American Asks For $1.8B Cuts

American Airlines passenger aircraft are seen at Lambert International Airport in St. Louis, Tuesday, Aug. 13, 2002. In the past year American has overhauled flight schedules at its hubs to use planes and employees more efficiently, reduced the number of different jets it flies to cut maintenance costs and tested a new fare structure to offer lower prices for business travelers _ each move a nod to the Southwest Ailines method. AP

American Airlines has asked its employees for $1.8 billion in permanent, annual cost cuts through a combination of wage, benefit and work rule changes as part of a restructuring aimed at stemming "unsustainable" losses.

The company had just posted the largest annual loss in aviation history.

American Airlines pleaded with employees Tuesday to accept steep cuts in wages, benefits and work rules that would save $1.8 billion annually, stressing that the company's future was at stake.

"Our financial results make it abundantly clear that American's future cannot be assured until ways are found to significantly lower our labor and other costs," the company said after a private meeting with labor leaders.

As losses pile up, a number of analysts have speculated in recent weeks that American is increasingly at risk of joining United Airlines and US Airways in bankruptcy unless it can dramatically reduce costs.

American, the world's largest airline, said it is under "unrelenting pressure" from low-cost carriers and from larger rivals that are currently shrinking costs under the protection of bankruptcy courts.

American called its request "a last resort" but stopped short of saying that bankruptcy loomed.

The Fort Worth, Texas-based company is working to cut annual non-labor expenses by $2 billion, mostly through changes to its flight schedules and fleet. But executives have said that it would take a total of $4 billion in cost cuts to regain profitability. In 2002, labor expenses totaled $8.4 billion.

Last month American's parent company, AMR Corp., reported a loss of $3.5 billion for the year, the industry's largest annual loss ever. It is currently burning through $5 million a day and has roughly $2 billion in unrestricted cash on hand.

The company also announced that it would close two of its 10 domestic reservation centers, affecting more than 900 jobs in Norfolk, Va. and Las Vegas.

The $1.8 billion in cost cuts being sought would come as follows: $660 million from pilots, $350 million from flight attendants, $620 million from mechanics and ground workers, $80 million from ticket agents and $100 million from management.

Labor leaders were not immediately available for comment.
  • Bootie Cosgrove-Mather

Comments