Sky Talk

Wright Amendment impact on American more than forecast

Even though American knew the lifting of the Wright Amendment was coming in October 2014, it did not adequately predict how Southwest Airlines’ new flights out of Dallas Love Field would affect American’s flights out of Dallas/Fort Worth Airport.

“We missed the impact of 50 new routes starting up,” American president Scott Kirby told analysts when explaining why the carrier missed its unit revenue forecasts for the fourth quarter. He added that the airline knew about the routes but didn’t build it into its normal forecasting process because its unusual to have a competitor launch so many new routes at one time.

Later on in the call, Kirby elaborated on the affect of Southwest’s new flights.

“What has happened in those Dallas markets is there has been a decline in the local yield as prices have come down. Our local volumes are about the same, our load factors have stayed about the same,” Kirby said. “We’ve managed to improve the connecting RASM to counteract some of the decline in the loss of local RASM. Rebanking will help with that because we will have more connecting opportunity in those markets.”

Here are some of the other comments American executives made on its Tuesday morning conference call with Wall Street analysts and reporters in discussing its fourth quarter earnings.

-Since American does not hedge its fuel costs, the airline spent 17.5 percent less on fuel in the fourth quarter. If fuel continues to stay below $100 a barrel, the carrier could save $5 billion in fuel costs in 2015.

-The carrier plans to take delivery of 74 mainline aircraft and 50 regional airplanes in 2015. It also will retire 104 mainline and 22 regional aircraft this year, more than it had previously planned as American has cut capacity in the Latin America market.

-American has plans to continue expanding to new Asian cities, but it likely won’t happen at DFW. The carrier will launch its DFW-Beijing route in May but said it will focus new Asian routes out of Los Angeles. The company has asked the government for permission to fly a route between Los Angeles and Tokyo’s Haneda airport.

“I’m pretty sure with fuel prices where they are we would expect even our Asian routes to be profitable in 2015,” Kirby said.

-There is no news on a possible headquarters announcement. When asked, American CEO Doug Parker reiterated that the company is looking at its options and it’s not high on the integration priority list.

“We are studying the possibility as to what might be available we have a perfectly acceptable facility that we’re working in today,” Parker said.

-And in a mea culpa, Parker apologized to Fort Worth Mayor Betsy Price as he referred to his company as a Dallas airline when talking about how American and Southwest stock prices were excellent investments for stockholders in 2014.

“We, of course, are based in Fort Worth here at American. I should have said Dallas/fort worth,” Parker said. “I apologize to Mayor Price and our colleagues in Fort Worth.”