Every day, American Airlines gets up in the morning, looks in the mirror, thinks about the $3.3 million dollars it lost yesterday, brushes its teeth and gets ready to lose another $3.3 million. Fortune says the hemorrhaging began in January, and while red ink is no stranger to the airline industry, they’re running out of things to cut.
Fortune interviewed American Airlines’ CEO Gerard Arpey, who had this to say:
In this climate, Arpey won’t rule anything out. If Delta were able to complete its purchase of Northwest, American would be toppled from its perch as world’s largest carrier. And a combined United and Continental would be even larger. That would leave American in arguably the weakest position among the network carriers. But Arpey says the size of his company doesn’t matter as much as the strength of its assets. “We believe we will remain competitive irrespective of any consolidation that occurs,” he said. “The real challenge is being profitable.”Later, as we were walking down the jet bridge, Arpey paused. “There is no business,” he said, “that can go on forever selling its product for less than the cost to produce it.”
Meanwhile, the Wall Street Journal notes that the airlines are finally starting to raise ticket prices along with the increased fees and surcharges. Travel blog Jaunted says:
Mergers would allow airlines to trim routes and, by reducing capacity, further raise prices, though carriers say that’s not the plan. (Riiiiight.) This is all good news to one company, though. Virgin America is keeping fares low by burning through investor cash…
Enjoy that while it lasts.
American Airlines loses $3.3 million a day[Fortune]
Airlines Finally Passing Higher Costs on to Passengers [Jaunted]
(Photo:Zonaphoto)
More From Consumerist
-
American Airlines Gets Court-Approved Labor Deal With Pilots At Long Last
-
American Airlines To Hire 2,500 Pilots While Still Dealing With Contract Disputes
-
Virgin America Soars Above The Rest In Annual Airline Survey While United Sinks To The Bottom
-
Angry Pilot Lets NYC Control Tower Know He's Not Happy With How Terror Threat Delay Is Being Handled
-
Pole Vaulter: Delta Airlines Robbed Me Of My Title By Losing My Poles
If they want to save money, why don’t they cut the millions and millions of dollars they pay every year to high level execs who do nothing but lie to stockholders?
@unklegwar: “they’re running out of things to cut.” should read “They’re running out of things they are willing to cut.”
There are many things in the airline industry that need to be streamlined, but, as has been said earlier, it needs to start with corporate compensations.
@RedShirt: I don’t know about JetBlue, but Southwest employees are indeed unionized. They just don’t fight with their unions and end up striking.
Poor American Eagle pilots have a union but are forbidden from striking, which sounds like its even more toothless then no union at all. No surprise co-pilots and flight attendants with kids are eligible for welfare.
Obviously a bad business model.
@JustThatguy and Redhirt
Not sure where you are both getting your info from but #1) SWA is in fact Union and all its ground ops peeps are in full contract negotiations right now. #2) SWA is in fact still profitable as seen in their Q1 earnings.
Airlines have more to pay for than just fuel costs (SWA Hedges their fuel costs so they don’t pay current market rates as do other airlines), they have to pay the airports they chose to “rent” space from, maintenance, employee salaries, employee benefits, workerscomp (which in places like CA is off the charts, advertising, etc.
While I’m not trying to defend the airlines I agree that a lot of it has to do with leadership for each airline as well as the government constantly bailing them out. My husband works for SWA and we actually got a letter from the CEO about how this is going to be an extremely tough year for them and they need to cut costs etc. Funny how several of their unions contracts expire this year and you can bet your behind that comp is going to be a major issue. I told my husband the CEO should come work for his pay in CA and see how long he can survive.
Should make for an interesting year across the entire industry and all of us will enjoy jammed packed flights as well.
@Jenng:
1. Never said SWA wasn’t union.
2. I stand corrected – they did a bit better than expected in 1Q08, and managed to generate a profit. Consensus had been for a loss.
3. As to fuel costs, SWA has some of the best hedging around, but fuel costs were still up 20% YoY in 1Q08 (went from effectively paying about $1.60/gal to $2/gal, and they’re going to rise even more in 2Q08 (expecting about $2.35/gal). That’s serious coin.