May
22

What To Expect From Airlines Now That Oil Is $130 A Barrel

Everybody is talking about the Oil have been increasing like hell. But what about Airlines? The first solution that some Airlines applied is slowing down flights to save on fuel but it seems that is not enough. The Consumerist published two articles about this one in general and one for American Airlines Now Charges $15 For The First Checked Bag. Scott McCartney, who writes the Wall Street Journal’s “Middle Seat” column Said:

It’s very difficult for airlines to simply raise prices to levels that cover their higher fuel costs. Raising prices chokes demand: If tickets get too expensive, business travelers make alternate plans, pick cheaper airlines or buy discounted tickets further in advance. For vacationers, if prices get too high, they don’t buy or they switch to cheaper destinations. Airlines can price themselves right out of a sale.

So to avoid that, carriers have been slap-happy with fees added at the airport, not at the ticket purchase point. A family heads off to Disney because they got a good fare – then find themselves paying $300 extra at the airport in baggage fees. Fees are essentially fare increases that airlines hope won’t choke demand.

But slapping fees on customers here, there and everywhere won’t solve the problem. Airlines will have to make big cuts in capacity, eliminating flights that just aren’t profitable with oil at $130 a barrel (as of Wednesday morning). Fewer flights means skimpier schedules for many travelers. More important, it means higher fares. The price of flying has to go up if airlines are to survive.

American to begin charging for first checked bag

FORT WORTH, Texas (AP) — American Airlines said Wednesday it will start charging $15 for the first checked bag, cut domestic flights and lay off workers as it grapples with record-high fuel prices.

The nation’s largest carrier said the fee for the first checked bag starts June 15 and that it would raise other fees for services ranging from reservation help to oversized bags.

American plans to cut domestic flight capacity by 11 percent to 12 percent in the fourth quarter. American had previously expected fourth-quarter capacity to fall 4.6 percent from the same period in 2007.

Parent AMR Corp. said reduced flying will lead to an undisclosed number of job cuts at both American and its American Eagle subsidiary.

AMR expects to retire 45 to 50 planes from its fleet, most of them gas-guzzling MD-80 aircraft. Those were the plane grounded for faulty wiring last month.

American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year.

AMR shares tumbled $1, or 12.3 percent, to $7.20 after the announcement.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

FORT WORTH, Texas (AP) — American Airlines says it will cut domestic capacity by 11 percent to 12 percent in the fourth quarter as it grapples with record-high fuel prices.

American had previously expected fourth-quarter capacity to fall 4.6 percent from the same period in 2007.

The airline’s parent company AMR Corp. said Wednesday it also expects to retire 45 to 50 planes from its fleet, most of them gas-guzzling MD-80 aircraft. Those were the plane grounded for faulty wiring last month.

American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year.

Source: American Airlines