American Airlines Plan Will Cut 13,000 Jobs

Feb. 2, 2012
Cuts include 4,600 maintenance workers and 4,200 baggage handlers; carrier hopes to shift pension obligations onto federal agency

American Airlines wants to cut about 13,000 jobs and end its current pension plans for employees and retirees as it seeks to reorganize under bankruptcy protection.

Thomas Horton, CEO of the airline's parent company, AMR, said Wednesday that to return to profitability, the company must cut spending by about $2 billion a year and raise another $1 billion a year in revenue by 2017.

"There is no avoiding the fact that the cost reductions will be deep," Horton said in a letter to employees unveiling the company's reorganization goals. "And there is no sugarcoating the effect on our people."

Maintenance workers would suffer the biggest cuts, about 4,600, followed by baggage handlers, about 4,200, company spokesman Bruce Hicks said. About 2,300 flight attendants, 1,400 management employees and 400 pilots also would lose their jobs under the plan, he said.

If American and its three unions can't agree on labor cuts, the company could ask the bankruptcy court to impose them. But federal law requires the company to make a good-faith effort to first negotiate agreements with its three unions.

American, the nation's third-largest airline, employees about 88,000 people. The company said it needs to reduce labor costs by about 20% to be competitive.

American's employees have been bracing for bad news since the company filed for bankruptcy protection Nov. 29.

"I expect dismay and outrage from our membership as details of the proposal are made public," said Laura Glading, president of the flight attendants' union.

AMR said Tuesday that it lost $904 million in December alone, after losing $884 million in the first nine months of last year. Since 2001, it's lost more than $11 billion. American is the last major U.S. airline to file for bankruptcy reorganization since the 1990s.

The company also seeks to end its defined pension plans for about 130,000 employees and retirees. It would replace them with 401(k)-type plans under which the company contributes to workers' retirement accounts.

Jeff Brundage, American's senior vice president for human resources, said in a notice to employees that the company intended to turn obligations for the plans over to the federal Pension Benefit Guaranty Corp. to pay -- a move the agency is resisting.

On Tuesday, the PBGC filed $91 million in liens against the company's property in a move to pressure it to fund its pensions.

That came after AMR paid only $6.5 million of a required $100 million contribution to its underfunded plans.

To increase revenue, American said it would increase flights in its New York, Los Angeles, Chicago, Dallas and Miami hub airports by 20% over the next five years.

And to cut costs, Horton said the company would move ahead to buy hundreds of new planes to replace American's aging, fuel-guzzling fleet.

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