American is restructuring its operations at San Juan as part of its capacity reduction efforts, and retiring American Eagle’s fleet of Saab 340s beginning in September. This round of reductions will affect American and American Eagle flights originating from San Juan to the United States and various islands in the Caribbean. The actions are part of AMR’s plans to reduce fourth quarter mainline domestic capacity by 11 percent to 12 percent compared to 2007 levels and its fourth quarter regional affiliate capacity by 10 percent to 11 percent compared to 2007. Related Story
Fourth quarter consolidated system capacity is expected to decline seven percent to eight percent year over year. To effect these changes, AMR plans to retire 40-45 mainline aircraft (mostly MD-80s and some Airbus A300s) and 35-40 regional jets. In an effort to significantly reduce costs, American Eagle also will retire its Saab fleet by the end of the year. AMR is also discontinuing Chicago-Buenos Aires September 3, Chicago-Honolulu January 5 and operate only on peak days after September 3 as well as Boston-San Diego on September 3.
Legacy carrier efforts to cut capacity have just created more opportunities for low-cost carriers, according to TheStreet.com’s Ted Reed who indicated domestic cutbacks at legacies since 2005 have only been more than matched by domestic capacity increases at the LCCs.
"Low-cost carriers are growing while the network guys are shrinking domestically, and this has gone on every month for the last three years,” FTN Midwest analyst Mike Derchin told Reed. “The change is that the rate of descent by the network airlines after Labor Day and in 2009 is likely to be steeper."
Legacy carriers dropped capacity every month since January 2005 reducing overall capacity that year by 2.8 percent, according to Derchin’s research. That was followed by 4.6 percent, 2.2 percent and 3.6 percent, respectively, in 2006, 2007 and so far in 2008. Meanwhile, said Derchin, Air Tran grew 19.4 percent to JetBlue’s 11.6 percent and Southwest’s 7.5 percent just last year alone. Even Continental increased capacity by 5.6 percent creating a slight uptick in capacity of 0.5 percent for last year. Both Southwest and JetBlue said they intend to expand capacity further this year.