Here we go again.
Following a whopping $340 million loss in the fourth quarter of 2008, American announced it will take fewer new planes in 2009 and reduce service overall. The cutback in new planes is due largely to manufacturing delays at Boeing, but American has also decided not to backfill the routes those new planes were supposed to fly. The end result is a projected 6.5 percent drop in capacity, a slightly bigger cut than previously expected.
With the economy taking a big bite out of the industry's business, last year's massive cuts (to combat record-high fuel prices) are beginning to look very wise. American, along with most other airlines, cut service by more than 10 percent for the second half of 2008, which put the airline in a better place when demand dropped off late last year.
But American's decision to expand its service reductions sets an ominous tone for 2009, because last year's cuts haven't kept up with plummeting demand. More airlines may be forced to broaden the capacity cuts put in effect over the past few months, and carry those reduced schedules well into the coming year.