Newspaper article THE JOURNAL RECORD

American Airlines to Slow Pace of Rapid Expansion

Newspaper article THE JOURNAL RECORD

American Airlines to Slow Pace of Rapid Expansion

Article excerpt

NEW YORK (AP) _ American Airlines on Wednesday announced a slowdown in the top U.S. carrier's rapid expansion pace, illustrating the industry's financial pain and sending a chill through the world of aircraft manufacturing.

"Profits simply aren't what they need to be," said Robert L. Crandall, chairman of the airline's parent, AMR Corp.

Crandall told securities analysts in New York he was planning cutbacks of $400 million over the next two years and more than $500 million over five years. He did not say where all the cuts will be made, but one big item will be reduced spending on aircraft.

"We're looking at food, advertising _ every single item of controllable expenses," he said.

His announcement came as American and other large airlines have been tightening the rules on fall-season discounts for air travelers, another sign that the biggest carriers aren't happy about selling cheap seats.

Crandall acknowledged fares may need to go up. He lashed out at executives at some competitors "who seem to believe their mission in life is to put every living human being on an airplane _ at any price _ and who have failed to do their economic homework. . ."

"This get-'em-on-the-plane mentality is exacerbated by the fact that more than 25 percent of our industry's capacity is being operated by bankrupt and near-bankrupt carriers," Crandall said. "As we all know, such carriers often price to raise cash, which makes absolutely no sense in a long-term, capital intensive industry like ours."

Crandall also attacked the government, saying lawmakers who require a wheelchair on board each widebody aircraft should be "more realistic about acknowledging their costs" and a proposal to remove seats next to emergency exits will be expensive while having no "measurable impact on passenger safety."

Most analysts saw Crandall's cost-cutting plans as a sensible move as the industry struggles to recover from losses brought on by the Persian Gulf War and the recession.

"The hard times have affected the top of the pack since the invasion of Kuwait last summer, but it's finally affected at least one company's thinking of their overall aircraft order plan," said Mark Daugherty, who follows airlines for Dean Witter Reynolds Inc. …

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