Delta Plans 2012 Seat Cuts as American Joins Pullback This Year - BusinessWeek
Sept. 13 (Bloomberg) -- Delta Air Lines Inc. said it will shrink seating capacity in 2012 while AMR Corp.'s American Airlines joined an industry pullback for the end of this year by cutting flights on lower-demand days of the week.
The reductions at Delta will be 2 percent to 3 percent from 2011 levels, the Atlanta-based airline said today in a regulatory filing. American's fourth-quarter trims will reduce flying by 0.5 percent, Treasurer Beverly Goulet said. The Bloomberg U.S. Airlines Index jumped the most in a month.
"Although advance bookings are generally in line, we are taking the step in light of the mixed economic environment and to make sure we run a smooth operation given additional pilot retirements we expect this fall," Goulet told analysts and investors at a Deutsche Bank AG conference in New York.
Paring capacity can be a positive step for airlines, both in savings from operating expenses and in pricing power for a smaller supply of seats. United Continental Holdings Inc., the world's largest carrier, and No. 2 Delta unveiled their end-of- year retrenchment earlier.
United said 2012 capacity would be unchanged, while Goulet said American, the third-largest U.S. airline, is "taking a very careful look" at next year's capacity and expects to announce plans shortly.
Airlines Rally
The Bloomberg airlines index jumped as much as 7 percent for its biggest intraday advance since Aug. 9, led by US Airways Group Inc. The Tempe, Arizona-based airline soared 92 cents, or 19 percent, to $5.77 at 12:26 p.m. in New York Stock Exchange composite trading, the most since September 2009.
AMR climbed 22 cents, or 6.7 percent, to $3.49, and Delta climbed 64 cents, or 8.7 percent, to $8.02.
US Airways President Scott Kirby told analysts and investors that air-travel demand appears to be disconnected from global economic events such as the European credit crisis that might have eroded airlines' business in the past.
"We don't see any evidence yet of a slowdown," Kirby said. "We've seen a strong demand environment from mid-July through yesterday."
American's pullback includes reductions that began in August of as much as 4 percent on Tuesdays, Wednesdays and Saturdays, Goulet said. Pilots were asked to voluntarily delay September vacations to avoid shortages after 111 retirements at the end of August exceeded expectations.
The Fort Worth, Texas-based airline had held off on disclosing fourth-quarter capacity changes as Delta decided in July to deepen its capacity reduction to 5 percent after the peak summer travel season, up from a planned 4 percent cut, and United chopped available seats by 4 percent.
Ready to Cut
United can accelerate retirements of some of its oldest planes if it needs to lower costs, Chief Executive Officer Jeffery Smisek said at the conference. Total seating will remain unchanged while domestic flying drops and international capacity rises, he said.
"If we had a material decrease in demand or a material increase in input prices, we would shrink" in 2012, Smisek said.
Delta's projected cut in 2012 flying builds on savings steps such as buyout and early retirement offers that were accepted this year by more than 2,000 employees. The airline also said this month it is eliminating 200 administrative jobs.
American also said Hurricane Irene will reduce revenue by about $25 million and that third-quarter unit revenue, a measure of sales for each seat flown a mile, will rise by about 7 percent from a year earlier.
Southwest Airlines Co., the largest low-fare carrier, said Irene reduced revenue by about $6.5 million.
--Editors: Ed Dufner, James Langford
14 Sep, 2011--
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