American May Need Deeper Capacity Cuts - CFO

American Airlines parent AMR may need to make deeper capacity cuts to accommodate weaker travel demand during the economic recession, the company's chief financial officer said Thursday.

"As we get a little bit better fix on the summer of this year and see just how tough this economic situation is... we may well make a decision to go deeper," Tom Horton said.

The airline industry is grappling with falling travel demand as the recession erodes travel budgets. Carriers have rapidly downsized to meet the shrunken demand.

Delta Air Lines said on Tuesday it would cut its international capacity by an additional 10 percent, starting in September.

AMR, the second-largest US airline, cut its mainline capacity in the fourth quarter by 8.3 percent. The airline has said it would reduce its mainline capacity by more than 6.5 percent in 2009.

Horton said capacity cuts have created new opportunities for cost cuts as well.

"When you cut capacity, there are certain costs that come out naturally," Horton said.

He noted, in particular, a lessened need for plane maintenance facilities. AMR is considering whether it still needs all three.

Demand for business travel has been hit especially hard as companies cut costs. But Horton said recent complaints by some politicians about extravagant and wasteful spending on business trips has unfairly demonized the travel industry.

"It's unwise to vilify industry in general," he said. "I just think it's important that they don't do things that unnecessarily hurt industries and the economy."

Horton said the airline industry has long been plagued with overcapacity and there is probably a role for further industry consolidation.

"Over time, there will probably be fewer airlines in the world," Horton said.

He noted, however, that tight credit markets make consolidation difficult right now.

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