Dallas, Texas 06/09/2015 (Financialstrend) – American Airlines Group Inc (NASDAQ:AAL) CEO, Doug Parker, is warning of the effects of increasing flight capacity. The chief is taking issue with the fact that demand has not grown to justify such increases.
Effects of Capacity Increases
According to Mr. Parker, American Airlines Group Inc (NASDAQ:AAL) will not increase its flight capacity until the fundamentals in the industry improve. Lower price fuels have prompted many airlines to increase their flight capacity in anticipation of growth in travel arrangements.
However, Parker affirms that this year’s capacity increases feel different, most of the airlines having learnt painful lessons in the past. Air Canada Chief Executive Calin Rovinescu has already said that effects of increased capacity remain minimal this year.
The American Airlines Group Inc (NASDAQ:AAL) chief fears that by adding capacity, the airline might be forced to lower its fares something that could have an effect on revenues. Southwest Airlines Co (NYSE:LUV) has already announced plans to increase flight operations at Dallas Love Field as it looks to take advantage of the low fuel prices
Low fuel prices has had a big impact on major airlines earnings over the past year. American Airlines expects to save up to $4.5 billion on fuel this year. Consolidation in the industry has also had an impact on price wars much to the benefit of the airlines.
Expansion into Asia
The increase in capacity is not going well with some investors who fear that demand is not high to justify such a move. The sentiment has already seen some of the airlines trading on the red as fears of reduced fares become clear which could hurt earnings going forward.
Parker has also confirmed that American Airlines Group Inc (NASDAQ:AAL) is looking to expand into Asia. The airline plans to achieve the same through partnerships and organic growth.