US Airways to Cut Capacity by 13%
US Airways Group Inc., operating under Chapter 11 bankruptcy protection, said Wednesday that it will eliminate about 200 flights, or 13% of its daily schedule, as part of a restructuring plan designed to allow the airline to emerge from reorganization as a profitable carrier.
The Arlington-based carrier’s cutback announcement was the latest in a string from major U.S. airlines. It helped boost airline stocks, which have been flagging as the industry tries to stem losses.
AMR Corp., parent of American Airlines, gained $1.88, or 20%, to $11.20 on the New York Stock Exchange, the stock’s biggest one-day percentage rise since October 1989. Delta Air Lines Inc., Continental Airlines Inc., Northwest Airlines Corp. and Southwest Airlines Inc. each rose at least 10%.
“The hope is that if the entire industry follows through and has a decent-sized capacity cut, it may restore some pricing normalcy to the industry,” said Standard & Poor’s equity analyst James Corridore. “The only way they are going to be able to get pricing power back is if demand improves and capacity shrinks.”
U.S. airlines are trying to reduce costs and boost revenue to curtail losses that totaled $7.3 billion last year and more than $3.8 billion in this year’s first half.
Underscoring the reason airlines are still in dire straits nearly a year after the terrorist attacks, the Air Transport Assn., the main U.S. airline trade group, said this week that the amount of money that airlines took in for each mile flown nationwide in July was down 8.7% from a year ago.
US Airways Chief Executive David Siegel said the airline will ground 19 planes and cut 30 flights next month. US Airways’ fleet will decline by 10% to 280 aircraft by the end of this year.
He also said there will be employee layoffs, which will be determined in the coming weeks.
US Airways will continue to serve all but one of the 204 cities it now flies to, instead of eliminating certain routes, said spokesman David Castelveter. The airline operates 10 daily departures from Los Angeles International Airport.
