Cancellations

[WallStreet]

Our guys in the PR department seemingly forgot to mention that we plan on exiting the ORD-NGO (Nagoya) market later this fall. Hmmm? To me that's pretty big news considering all the fanfare that surrounded it's start-up earlier this year.

Anyone have any info on this move? This now leaves that market solely to UA. They also service NGO out of SFO if I'm not mistaken. No hope for us in Asia if we can't make this work. Wouldn't flying it out of DFW make more sense?

 

[Oneflyer]

We are in a severe over capacity problem in the industry, the glut of seats is why revenue cannot offset fuel prices, and you want to grow the airline.

The delima that you don't seem to understand is that there is an overcapacity problem within the industry, but it is in the best interest of AA's to grow itself. Growth makes everything cheaper and more productive.

Surely out of those 48 Trips there was some revenue that is now lost and should be deducted from your so-called fuel savings.

Look at the routes there reducing, all high frequency. Clearly the belief is that most customers will just take different flights, so the cost savings will clearly outway the lost revenue.

 

[TWU informer]

The delima that you don't seem to understand is that there is an overcapacity problem within the industry, but it is in the best interest of AA's to grow itself. Growth makes everything cheaper and more productive.
Look at the routes there reducing, all high frequency. Clearly the belief is that most customers will just take different flights, so the cost savings will clearly outway the lost revenue.

[post="307880"][/post]​

That's a good one!!!!

The industry has an over capacity problem so it in AA's best interest to grow.

Who are you? One of the leaders that got us into this mess?

On one hand you admit that reducing high freq. flights saves money, on the other hand you want to grow the airline. You are correct, this I do not understand.

Yeah, AA grew with the purchase of TWA and look at how that turned out.

 

[Oneflyer]

The industry has an over capacity problem so it in AA's best interest to grow.

Do you have any level of education at all? Have you ever taken an economics class? Its impossible to even discuss these topics with you because you are so damn ignorant.

 

[BoeingBoy]

That's pretty good fuzzy math.

Now can you calculate the lost revenue? Your math assumes not one passenger, not one ticket sold.

Not quite - I assume that AA will attempt to reaccomodate the passengers on the 15 domestic R/T's on the remaining 3 to 15 R/T's that will still operate in each of these markets, not that there are no tickets sold. Obviously, a far different assumption. Also notice that I never said that the profit for October would be that much larger or that the loss would be that much smaller. I only said the costs would go down (see below).

Surely out of those 48 Trips there was some revenue that is now lost and should be deducted from your so-called fuel savings.

It's quite possible. If you can quantify it I'll be glad to deduct it. Since I had no way to quantify it, I didn't deduct it, but I did assume it would be a small number (see above).

Will 0, 5, 10 or what number of passengers that would have been on the cancelled flights end up taking their money to another carrier rather than be reaccomodated on one of the remaining AA flights in those markets? And how much did each lost passenger not therefore spend on an AA ticket? Give me those numbers and I'll gladly use my fuzzy math to calculate the revenue hit from the calculations, so everyone can see if this is an economically sound decision or not.

Imagine the savings AA would have using your math if they shut down 2200 flights per day.

[post="307849"][/post]​

There would most certainly be very large savings if AA shut down the entire mainline operation (just going by the number of flights per day given in another post). How much does AA spend on fuel per day? Can you honestly claim that the fuel bill would stay the same if every AA plane was parked, even if all other expenses stayed the same?

Where your statement becomes absurd is on the revenue side, not the cost side.

It's not much of a stretch to assume that:

1 - AA is choosing to cancel the lightest booked flights in each of these domestic markets, and

2 - that most if not all the passengers originally booked on the cancelled flights will be reaccomodated on the remaining AA flights in these domestic markets, given

3 - there will still still be a minimum of 3 R/T's per day operating in these markets.

On the other hand, one would be very foolish to assume that the revenue impact of cancelling 100% of the mainline flights would be no greater than the revenue impact of cancelling a little over 1% of them.

Like all airlines, AA routinely cancels flights. According to the DOT, the cancellation rate was 1.4% in July - about the same as that contained in this announcement. So whatever revenue impact there will be from these cancellations should be roughly the same as that from the July cancellations and possibly less since presumably they can better plan around these pre-cancellations that they would be able to with last-minute cancellations.

Jim

 

[eolesen]

All I can say is that I hope 15 trips in addition to the 10 MSY trips that haven't returned yet is just the tip of the iceberg. I'll be happier when it's 50 to 100 trips being taken out.

As for ORD-NGO.... unofficially, I'm told that there was a national contract for Toyota (they're based in NGO) which was up for bid, with AA, UA, and NW all bidding on it. UA reportedly got the contract last week (overwater portion being SFO-NGO), so it's probably no coincidence that both AA and NW are pulling NGO (NW is taking out three of their six or seven weekly frequencies). NGO is a fairly high-cost airport without fuel, so I suppose losing the Toyota contract was just the last straw.

The telling point will be if DFW-KIX really starts up. It's another high-cost airport.

 

[Connected1]

I only mentioned growth in the first place because TWU Informer asked how fuel prices had affected our schedule. The fact remains that had fuel prices never risen, we would be profitable and likely expanding. Growth is a good thing when you're expanding into a profitable industry, you know. My point is that higher fuel prices have hampered growth - not that we should be growing despite higher fuel prices.