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AA Boosts Number Of Scheduled Flights Despite Fragile Climate In Industry

Cruz attributes success to local four-man team


October 10, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

When U.S. airlines began experiencing unprecedented financial instability, forcing them to trim schedules and cut their labor forces, American Airlines (AA) increased its number of flights to and from San Juan.

Enrique Cruz, regional managing director of AA in Puerto Rico, announced that instead of having to lay off the projected 100 local employees this year, as part of its cost-cutting measures, the carrier has been able to keep that number to 10.

Cruz attributed the local success story to the joint efforts of a four-man team: Economic Development & Commerce Secretary Ramon Cantero-Frau, Puerto Rico Ports Authority Director Jose Baquero, Puerto Rico Tourism Co. Executive Director Milton Segarra, and himself.

"The airline industry is in a transformation era. Basically the rule of the day is reduction, reduction, and more reduction," Cruz said. "Everyone is looking for the simplest way to cut both costs and the number of flights. The local government’s swift action at a time when there was much uncertainty helped protect the aviation industry’s service and stimulated other carriers to enter the market."

Low-fare newcomers such as Spirit Airlines and JetBlue Airlines, which entered the Puerto Rico market after 9/11, have taken advantage of a Ports Authority incentive that reduces landing fees for the island’s major commercial airlines.

As part of the incentive, all commercial airlines (except AA) that operate in San Juan will get 25% off their landing fees. AA’s reduction is based on its load factor, with a maximum discount of 25%. Last year, landing fee discounts cost the Ports Authority $5.8 million, including $3.8 million in discounts to AA.

"We extended the landing fee incentive another year in order to permit the airlines serving San Juan to give continuity to their strategic plans," said Baquero. "We expect the impact will be less next year."

An initiative that helped the industry after 9/11 was the Tourism Co.’s Fly Free program, which was reactivated in August and has produced 12,800 room nights during the slow months of September and October. Fly Free offers two free airline tickets to tourists who book a five-night minimum stay on the island.

"We have an emergency fund where every month we store $50,000 in case Puerto Rico needs another promotional tool," said Cantero-Frau.

The combined efforts helped airlines enjoy higher load factors during the months of September and October. At 25% to 35%, load factors for the shoulder months of September and October were considerably better than last year’s numbers, but still much lower than the usual 45% to 55%). AA finished the month of September with load factors above 55%, though October continues to look bleak.

AA increased its number of scheduled departures out of Luis Muñoz Marin (LMM) International Airport from 9,800 during January-July 2001 to 11,600 during the same period in 2002, an 18% hike.

Last year, AA had more daily flights (58) out of LMM during the peak of the tourist season, which runs from the end of November through March, than ever. The average is between 48 and 50 flights a day.

As a result, AA’s number of available seats rose by 14%, from 3,100 in January-July 2001 to 3,500 during the same period in 2002. The number of embarked passengers jumped 16%, from 2,100 during January-July 2001 to 2,450 during the same period this year, while disembarked passengers went from 1.34 million in January-July 2001 to 1.43 million for the same period in 2002, a 7% increase.

"We in the aviation industry foresee bigger challenges this winter season, given the possibility of a war against Iraq and United Airlines’ filing for Chapter 11 [which gives it a financial advantage over its rivals]," Cruz said. "But at the same time, given the way the airlines and the local government have been working together and communicating, I’m not worried about our teamwork, which has benefited all airlines as well as the destination."

This Caribbean Business article appears courtesy of Casiano Communications.
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