American Airlines (Nasdaq: AAL) plans to offer exclusive, low-priced air tickets to address a concern that ultra-low cost airlines such as Spirit and Frontier are luring cost-sensitive, nonstop travelers from the world’s largest airline.
American Airlines CEO Doug Parker and airline President Scott Kirby discussed the plan in a third quarter earnings call that I covered on Oct. 23.
About 87 percent of Fort Worth-based American’s passengers fly the airline once or less per year, and those passengers account for more than half of the airline’s revenue, Kirby said in the call. The airline essentially has to match budget carriers like Spirit and Frontier to remain competitive, he said.
“If 50 percent of our customers (in terms of revenue) are up for grabs, we can’t walk away from that side of the business,” Kirby said in the call.
Sounds sensible from a competitive standpoint, but the markets didn’t like it. American’s stock fell nearly 1 percent that day despite the fact that the airline reported record earnings.