American Airlines to cut 4Q capacity by 3% and retire up to 11 Boeing 757s

American Airlines (Dallas/Fort Worth) announced it will adjust its late fall and winter schedule, which is expected to result in fourth quarter mainline capacity that is approximately 3 percent lower on a year-over-year basis.

In addition, as part of the reductions, American said it will retire up to 11 Boeing 757-200 aircraft in 2012.

American has moved on a few occasions throughout the year to reduce its capacity as fuel prices moved upward and improvement in the broader economy failed to materialize. With these latest moves American expects full year capacity to be up about 0.4 percent year-over-year for mainline and consolidated capacity will be up approximately 1.2 percent. This represents an approximate 3 percent reduction in the company’s capacity expectations versus American’s initial guidance provided in January 2011.

These reductions will modestly increase 2011 unit costs compared to those incorporated in the guidance provided on Sept. 21, 2011. In addition, compared to prior guidance, third quarter unit costs will be adversely impacted by quarter-end volatility in WTI crude oil prices and foreign exchange rates. WTI prices decreased, while jet fuel prices remained high, which will result in a $29 million non-cash fuel hedging ineffectiveness charge, which will be recorded in fuel expense. In addition, the U.S. dollar strengthened, which will drive a $22 million incremental charge as a result of foreign exchange volatility.

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Copyright Photo: Brian McDonough.