News from American
AP
American workers brace for thousands of job cuts
Thursday July 3, 4:27 pm ET
By David Koenig, AP Business Writer American Airlines workers brace for up to 6,800 job cuts by later this year
DALLAS (AP) -- Many more job cuts, likely totaling more than 6,000, are likely at American Airlines as the nation's biggest airline hunkers down and tries to survive record high fuel costs. American notified its flight attendants union on Wednesday that it will cut up to 900 jobs starting Aug. 31, but that appears to be the tip of the iceberg.
Although American has not given a total figure, the airline says it expects to shed 8 percent of its work force. With about 85,500 workers, including those at sister airline American Eagle, that would represent more than 6,800 jobs.
American plans to cut domestic capacity 11 percent to 12 percent this fall. Overall, including international flying, that translates to a pullback of about 8 percent.
Jeffrey Brundage, senior vice president of personnel at American parent AMR Corp., said in a memo to employees Wednesday that jobs will be reduced "commensurate" with the overall 8 percent reductions.
Brundage, however, did not cite a specific number in his memo. And he said the company is still working through the specifics by employee type -- pilots, mechanics and so on.
The company said last week that it would cut management and support staff jobs by about 8 percent in September.
American's unions have been waiting for grim news since May, when the company announced it would sharply curtail U.S. flying and retire 45 to 50 planes after the busy summer vacation season.
AMR lost $328 million in the first quarter of this year, and the second quarter got off to an even worse start when American grounded its MD-80 fleet for safety inspections. More than 3,000 flights were canceled, costing the airline tens of millions of dollars in lost ticket sales.
Analysts expect AMR to post a loss of about $330 million in the just-concluded second quarter, according to a survey by Thomson Financial.
That does not include one-time charges, and AMR said Wednesday it expects to take a charge of $1.1 billion to $1.2 billion in the second quarter to write down the value of its MD-80 and Embraer RJ-135 aircraft fleets. AMR also expects a $70 million charge to cover severance costs over the next year, some of which will show up in the third quarter.
Shares of AMR rose 21 cents, or 4.6 percent, to $4.83 Thursday after falling to a 5-year low of $4.48 earlier in the session.
American's planned job cuts follow announcements of similar reductions at other U.S. carriers -- 4,000 at Delta Air Lines Inc., 3,000 at Continental Airlines Inc., 2,550 at UAL Corp.'s United Airlines, and 1,700 at US Airways Group Inc.
Airlines are raising fares and special fees to raise cash. Late Wednesday, United boosted the fuel surcharge on U.S. travel by $20, it is now up to $170 per round trip. American and Continental matched the increase on Thursday.
But those steps won't offset fuel prices that are at record levels and still rising.
Ray Neidl, an analyst with Calyon Securities, said Thursday he expects the 2008 losses to be closer to $6.5 billion before write-downs and that the red ink will continue for the next year and a half.
"The industry is moving into survival mode and has entered uncharted territory with fuel costs well above $140 a barrel," he said in a note to clients.
Neidl said the best thing that could happen to the airline industry would be having one or two big carriers fail, shrinking the supply of seats and letting the survivors raise ticket prices.
At American, the job cuts disclosed so far are only a small fraction of those needed if American is to cut its work force by 8 percent.
The reduction of 900 flight attendant jobs equals only 5 percent of the airline's 18,000 active flight attendants, and the reaction among the employees this week was one of relief -- they expected a much bigger cut.
Pilots, who have their own union, and ground workers represented by the Transport Workers Union say they have not been told how many of their jobs will be lost.
Jamie Horowitz, a spokesman for the TWU, said the union hoped no mechanic jobs would be lost because those workers bring in money For American by working on planes for other carriers at American facilities. TWU also represents baggage handlers.
American has agreements with the TWU and the Association of Professional Flight Attendants to offer voluntary measures before making layoffs. Voluntary steps will include leaves of absence for U.S.-based employees who are 50 or older and have been at American for at least 15 years.
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