News Column

American Airlines Ponders Layoffs

Oct. 12, 2011

D.R. Stewart


American Airlines is considering companywide layoffs along with reductions in its fleet and seating capacity to deal with a slowing economy and high fuel prices in the traditionally lackluster fourth quarter, company executives said Tuesday.

Company officials said potential layoffs would be related to the 3 percent fourth quarter mainline capacity cuts announced Monday.

However, spokesmen for the Transport Workers Union in Tulsa, where more than 7,000 people are employed at American's largest maintenance base, said the layoffs are not expected to affect the local work force.

"The TWU has not been notified by management that there will be any reductions in any of our TWU classifications and there has been no WARN Act notices sent," said John Hewitt, TWU's chairman of maintenance. Hewitt referred to the federal law requiring employers with at least 100 employees to give workers 60 days' notice of a plant closing and layoffs.

"This is not expected to affect Tulsa, since the company is still hiring" union and non-union workers, Hewitt said. "Of course, if the company comes out with a new business model or something else changes, all bets are off."

American spokesman Tim Smith said late fall and winter cuts in service could result in some layoffs at the company, which employs 73,000 people.

Smith said high fuel costs, a weak economy and accelerated retirements of American's unionized pilots are causing the Fort Worth-based carrier to reduce capacity 3 percent in the October-through-December period -- a tactic adopted by several large airlines to maintain ticket prices while reducing costs.

"These capacity adjustments could have a significant impact on operations and, unfortunately, could result in employee reductions companywide," Smith said. "However, we are still working on the specific schedule adjustments and will know more in the coming days.

"Historically, American has been able to offer many of our employee groups voluntary options to reduce the impact of involuntary reductions and we are evaluating all of these options should they be necessary."

AMR Corp., the parent of American, is the only major U.S. airline to post losses the past three years, and it is expected to continue to lose money through next year, industry analysts say.

Second-quarter fuel prices 31 percent higher than a year earlier cost the airline $524 million more for fuel and caused company executives to negotiate a blockbuster $13 billion deal with Boeing Co. and Airbus SAS for 450 fuel-efficient aircraft.

AMR lost $286 million or 85 cents per share in the second quarter.

As part of its fleet renewal plan, American said this week it will retire up to 11 Boeing 757 aircraft in 2012. The retirements will result in maintenance and fuel cost savings next year, officials said.

A spokesman for the Allied Pilots Association said Tuesday the retirements of more than 200 pilots during the last two months are not related to concerns about American's finances but reflect retirees' ability to lock in stock-based pension benefits.

American also said it will take a $29 million fuel hedging charge and a $22 million charge as a result of foreign exchange volatility in the third quarter.

Shares of AMR closed Tuesday at $2.71, up 18 cents or 7.1 percent. The stock sunk to a 52-week low of $1.75 on Oct. 3 as speculation circulated on Wall Street that the carrier may have to file bankruptcy. Since then, several analysts have downplayed the chances of AMR needing to reorganize in Chapter 11.

Source: (c) 2011 Tulsa World (Tulsa, Okla.) Distributed by MCT Information Services

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