American Airlines to cut 13,000 employees

American Airlines Re-Organization

As part of the American Airlines re-organization while in Chapter 11, the carrier will cut approximately 13,000 employees.  Employees who do stay with American Airlines will end up taking cuts in pay.  Unionized groups such as the mechanics and maintenance workers will be hit the hardest with 8,800 layoffs, as the airline outsources its maintenance.

In a February 1st letter from American Airlines CEO, Tom Horton, to the employee’s of American, Horton states, “all workgroups will have total costs reduced by 20 percent, including management.  While the savings from each work group will be achieved somewhat differently, each will experience the same percentage reduction.”

The letter also outlines a Profit Sharing plan that, “beginning with the first dollar of pre-tax income, would pay awards totaling 15 percent of all pre-tax income.”

Horton also calls for the further building of their network and alliances, “by increasing departures across American’s five key markets – Dallas/Fort Worth, Chicago, Miami, Los Angeles, and New York – by 20 percent over the next five years, capitalizing on our loyal customer base and world-class alliance partners, and increasing international flying”

The carrier’s business plan calls for a $3 billion annual improvement – $1 billion in revenue improvements per year though network scale, fleet optimization, and product improvements and $2 billion from restructuring debt and leases, grounding older planes, improving supplier contracts, and other initiatives, including employee related changes.

Horton does address the rumors of mergers, break-ups, and take-overs and acknowledges the “many parties with input into the outcome of our restructuring.”  Horton states he does not believe such outcomes are best for the carrier or stakeholders and specifically states, “The best way for us to assure that we are in control of our own future is to make the necessary changes, complete our restructuring completely, and continue working hard to position American as a world-class competitor.”

We believe American will likely emerge as a single carrier, but you can bet their stakeholders have looked at a variety of options.

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