While American Airlines executives are discussing restructured labor contracts with the company's unionized mechanics, pilots and flight attendants, the bankrupt company is preparing for further reductions in its management ranks, company sources and court documents say.
Some of the management cuts are expected at American's Maintenance & Engineering Center, which employs 7,000 people at Tulsa International Airport, sources said.
American, the principal subsidiary of bankrupt AMR Corp., could announce a new series of management layoffs as soon as Wednesday, sources said.
The reductions in the management ranks are part of the company's overall goal of reducing employee costs by 20 percent in each group -- management and support staff, non-union employees, mechanics & related workers, pilots, flight attendants and ground workers, company executives said.
American executives said they must reduce the company's 72,872 employees by 13,000 and slash labor costs by $1.25 billion a year to compete in the airline industry.
American has lost more than $10 billion over the past decade. AMR filed for bankruptcy on Nov. 29.
Following its bankruptcy filing, AMR retained the Boston Consulting Group as its management restructuring consultant. BCG is assisting AMR management in redesigning and realigning the company's management structure in a process known as the "cascade project," court documents show.
"The cascade project will enable the debtors to, among other things, ensure that the right management teams are working on the right tasks; design a management structure that fosters accountability and high performance, adaptability and fast, effective decision making; and create an efficient cost structure," AMR said in its application to employ BCG.
"Specifically, BCG will work directly with (American CEO) Mr. (Thomas) Horton and senior management to create an organizational "top layer" (structure, activities and executive selection) and design a layer of organizational management below the "top layer" applying established rules and defined objectives. The management team in the second layer, in turn, designs and staffs the third layer. This cascading process continues until a base layer is established."
AMR told U.S. Bankruptcy Judge Sean Lane that the cascade project will take about 32 weeks to complete for all layers of management.
BCG and its team of 8.8 full-time employees is being paid a flat fee of $254,000 per week for the first six weeks of its work. Its team of 13.5 full-time employees is being paid a flat fee of $392,000 per week for the final 26 weeks, court filings show.
BCG's total cost for the management cascade project is not to exceed $11.73 million, court documents say.
On May 1, American announced the third phase of its management restructuring. It included the elimination of five positions, including the retirements of David Brooks, president of American's cargo division; Mark DuPont, director of airport services; Susan Garcia, vice president of information technology; and Andrew Watson, vice president of customer technology.
In addition, the company said the position of vice president of operations finance and strategy planning had been eliminated. Doug Herring, who previously held the position, has been transferred to other duties, company executives said.
In announcing the changes in May, Horton said the company needed to get leaner and more streamlined.
"Our organization redesign purposefully began at the top, and today's changes will further advance the company's restructuring objectives and bring us one step closer to ensuring American has the leanest, most capable and effective leadership team in the industry," Horton said.
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