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American to Cut Nearly 7,000 Jobs

By DAVID KOENIG,

Posted: 2008-07-03 12:13:05

DALLAS (July 3) - Many more job cuts, likely totaling more than 6,000, are likely at American Airlines as the biggest U.S. airline hunkers down and tries to survive record high fuel costs.

Turbulence in the Skies

Tim Boyle, Getty Images

American Airlines is cutting 200 pilot jobs as part of ongoing efforts to offset the unforeseen sky-high costs of jet fuel. American's pilots union recently received a plan that offers incentives to senior pilots who leave voluntarily.

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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 Flights Canceled for Good

Last Thursday, American Airlines elaborated on the deep capacity reductions it announced in May, which will include dozens of flights cut at a number of hubs in order to offset soaring fuel prices.

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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 14 cents, or 3 percent, to $4.76 in morning trading 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.

Who's Getting Laid Off?

Ric Francis, AP

On Monday, IndyMac Bancorp announced it would cut its work force to roughly 3,400 employees from 7,200 in the next several months in an attempt to reduce operating expenses by about 60 percent.

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Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.

2008-07-03 11:37:28

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TBlasi5847 12:09:13 AM Jul 04 2008

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Just when you thought things coulden't get any worst, 33 states are advising that there is a dwindling amount of cash in their unemployment insurance funds and that they cannot pay benefits after December.

Chapzkin 08:25:12 PM Jul 03 2008

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UNTIL THEY CHANGE THE NAME OF THIS COUNTRY TO JAPAN, BUYING AN IMPORT DOES NOT HELP THE AMERICAN ECONOMY. GO FIGURE, J.D. POWERS AND ASSOCIATES IS OWNED BY THE JAPANESE.

RoadThundr2 07:22:46 PM Jul 03 2008

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Human-Nights:Before there are job cuts the airline should be force to cancel the sponsorship of HOCKEY ARENA!! This is cost MILLIONS!! It brings NO business back to this airline in any manner. The airline unions SUCK for allowing this spending ob sponsorship of sport facalities, madelions in baseball parks ect. Poooor Tom

DMALCHOW 01:48:05 PM Jul 03 2008

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For Ceo0797 a good start for the country to get back on its feet is to have a plan to fix the energy crisis. Have you contacted Congress about passing legislation for more Domestic Oil Drilling and significant tax credits for alternative forms of energy?

Ceo0797 01:46:16 PM Jul 03 2008

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Hey Annasdad....you must work for some well protected employer.The rest of us are greatly enjoying the onset of the Bush Depressioin.

Aanaasdad 01:43:09 PM Jul 03 2008

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So what are you trying to do media jerks? Trying to puke out some more market deflating news? You people are irresponsible and so far from being journalists it's laughable. Go sell your "dirty laundry" Maybe you can get a job on the national enquirer.

Ceo0797 01:42:59 PM Jul 03 2008

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American Airlines is an inbred and inept corporation.When they could, they acted like a card carrying member of an oligopoly.When they couldn't they asked for government bailouts.The have systematically screwed their customers, their employees and their vendors.They are symptomatic of the overgrown bureauacracies protected and coddled by the Bush Administration. Big Air, Big Oil, Big Banks are what is wrong with this country. Aided and abetted by corrupt government members of the elite (read Bush).It's time for the little guy to grab control back of this nation.

Mbae2me 11:57:41 AM Jul 03 2008

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8.5 % by September

DMALCHOW 11:52:48 AM Jul 03 2008

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The oil bubble will burst when CONGRESS passes legislation to increase Domestic Oil Drilling and significant tax credits for other alternative forms of energy. CALL CONGRESS TODAY TELL THEM WE NEED MORE DOMESTIC OIL DRILLING NOW.

CMountainDave 11:44:34 AM Jul 03 2008

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THe economy wide layoffs have begun. Lets check out the unemployment rate come Sept, assuming the oil bubble doesn't burst.

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