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American Airlines to cut 13,000 jobs
US carrier is latest to go through bankruptcy proceedings, plagued by low revenues and high fuel costs.
Last Modified: 02 Feb 2012 10:57
American Airlines hopes it can raise revenues by at least $1bn per year as it cuts costs during bankruptcy [Reuters]

The parent company of American Airlines says it needs to eliminate about 13,000 jobs, as one of the largest US airlines remakes itself under bankruptcy protection.

Thomas W Horton, chief executive of AMR Corp, said on Wednesday that the company hoped to return to profitability by cutting spending by more than $2bn per year and raising revenue by $1bn per year.

The company aims to cut labour costs by 20 per cent, along with 15 per cent of its workforce, and will soon begin negotiations with its three major unions.

AMR lost $884m in the first nine months of 2011, and on Tuesday it disclosed a $904m loss for December alone. It has lost more than $11bn since 2001.

"We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalise fully on the solid foundation we've put in place," Horton said in a letter to employees.

Employees have braced for bad news for weeks. AMR, American and short-haul affiliate American Eagle filed for bankruptcy protection in November.

Horton said in December that the company would emerge from bankruptcy with fewer workers.

"I expect dismay and outrage from our membership as details of the proposal are made public," Laura Glading, president of the flight attendants' union, said.

Horton said cost-cutting moves would include restructuring debt and aircraft leases, grounding older planes, and changing labour contracts.

Horton and other top executives outlined the job cuts and other proposals during a closed-door meeting with employees near the company's Fort Worth, Texas headquarters.

Extensive cuts

The company has about 88,000 workers, most of whom are represented by a union.

The biggest cuts would come from the ranks of maintenance workers, about 4,600, and baggage handlers, about 4,200, according to Bruce Hicks, a company spokesman.

About 2,300 flight attendants, 1,400 management employees and 400 pilots would also lose their jobs under the plan, he said.

If the airline and its three unions cannot agree on labour cuts, the company could ask a bankruptcy judge in New York to impose changes on workers.

But federal law requires the company to make a good-faith effort to first negotiate agreements with its workers.

Ray Neidl, an analyst with Maxim Group LLC, said for AMR to win support for its plan, it would have to offer employees a goal, such as returning the company to profitability.

"It's hard to see a carrot right now," he said. "But you have to convince them that this is part of a plan to return to profits and secure jobs."

Besides spending cuts, Horton said AMR planned to ground older planes and go ahead with orders to buy hundreds of new aircraft.

That would cut fuel use at a time when high fuel costs are been a major drag on American and other airlines.

To increase revenue, the airline plans to increase flights in New York, Los Angeles, Chicago, Dallas and Miami by 20 per cent over the next five years, Horton said.

American Airlines is the latest of several large US airlines to go through bankruptcy in an effort to reduce costs and debt: United, Delta and US Airways in the past decade, and Continental - now part of United - in the 1990s.

Source:
Agencies
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