American on travel demand: 'We do expect Europe to get worse'

American Airlines officials refused to say Friday what changes they anticipate for flights to the United Kingdom. Rivals Delta Air Lines and United Airlines each have recently announced plans to reduce capacity this winter because of the Brexit vote to leave the European Union.

American and its partner British Airways speak regularly about schedules, President Scott Kirby said. But multiple factors contribute to the demand for tickets in the United Kingdom and the rest of Europe, he said.

“I don’t think we’ve said anything about what we’re going to do in the U.K.,” Kirby told stock analysts and reporters on a conference call to discuss second-quarter earnings. “I haven’t said anything.”

Revenue on seat-capacityavailable to Europe dropped 6% during April, May and June, compared to a year earlier, Kirby said. A double-digit decline Europe is expected in the third quarter, he added.

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But he pointed to broader factors for European demand beyond Brexit,saying terror incidents, the overall economy and more competition from rival airlines each contribute to the decline.

“We do expect Europe to get worse,” Kirby said. “There’s a lot of things that could be driving it and it’s probably all of the above.”

Speaking specifically about the United Kingdom, Kirby noted three major variables from the Brexit vote: currency, direct impact on flights and general confidence in the economy.

The British pound dropped substantially after the vote, which Kirby said “is a pretty clear negative.” American gets 4% of its revenue in pounds.

But Kirby said the direct impact of people flying could actually increase as bankers, consultants and other fly more frequently during the two years or more while sorting out how the exit will work.

“The direct impact I think will be positive,” Kirby said.

The broader concern is if general confidence in the economy declined because the first budget item that businesses cut is travel, Kirby said. But the U.S. stock market bounced back after two days down from the Brexit vote.

“I think for the next few year at least, there is not going to be much impact from Brexit,” Kirby said. “Hard to see any evidence that it’s a big problem.”

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The reaction came after Delta and United officials described currency concerns and capacity reductions this winter from less leisure travel originating in Britain.

Delta President Glen Hauenstein said the 12% decline in the currency cost the airline about $40 million in currency exchange. Diminished leisure travel from the U.K. to destinations such as Florida, Las Vegas and New York prompted plans to cut capacity on U.S.-U.K. routes by 2% this winter, he said.

Jim Compton, United’s chief revenue officer, said winter flights from Washington Dulles to Manchester would be reduced and flights from Dulles to Heathrow would switch to smaller planes.In addition, United will reduce flights from Newark to Birmingham from six to four per week, he said.

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