American Reconfigures Flight Map, Gains Financing
American Airlines next year will bulk up service at its hubs in Chicago, Dallas, Miami and New York, as it reallocates capacity from underperforming markets, including the discontinuation of 20 destinations from St Louis and nine departures from Raleigh/Durham, N.C.
Executives for the airline during a conference call with analysts and reporters today said they are targeting mainline capacity to be up 1 percent next year compared with 2009, with domestic available seat mile holding flat and international growing by 2.5 percent.
Though technically an increase, CFO Tom Horton today said 2010 capacity remains essentially flat since year-over-year comparisons include Mexico cancellations related to swine flu and the deferral of Chicago-Beijing flights until next summer. "We don't mean to imply that we're resuming growth," he stressed.
Most of the new capacity adjustments will be effective next summer. The biggest surge takes place at Chicago O'Hare with the addition of 50 daily flights, including service to 12 new cities. Those include mainline service to Honolulu and Vancouver and American Eagle service to Calgary, Allentown, Pa.; Charleston, W.Va.; Dayton, Ohio; and Lexington, Ky.
In conjunction with that regional service, American Eagle plans to launch a first-class cabin on 25 CRJ700 aircraft, most of which will be deployed to Chicago.
At its Dallas/Fort Worth hub, American will add 19 daily departures, which include 17 mainline departures. In Miami, American in the next year will launch four new domestic routes—to Birmingham, Ala.; Charleston, S.C.; Pensacola, Fla.; and Knoxville, Tenn.—and three Bahaman destinations. New York JFK will gain six new destinations, half of which are international, including Madrid and Manchester, while Los Angeles will gain two daily flights.
American today also said it reached major financing deals totaling $2.9 billion. The carrier immediately gains $1.3 billion in cash through a $1 billion advance mileage sale to Citi and a $280 million loan from GE Capital Aviation Services. Additionally, American struck a $1.6 billion financing deal with GE Capital Aviation Services to cover the purchase of new Boeing 737s , which are "newer, more efficient airplanes" than the MD-80s they are replacing, AMR chairman, CEO and president Gerard Arpey wrote in a letter to employees today.
American is not alone in building its cash reserves. "Larger airlines have built up cash reserves of $15 billion in the past 10 months," International Air Transport Association director general and CEO Giovanni Bisignani said this week prior to the American announcement. Of that, he said, $12 billion is in debt and $3 billion is in equity. He likened the increase in liquidity to a "war chest to fight the crisis." Still, Bisignani said, "some airlines have not been able to build up their reserves. They've relied on banks, and banks are not lending," which means "we could see some more casualties in the coming months."
"There's no denying that the crises of the past two years have taken a toll on our earnings as well as our balance sheet," Arpey said in a call today with financial analysts and media. "I think it's fair to say that the same could be said for every airline. While you can never borrow your way to success, today's financing announcements are very important and positive developments."