Thursday, June 05, 2008


CAL has announced capacity cuts of 16% by the fourth quarter. In the old days, airlines stuck themselves in the eye time and time again. Today's managers manage for profits, not greatest market share. The labor, fuel and other cost will go down when the planes are grounded on the least profitable routes. Fares will be raised on the remaining routes. CAL has joined the chorus of major carriers that will reduce capacity during the slow season. However, many of these decisions can be easily reversed. As the economy strengthens, these carriers will be able to recall furloughed employees and in many cases lease more fuel efficient aircraft than the ones grounded. Yesterday, UAUA shares went up 9% after the announced cut back. CAL could do just as well today.