The Friedman Files

$15 for your first checked bag!  That’s the announcement from American Airlines today.  At least that’s the announcement that will probably draw the most immediate anger from passengers. 

But the other major announcement American made will also have a real impact on travel across the country.  The airline plans to cut the number of flights it offers and that will mean cut jobs as well.  No word yet on how many cuts or where – but CEO Gerard Arpey told me today that the job cuts will probably be across all of the airline’s work groups.  Obviously, bad news for employees, and potentially bad for the DFW economy if a significant number of those cuts happen here.

So why is the airline doing this?   The answer is oil.  They need to drive up ticket prices and extra fees to offset the rising cost of oil (which touched $130 a barrel earlier today.

To explain it better, here are some figures Arpey threw out at the company’s shareholder’s meeting today:

in 2000 the company’s average price per segment was $163.  Today’s it $149.  So the company is taking in less today than it was eight years ago.  Meanwhile fuel cost per segment has gone from $24 to $64 today.  There’s no way the carrier can make money on many flights unless it figures out ways to charge more.  Not a way to make customers happy – but then more cuts in flights won’t make customers happy either.  Glad you’re not an airline CEO these days?