air travel."
Schulte said executives at squeezed U.S. airlines are scrambling for ways to raise cash to cope with the crisis. He said their options included selling off assets, taking on more debt and selling ownership stakes to foreign rivals.