American Airlines Suffers From High Oil Prices
May 27th, 08American Airlines intends to decrease the amount of domestic flights it offers by between 11 and 12% after the end of summer of 2008. Earlier this year, American Airlines had only meant to lower the amount of flights by 4.6%.
In the meantime, the parent company of American Airlines, AMR Corp, suffered at the stock market. Its shares went down by a full 24% this week. Presently, a share of AMR stock costs $6.22, which is less than it used to cost just a day ago by $1.98.
Other signs of decline for American Airlines include the fact that the company intends to ask customers $15 merely for checking in a single bag on one of its flights. This new policy will go into effect as of June 15, according to American Airlines. Additionally, the company plans to charge customers more for reservations and for transporting larger-than-normal sized luggage. In April, the company already started asking its customers $25 for checking in a second bag. Several other carriers have also started to implement similar policies.
The company also intends to lay off many thousands of its workers. This will have a significant effect on the country’s infrastructure, because American Airlines is the largest air travel company in America.
Gerard J. Arpey, Chariman and Chief Executive of American Airlines, said the company will be resorting to all of these new measures due to the “current reality of slow economic growth and high prices.”
The reason for all these problems is the high price of oil, resulting in a very high cost of fuel for the company’s jets. Oil prices have gone up to more than $130 per barrel, heights that have no known precedent. According to American Airlines, the increasing cost of oil has cost the company almost $3 billion since the beginning of 2008.
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