The high cost of gas has finally hit the airlines where it hurts most — in the pocketbook — and now some of them are cutting flights.
The Houston Chronicle:
American Airlines, citing skyrocketing fuel costs, said Friday it would cut some flights, and Houston-based Continental is likely to do the same.
At the same time, several major airlines were hoping a fare increase instituted this week would stick.
American Airlines said Friday it would temporarily cut 15 daily flights from its two major hubs, including two to George Bush Intercontinental Airport. Continental said Friday it likely will also cut flights because of fuel costs.
Airlines are paying record prices for fuel, a trend that’s expected to continue because of disruptions to refineries on the Gulf Coast after hurricanes Katrina and Rita.
A Bloomberg report echoes the above report via the Houston Chronicle (link in first paragraph).
American, the world’s largest carrier, said today it will suspend flights from Chicago and Dallas-Fort Worth to 12 cities Oct. 5 through Oct. 29. Delta, the No. 3 U.S. airline, has canceled an unspecified number of flights. Continental expects to suspend some flights after reviewing its October schedule.
Refinery outages from hurricanes and tightened supply are boosting prices for jet fuel, which is refined from crude oil. The price of oil, plus the price paid for refining, pushed the cost of a barrel of jet fuel on the Gulf Coast to $124.99, or $2.98 a gallon, on Sept. 28, according to American. Fuel is the second-largest expense for airlines, behind labor.
“I expect more of the network airlines to do the same,” Alan Sbarra of San Francisco-based Roach & Sbarra, said in an interview. “Now that fuel is an issue, and other economics of the airline industry are pretty difficult, a lot of marginal flights are hard to justify. It’s a prudent trimming of marginal routes.”
American also said it’s dropping daily service between Chicago and Nagoya, Japan, at the end of October. While passenger numbers on the flight, which began in April, had been building, higher fuel prices made it “financially untenable” to continue, said spokesman Tim Wagner.
Rising jet fuel prices prompted Northwest Airlines Corp., the No. 4 U.S. airline, to say earlier this month that it will stop daily, non-stop flights between Tokyo and New York. Eagan, Minnesota-based Northwest and Delta filed for bankruptcy protection Sept. 14.
The bottom line is that this seems to be the beginning of a shakedown within the airline industry. Don’t hold your breath expecting an industry expansion soon.