American Airlines will remove the carry-on restriction from
its Basic Economy fares later this year to make them more competitive,
executives said in the carrier's earnings call.
While chairman and CEO Doug Parker said American has been
"very happy with the results" of its Basic Economy fare, which
it launched in early 2017, the carry-on restriction has put American
at a disadvantage in markets where it competes with Delta, which has a similar
fare without the restriction. "There are filters for things like Google
[Flights] search that ask if you want to bring a carry-on, and all of a sudden,
American flights don't show up as highly as before because it adds $20 to the
fare," he said. "We've gotten to the point where the right thing to
do is to get in line with the competition."
The change will apply to flights on and after Sept. 5, after
which United will be the only major U.S. carrier with Basic Economy carry-on
restrictions. Networkwide Basic Economy fares remain central to American's
plans, president Robert Isom said. The carrier expanded Basic Economy to its
transatlantic flights during the second quarter, though those fares already
are free of carry-on restrictions.
More than 60 percent of travelers overall opt to buy into
higher fare classes when offered Basic Economy, Isom said, and corporate travel
programs particularly have eschewed them due to other restrictions including no
seat selection and no cancellations or changes.
American's Q2
American's Basic Economy change follows what Parker called
"the most challenging quarter we've faced since our merger in 2013."
Higher fuel prices drove the carrier's expenses up $700 million during the
quarter, and American also took a hit due to a June technical glitch at
subsidiary PSA Airlines that resulted in thousands of canceled flights. While
passenger revenue increased 3.1 percent year over year to $10.67 billion, American's
growth rate trailed that of each United and Delta, Parker said.
That lag has not occurred on the corporate side, however.
Corporate revenue rose 10 percent year over year in the second quarter, and
American increased its market share among corporate travelers during the
quarter, Isom said. "The corporate demand environment is strong. The sales
team has built a healthy corporate pipeline, signing new agreements with key
accounts, and our small to medium-sized corporate account acquisitions are at
an all-time high."
Like
its competitors, American is trimming its capacity plans in response
to higher fuel prices, including reductions in routes to China and Brazil, Isom
said. The carrier has lowered its third-quarter capacity growth to 3.3 percent,
down 0.6 percentage points from earlier projections, and has lowered its fourth-quarter
growth to 1.6 percent, down 1 percentage point. American also has deferred some
aircraft deliveries, including spreading out the delivery of 22 Airbus A321neos
that were slated to be delivered between 2019 and 2021. That will reduce costs
by about $1.2 billion over that period.
In the second quarter, systemwide traffic rose 2 percent year
over year as capacity increased 1.6 percent, pushing load factor up 0.4
percentage points to 83.4 percent. Yield increased 1 percent in the quarter.
American Airlines reported a net income of $566 million for
the quarter, down from $864 million in the second quarter of 2017.
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