Last updated: 02:26 PM ET, Mon July 13 2015

American Airlines Wows Wall Street, But Not Travel Industry

Airlines & Airports | American Airlines | Rich Thomaselli | July 13, 2015

American Airlines Wows Wall Street, But Not Travel Industry

You can’t please everybody.

American Airlines made Wall Street and its investors happy on Friday when it announced it will scale back its intended growth this year, a move that likely prevents a decrease in average airline fares if fewer seats are available for purchase.

The announcement shot the stock price up almost five percent on Friday, as analysts have been all but begging the airlines to slow their growth.

But U.S. Travel Association President and CEO Roger Dow was not pleased.

"It's depressing that actions that show disdain for travelers are the ones deemed to be the best business practices,” he said in a statement this morning. “The real irony is that American says it's cutting seats because of softening demand—which we've been worried was inevitable all along because surveys show U.S. travelers would almost rather have a root canal than fly commercial.”

American said the softening demand is actually in international travel; domestic travel is up slightly.

Dow said there’s more at play here than just the airline’s decision, however.

"The untold story is that inaction in Washington is driving these decisions in the board room. This happens in the airline industry because major carriers are allowed to dominate routes and individual markets, keeping competitors out and enabling them to set prices with little or no downward pressure,” he said.

Dow urged a model that allows airports to expand and let new carriers bid for service. He suggested Congress cut ticket taxes and at the same time boost the cap on the Passenger Facility Charge user fee to pave the way for airport terminal upgrades that, he said, airlines have lobbied hard against expressly because they would help bring new competition.

"Until Washington creates the circumstances in which 'capacity discipline' is not the profit-making virtue for airlines that it currently is, speculators will continue to reward them for it, which is harmful to an American economy and way of life that is deeply intertwined with travel," he said.

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