Fuel prices forcing airlines to cut planes, flights, jobs
Fewer planes, fewer flights and fewer jobs - that's how some U.S. airlines plan to cope with a 30 percent rise in fuel prices the past six weeks.
Top executives from United, Delta, JetBlue and US Airways announced new fleet cutbacks Tuesday, while executives from other carriers, including both global No. 1 American and top discounter Southwest, left the door open for capacity cuts or further slowing of their growth.
The executives spoke Tuesday at the annual JPMorgan Chase Transportation Conference in New York.
"It's not a good time for the industry right now," said Delta President and CFO Ed Bastian. "We believe the capacity reductions we're implementing are the right tonic. But to the extent we need to go deeper, we are committed to doing so."
Oil prices rose Tuesday to $109.42 a barrel. Jet fuel recently has traded at record levels above $3.15 a gallon compared with an average of $2.17 last year.
But the announced fleet cuts, and hints of possible additional cutbacks, seemed to help airline stocks. On a day when the Dow Jones average jumped 420 points, all the USA's big airlines saw their shares finish in positive territory for the first time in several weeks.
The changes announced Tuesday:
- Delta will dump 15-20 older, less efficient mainline jets, plus 20-25 regional jets. The change will result in a 10 percent reduction in Delta's domestic flying capacity by year's end. It also will eliminate at least 2,000 jobs.
- United will remove 10-15 older mainline jets to partially offset fuel costs that could swell $1.2 billion more than planned this year. United has led in pushing fares higher to offset rising fuel prices. But CFO Jake Brace warned that the industry likely won't be able to raise fares enough to fully offset higher fuel prices.
- JetBlue will sell four more Airbus A320s, on top of the six it previously announced that it would sell. In total, 10 A320s will leave the fleet by early 2009.
- US Airways will fly three fewer planes during the second half of the year than previously expected and could cut back further, President Scott Kirby said. But he added that despite tough fuel prices "remarkably, the (travel) demand environment remains pretty strong."
While American and Southwest executives hinted at possible capacity cuts, Continental CFO Jeff Misner noted that his carrier can generate big fuel cost savings by retiring up to 63 older, less efficient 737s, 757s and 767s by the end of 2009. Replacements are on order with Boeing.
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