This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

American Airlines Loses to Low-Cost Carriers in Colombia

CHARLOTTE, N.C. -- A groundbreaking agreement has opened Colombia to low-fare carriers, but it has displeased two legacy carriers, as AMR's (AMR) American lost some flights and US Airways (LCC) didn't get any.

In a decision announced earlier this month, after Colombia and the U.S. agreed to increase air service between the two countries, the Transportation Department tentatively awarded four new routes to Bogota.

Low-fare carriers JetBlue (JBLU - Get Report) and privately held Spirit would fly from Orlando and Fort Lauderdale, respectively. Also, Delta (DAL - Get Report) would fly from New York's Kennedy Airport, while Continental (CAL) would fly from Houston.

Charlotte was shut out, as the DOT rejected US Airways' request for a Bogota flight from the Southeast's second-biggest domestic hub.

Spirit's Fort Lauderdale route "is good for us and better for consumers," says CEO Ben Baldanza. "Fares between the U.S. and Colombia are some of the highest in the Western Hemisphere, on a mileage basis. But we're going to change that dynamic."

In a September agreement with the U.S., the Colombian government moved to expand air access by boosting the number of authorized routes between the two countries and removing all restrictions for flights to Barranquilla and Cartagena. The government has also allowed fares to decline.

Overall, travel between the two countries is booming -- traffic grew by 36% between 2002 and 2006. During the 12 months ending in September 2007, about 759,000 passengers traveled between the nations, with 64% flying between Bogota and the U.S.

American, the principal carrier, operates seven daily flights to Miami from four Colombian cities. Additionally, Delta has Bogota-Atlanta service, and Continental serves Bogota from Houston and Newark, as well as Cali from Houston. Avianca offers 53 weekly flights, serving five Colombian cities and three U.S. cities.

However, the Transportation Department ruled that American should lose seven of its daily routes, allowing a total of 28 (including 21 new authorities) to be awarded to other carriers. American says it will sue the department in federal appeals court.

"We do not believe that it was legitimate for DOT to seize American's duly authorized frequencies for reallocation to another carrier," said American spokesman Tim Smith. "We believe DOT's actions are unprecedented and the issue needs to be aired in a court of law."

Meanwhile, US Airways, which sought new service between Charlotte and Bogota, says it will likely appeal to the department. "We are disappointed," says spokesman Phil Gee. "We thought we had a strong case." US Airways could have offered connections to 73 cities beyond Charlotte.

"We hope given the unmet demand for U.S.-Colombia services that DOT will go back and attempt to secure additional frequencies for U.S. carriers," Gee added.

In its ruling, the department laid out this rationale: Delta's Kennedy service would boost flying between Colombia and New York/Newark, which has 21 weekly flights, while South Florida has 80. JetBlue and Spirit would provide low-fare service, with Orlando as a new gateway. Continental's new service addresses an imbalance that has just 20 weekly Colombia flights originating west of Atlanta, while 108 originate in the eastern U.S.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
DAL $45.37 1.90%
JBLU $17.57 2.20%
LCC $0.00 0.00%
AAPL $129.08 0.48%
FB $79.74 0.98%

Markets

DOW 18,286.38 +153.68 0.85%
S&P 500 2,116.92 +12.42 0.59%
NASDAQ 5,005.0930 +41.5660 0.84%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs