American Airlines Ask Labor for Cost Cuts
By BRAD FOSS
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
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
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
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
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.