Posts by Diane Clarkson from May 21, 2008

Diane Clarkson | May 21, 2008, 01:05 PM
AA cuts domestic capacity and increases fees

American Airlines announced major reductions this morning, planning to cut mainline domestic capacity by between 10 – 12% in the fourth quarter this year and to lay off an undisclosed number of employees.

These are the painful, practical realities of record high fuel prices.

American Airlines is also introducing a $15 one way fee for the first bag checked starting June 15, applied to all travelers not elite members of AAdvantage, full-fare or international. Fees are also increasing by $5 to $50 for services ranging from reservations services to pet and oversized bags.

Ironically, AA’s announcement comes the day after a University of Michigan’s American Customer Satisfaction Index finds customer satisfaction with airlines in the United States has fallen to its lowest level since 2001.

Scott McCartney at the Wall St Journal describes airline fees as “essentially fare increases that airlines hope won't choke demand.” I agree. Fees will choke demand. And stab any brand efforts to appear customer-centric. Demand will find a new equilibrium. Brand will be harder to rebalance.

American Airline’s announcement today reflects the hard reality of the airline industry. It is very likely the first of more announcements about fare and fee increases, and capacity reduction.