Around Town

How American Airlines’ use of Econ 101 will tick you off

The Story

American Airlines (now merged with US Airways) posted record profits last quarter, thanks to super low gas prices. It’s good for them — but sorry, not for you, our dear traveler.

The Facts

– American raked in a $597 million profit in the fourth quarter, way up from its $1.9 billion loss a year ago.

– It largely credits the super cheap fuel costs we’re all enjoying at the pump these days.

– But when CEO Doug Parker was asked if this meant lower fares in the future, his answer came right out of an econ textbook: As long as demand at the current prices is high, the prices won’t lower.

american-airlines-doug-parker-charlotte

– “Pricing is tied to demand, and demand remains strong. When demand is strong, you see pricing move accordingly.” – Parker

– Parker adds that not all the money is going to the bottom line. It’s also going to:

  • Retire old planes and buy new, energy-efficient planes
  • Add fancy seats to first class
  • Pay shareholders
  • Give employees raises

Yes, you can whine

https://twitter.com/biztrends/status/560175695230275584

C5’s Take

At least we’re going to get lie-flat seats in first class. Not that we can afford first class.

Photos: Tony Gutierrez / AP & John Simmons / Charlotte Observer

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