Posts Tagged ‘American Airlines’

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U.S. airlines still struggling

Thursday, October 22nd, 2009

The airline industry is still struggling to combat the global recession and most U.S. airlines have posted poor results for the third quarter. Although a drop in fuel prices has helped ease some of the pain, the world’s airlines are still struggling due to the disappearance of the business traveler.

This week some airlines reported a dramatic drop in share value with some losing more than twelve percent. Revenues on average dropped by twenty percent in the third quarter as demand for seats lessened and airlines cut back on capacity. There have been glimmers of hope in the fourth quarter as some airlines report a slight rise in bookings but experts say that they cannot be sure that passenger levels will ever increase to the numbers who were flying before the global downturn.

AirTran senior vice president for marketing and planning, Kevin Healy says that he is worried by signs that oil prices might be about to go up. He said that any increase in the cost of fuels would be devastating for airlines.

American Airlines have just posted a $359 million loss for the third quarter and Continental Airlines have announced that their shares have dropped by 11.3 percent.

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Global alliances will allow airlines to grow

Tuesday, October 6th, 2009

In an attempt to expand business airlines around the word which have been suffering because of a lack of passengers, rising fuel prices and a poor global economy are now looking to build partnerships with other airlines.

At the moment there is a bidding war going on between American Airlines and Delta who are trying to form tie ups with beleaguered Japan Airlines. The fact that the two U.S. carriers are fighting over Japan Airlines, which is in an awful lot of trouble at the moment, shows how much importance is being placed in forming global alliances. The domestic market is showing little sign of any immediate recovery and therefore airlines need to look to the international markets.

There are already alliances in place between airlines like oneworld and SkyTeam. However these alliances were made so that partners could offer passengers more choice in destinations. Analysts predict that the new alliances will be more about sharing revenues and staff and pooling resources whilst coordinating flights.

Alliances are seen by many to be far more attractive than straightforward takeovers because they do not require companies to spend large amounts of money on restructuring and relocation. Global alliances will also put airlines in a stronger position when it comes to dealing with travel organizations, airports and aircraft manufacturers.

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Airline tie-up plan under scrutiny

Monday, October 5th, 2009

The European Union’s competition watchdog has issued concerns about the proposed transatlantic tie-up plans of British Airways, Iberia and American Airlines.

The airlines, all members of the Oneworld alliance, want to operate as a joint business on services between the EU and the United States.

If the plans are to proceed they would also need approval from regulators in the US.

The EU has sent a Statement of Objections to the airlines, and they now have te chance to respond before a decision is reached.

The EU has confirmed that other plans by Star Alliance members Lufthansa, Continental and United, as well as Skyteam members Air France/KLM and Delta/Northwest are also under scrutiny.

The Oneworld plans would allow the three carriers to co-operate on schedules and pricing for the US bound flights, and if a customer contacted one of the airlines, they would be offered seats on all three airlines.

British Airways has said in a statement that it was looking forward to the opportunity to address and overcome the EU’s concerns.

The statement went on to mention that the join business would benefit millions of customers with greater access to discounted fares, more convenient connections and better access to a global network of more than 500 destinations.

British Airways currently operates two joint businesses, one with Qantas on flights to Australia and Iberia with services to Spain, neither of which need EU regulatory approval.

The Star Alliance and Skyteam plans have already received approval from US regulators, with BA expecting a rule on the Oneworld plans by the end of this month.

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E.U. accuses oneworld alliance of illegal practices

Friday, October 2nd, 2009

The European Union has formally charged British Airways, Iberia and American Airlines for breaching anti-trust rules which forbid companies from making deals with each other that shut out rivals.

The airlines are accused of making deals with each other to share lucrative trans-Atlantic routes. The European Union has been investigating the oneworld alliance that the airlines belong to. It says that if it finds the companies guilty of forming an illegal cartel to fix prices on trans-Atlantic routes it could fine them up to ten percent of their yearly turnover.

The European Union has said that it is only looking into the trans-Atlantic airlines at present and any findings should not affect other members of the oneworld alliance. However it is conducting investigations into the Star Alliance which is made up by Air Canada, United, Continental and Lufthansa and also SkyTeam, an alliance made up of Delta/Northwest and Air France/KLM.

The European Union has told all three airlines under investigation that they now have the opportunity to defend themselves against the accusations of price fixing either in writing or at a formal hearing. The airlines are also under investigation for planning to extend their alliance across routes to places like Mexico and Canada.

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Minister declares that Japan Airlines will not be bankrupted

Monday, September 28th, 2009

There was a ray of hope for Japan Airlines at the weekend when Seiji Maehara, the Japanese Land, Infrastructure and Transport Minister declared that it would be impossible for him to force the largest airline in Asia into bankruptcy. Japan Airlines is in dire straits at the moment having lost around $1 billion in the second quarter this year. Forecasts for losses for the current fiscal year ending March 2010 are a phenomenal $701 billion at present.

The airline has been looking for financial support from the Japanese tax payer recently and in June this year took a loan from the Development Bank of Japan for $668 million.

According to reports the president of Japan Airlines, Haruka Nishimatsu told the transport minister at a meeting last week that the airline would have to raise somewhere in the region of $5 billion before year end in March 2010 to cover up-coming debt repayments. Nishimatsu allegedly told Maehara that two of the ways he would try to start raising the cash would be by selling off the in-flight catering arm of Japan Airlines and looking into some sort of pension restructuring.

Maehara says that he felt the government had to step in and create a restructuring plan for Japan Airlines because plans by the airline itself were not sufficient. He said that his government appointed team should be in a position to give advice on how to proceed by the end of October.

At present Japan Airlines is still thought to be in talks with America’s Delta Airlines and American Airlines as well as Air France-KLM about potential investment tie-ups.

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American Airlines to sell 30 million shares

Tuesday, September 22nd, 2009

American Airlines are planning their second move in less than a week to increase the company’s liquidity. AMR Corp who own American Airlines have said that they will sell off 30 million shares in common stock and issue $250 million in convertible debt to be due in 2014.

AMR Corp has said that the money raised will be put towards general corporate purposes. However the airline is believed to be trying to prevent a tie up between rival carrier Delta Airlines and Japan Airlines. The move to free up cash may very well be linked with talks the airline has been engaged in with Japan Airlines, and comes ahead of a possible deal. AMR Corp has refused to comment.

Analysts say that it is probably a good time for AMR Corp to offer stock as it is believed that the American airline industry has finally turned the corner. Experts say that the drop in passenger numbers may well be leveling out and investors are now turning their attention back to the airline industry. Bill Warlick, an analyst at Fitch Ratings said that although the airline industry was getting better, he was cautious about using the term snap back, warning that the most profitable area of the industry, the business sector was still lagging behind the current rate of economic recovery.

AMR Corp have said that depending on how the initial offering of stock goes, it might consider upping its offering of shares by another 4.5 million and offering another $37.5 million in convertible debt.

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American wants Japan Airlines to stay in oneworld alliance

Monday, September 21st, 2009

Japan Airlines is being forced to reevaluate its business model according to analysts, a situation that would have been unthinkable for Asia’s biggest airline just a few years ago. It is no secret that the carrier is in talks with both American Airlines and Delta Airlines about a possible tie up which would involve a large cash injection from either one of the U.S. carriers to allow the Japanese airline to stay alive.

Japan Airlines has not only been hit hard by the recession but a change in Japanese policy has seen a rise in other airlines competing for customers. The open skies treaty with the U.S. will also mean the airline will face tougher competition in the future.

Japan Airlines Chief Executive, Haruka Nishimatsu has refused to say which of the U.S. airlines Japan is in discussion with, but if Delta is chosen as a partner it would mean a departure for Japan Airlines from the oneworld alliance it is currently a member of. It would be required to join Delta’s SkyTeam group. British Airways have allegedly spoken to Japan Airlines and asked them not to consider leaving oneworld as they are still seen as a very valuable member.

American Airlines is said to be desperate to keep Japan Airlines under the oneworld umbrella as it shares flight codes with the carrier. It has warned Japan that if it does decide to move then it will end up losing revenue whilst trying to get regulators to hammer out new commercial arrangements for the airline.

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Delta puts in offer to Japan Airlines as American hold talks

Monday, September 14th, 2009

Japan Airlines, who are under an increasing amount of pressure from the powers that be to reduce costs, prevent further losses and generally stabilize their accounts, had been meeting with American Airlines officials to discuss a possible transpacific partnership when American learnt that rivals, Delta Airlines, had offered to pump somewhere in the region of $300 million into Japan Airlines in return for it leaving the Oneworld Alliance and coming over to Delta’s SkyTeam. The Oneworld alliance contains American Airlines along with British Airways and Qantas.

The move could now see a bidding war breakout between American and Delta.

Japan Airlines is Asia’s largest airline in terms of revenue but it has been struggling and saw losses in the last quarter of around $1 billion. An overhaul of the company and its management is expected to result in selling off of assets, job cuts and a reduction in routes. The company has been looking for investors to help it with its financial problems.

The moves by American and Delta coincide with Japanese and U.S. discussions on an open skies agreement aimed at making it easier for Japan and the U.S. to have access to each other’s hub airports. Insiders have said that American will definitely want some sort of agreement in place with Japan Airlines before any accord is signed between the two nations.

American representatives will stay in Japan this week to continue talks. Although the investment from American may not be enough to sort out Japan’s difficulties it might send out a strong signal to other investors that the airline is a safe bet.

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Airlines swell revenues through extra charges

Thursday, September 10th, 2009

Market research company IdeaWorks has just released a new report that shows a 345 percent increase in airline charges for ancillary services since 2006. Ancillary charges are the add on charges that customers now pay for services such as checking in baggage, a little more leg room, advanced check in and on board meals. These additional services earned the airlines $10.25 billion in 2008.

IdeaWorks looked at the accounts of 93 airlines and found some surprising results. Ryanair, the airline industries budget king, has been knocked off the top spot for profits from ancillary charges by Allegiant Air, a U.S. carrier. In 2006 Allegiant made up 22.7% of its profits from add on charges compared to Ryanair’s 19.3%. Revenues at Allegiant shot up from $56.3 million in the first half of 2008 to $85.9 million in the first half of 2009.

The larger networks are also relying more and more on revenues generated from charging customer’s to check their bags or buy a sandwich on board the aircraft. The charges now account for 6.6 percent of Delta Airline’s revenue, 7.9 percent of United Airlines revenue and 9.3 of American Airlines revenue.

Last week Southwest Airlines introduced a $10 extra charge to allow customers to check in early so that they could increase their chances of getting a better seat. American Airlines are also about to charge an extra $50 for anyone wishing to check in a second piece of luggage on some of its long haul flights.

Analysts predict that these charges will increase as airlines look for more ways to make a profit in tough times.

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American Airlines axes 900 flight attendants

Thursday, September 3rd, 2009

American Airlines, suffering through the worst economic downturn in its history, announced it is eliminating 921 flight attendant jobs. The job cuts will become effective on October 1st.

They are achieving the job cutbacks via a series of voluntary and involuntary lay-offs as well as furloughing some employees.

Airlines the world over have been suffering from declining demand as travelers stay home and weather the economic downturn. Ryanair has been eliminating routes in and out of the UK. British Airways is in dire financial straights. SkyEurope airlines declared bankruptcy this week.

The same day that American Airlines announced the job cuts, The International Air Transport Association released figures indicating that the industry as a whole has lost more than $6 billion worldwide just in the first six months alone of this year

Now the cutbacks are hitting the USA. American Airlines is anticipating more declining demand and is attempting to prepare for the worst. American’s passenger count is down by 9% this year as compared to last year.

At the same time, another US carrier, Southwest Airlines announced that it was cutting back on flights and was eliminating at least three non-stop routes during the winter months. They hope to restart the routes next summer.

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