American Airlines, facing continuing deterioration of its financial condition, will cut more than 500 employees at its Kansas City maintenance base in June.
The company notified workers of the job cuts on Wednesday. It said the possibility of the cutback had been known since American eliminated more than 400 jobs at the base in December through layoffs and early retirements.
The cuts in June will affect roughly one-third of the remaining workers at the base.
Gordon Clark, president of Transport Workers Union Local 530, said 513 mechanics and related employees were expected to be furloughed.
"Basically, it's what was talked about last year in that if the industry picture didn't change, we would be affected again in June," Clark said. "We are going to see a reduction in head count effective June 10."
Despite substantial cost-cutting in the past two years, American continues to lose money in the face of record fuel prices and fierce air-fare competition. The Air Transport Association has estimated that carriers lost $10 billion last year.
American officials, the union and the city have been trying to attract third-party maintenance work for the overhaul base, but with little success.
After the June layoffs, American will have about 900 salaried and hourly employees at the base, down from 4,500 as recently as 1990. A lease agreement with Kansas City signed in February requires that American employ at least 700 workers at the base to keep its economic development incentives.
American said that 500 to 600 employees would be laid off from the base, which is next to Kansas City International Airport. David Campbell, American's vice president of maintenance, sent a letter to employees Wednesday explaining the decision.
Campbell said the company and Kansas City officials had been working to secure additional maintenance work. American recently completed a job for Reno Air and has a contract with Capital Cargo, he said.
"While some progress has been made, it unfortunately is not enough to offset the negative industry conditions we discussed," Campbell said in the letter. "Therefore, regrettably this week we are moving forward with the previously announced June reduction in force by a notification to the affected people."
American initially planned to return 28 MD-80s to its fleet by the end of the year, which would have created more work for the Kansas City base, Campbell said. Those plans were canceled because of deteriorating industry conditions.
As in the previous layoff, American will offer an early retirement package before making involuntary cuts, Clark said.
"We have quite a few people who will be eligible for that," Clark said, although he didn't have specific numbers. "We're also trying to enhance the package, but that's still being discussed with the company."
Workers at the base earn an average of about $55,000 a year.
Clark said many of the affected workers would have the option of transferring to other American stations around the country.
Several hundred workers at the base received a six-month reprieve in December. American initially was expected to lay off 800 to 900 workers in Kansas City at that time, but union officials persuaded the airline to do additional work at the base. That involved maintenance checks of aircraft being retired as well as reducing the number of seats on some of American's planes.
Union officials had hoped that third-party maintenance work could reduce the job losses in June, but not enough work has been obtained.
More airlines are turning to outside contractors for maintenance. These contractors generally are nonunion and have a lower cost structure.
"It can be said that the competition in the maintenance, repair and overhaul segment of the industry is very similar to our airline competing with low-cost carriers," Campbell said in his letter.
Clark agreed.
"It's a tough market to be in right now due to the third-party outsourcing," he said. "It's difficult for us to compete, but there is some specialized work that we can be competitive in."
American is trying to get maintenance work with a company that flies MD-80s, Clark said, a job that would be done at the Kansas City base. He declined to identify the potential customer.
"That could save 80 to 100 jobs between now and June," he said. "But these things take time, and it's a very competitive market. If there's anything we can do in working with the company to get more work, then we'll do that."
Pete Fullerton, executive director of the Platte County Economic Development Council, said Wednesday's decision was unfortunate but expected.
"Those folks employed at the base have done great honor to the aviation industry as a whole for a long time," he said.
Although Kansas City has an aging maintenance facility, Fullerton said, the area's advantage in marketing itself to aviation companies is the base's skilled work force.
"We have brainpower that is head and shoulders above what other cities can offer in aviation," he said. "Our immediate challenge is getting up to speed and keeping that group employed in the area."
American, which has lost nearly $2 billion in the past two years, also has maintenance facilities in Tulsa, Okla., and in Fort Worth, Texas, where the company is based. American's 25-year lease with Kansas City is to operate the base's super hangar. Several narrow-body aircraft bays are no longer being used at the city-owned complex.
