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American Airlines Ask Labor for Cost Cuts

The Associated Press

Tuesday, February 4, 2003; 2:22 PM

AMERICAN AIRLINES PLEADED WITH employees Tuesday to accept steep cuts in wages, benefits and work rules that would save $1.8 billion annually, stressing that the company's livelihood was at stake.

"Our financial results make it abundantly clear that American's future cannot be assured until ways are found to significantly lower our labor and other costs," the company said in statement issued after a private meeting with labor leaders.

As losses pile up, a number of analysts have speculated in recent weeks that American is increasingly at risk of becoming the next major carrier to file for bankruptcy, joining United Airlines and US Airways, unless it can dramatically reduce costs.

The Fort Worth, Texas-based company is working to cut annual non-labor expenses by $2 billion, mostly through changes to its flight schedules and fleet. But executives have repeatedly said that it would take a total of $4 billion in costs in order to regain profitability. In 2002, labor expenses totaled $8.4 billion.

Late last month American's parent company, AMR Corp., reported a loss of $3.5 billion for the year, the industry's largest annual loss ever. It is currently burning through $5 million a day and has roughly $2 billion in unrestricted cash on hand.

American, the world's largest airline, said Tuesday it is under "unrelenting pressure" from low-cost carriers and larger rivals that are currently shrinking costs under the protection of bankruptcy courts.

American called the request "a last resort" but stopped short of saying that bankruptcy loomed.

The company also announced that it would close two of its 10 domestic reservation centers, affecting more than 900 jobs in Norfolk, Va. and Las Vegas.

The $1.8 billion in cost cuts being sought would come as follows: $660 million from pilots, $350 million from flight attendants, $620 million from mechanics and ground workers, $80 million from ticket agents and $100 million from management.

Labor leaders were not immediately available for comment.

Shares of AMR fell 15 cents, or 5 percent, to $2.80--a new 52-week low--in afternoon trading on the New York Stock Exchange.

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