American Airlines Posts

Has Airline Consolidation Gone Too Far?

Airline consolidation over recent decades

Last week, we learned that the US Justice Department and six states filed an antitrust suit to prevent American Airlines from merging with US Air. The government’s position is that while the merger would benefit the two companies and the air travel industry as a whole, it would have a negative impact on consumers through higher fares and fees. The airlines disagree, claiming the merger would result in improved service for customers; It would also allow American Airlines to emerge from bankruptcy court protection, where it has been since filing in 2011.

AA: We Should Have Pulled Planes Down Faster

How do you raise $2.9 billion in this economy? That´s a question that American Airlines is happy to be able to answer these days.  I met with an AA  representative here while I was visiting tourism boards at Travel Mart Latin America in Chile and she told me some of the ways that the airline raised the funds.

First, they sold a billion bucks worth of airmiles to Citibank. Then they refinanced their leases for many of their aircraft, essentially selling the planes back to the leasing firms and raised hundreds of millions. Now she said theý are about to get rid of a huge chunk of their fleet of MD-80s, very old vintage 1980s planes that get terrible gas mileage, pollute a lot, and aren´t very comfortable. Plus they don´t have enough TV screens.

The plan is to replace them with new Boeing 737s, which will all be outfitted with seatback video screens and use a lot less fuel.  I asked her who would buy the fleet of aging MD-80s. African airlines, small charter operators, and people who need planes to haul freight, she said.

She said one mistake that AA made at the beginning of the crisis was that they didn´t pull down planes fast enough. In other words, they should have parked more old planes in the Arizona desert to reduce the amount of seats in the sky.  Airlines do this when times are tough, so that they don´t have excess capacity.

Another topic we discussed was new routes: American will soon fly to Beijing from Chicago, and are adding 12 new cities out of Chicago that they will service. They´re bringing back Honolulu to Chicago, a route that was abandoned a few years back.