Financially troubled American Airlines on Wednesday announced it's looking to cut 13,000 employees and terminate the company’s defined pension plan as part of its restructuring strategy to emerge from bankruptcy and return to profitability.
“A difficult outcome of the restructuring process is our need to reduce our workforce to better align with a more efficient operation,” said Bruce Hicks, a company spokesman.
The deepest cuts will come from fleet services and mechanics for a total of 8,000, followed by flight attendants with 2,300 proposed reductions; management with 1,400 and pilots with 400. American Airlines and American Eagle Airlines, both subsidiaries of AMR Corporation, employ a total of 88,000 full and part time employees, including about 68,000 workers covered by unions.
Representatives of the Allied Pilots Association, Transport Workers Union, and Association of Professional Flight Attendants met with company officials in Dallas earlier on Wednesday to hear the restructuring plan.
Reached before details emerged about the proposal, Sam Mayer, a long-time American pilot who sits on the union's communication committee, said, "just because they ask for something today doesn't mean they're going to get it.”
AMR has been operating under bankruptcy protection since November and is in negotiations with its unions over cost-cutting measures. AMR reported a loss of $904 million in December alone.
In a letter to employees today, AMR CEO Tom Horton spelled out the sacrifices and investments the company is proposing including upgrading the airline’s infrastructure by investing about $2 billion per year in aircraft and $1 billion in network and product improvements.
As for belt tightening, Horton expects $2 billion in cost savings from “restructuring debt and leases, grounding older planes, improving supplier contracts and other initiatives, and necessary employee-related changes.”
The company is seeking “$1.25 billion in permanent annual cost reductions from all employee groups,” Jeff Brundage, American’s senior vice president of human resources told employees in an email today.
In addition to employee cuts, he wrote, the company will:
- “Seek court approval to terminate our defined benefit pension plans. If terminated, the plans would be replaced with a 401(k) plan with a company match.”
- “Seek to discontinue company-subsidized retiree medical coverage for current employees, but will offer access to these plans if employees choose to pay for them.”
Such changes, he acknowledged, will require “decisive action, difficult changes, and an unwavering commitment to our future success.”
It’s unclear how abiding American’s employees will be.
The company has had a rocky history when it comes to worker-management relations, and it’s unclear how much sway the newly minted CEO Horton will have getting employees to buy in.
Horton took the job after Gerard Arpey resigned late last year over objections to the bankruptcy filing. Arpey had spent years trying to turn the company around, and also mend fences with American’s unions that felt slighted by the CEO who had the job before him, Don Carty.
Before Arpey came on board in 2004, the company’s management got employees to agree to nearly $2 billion in wage and benefits cuts, but at the same time funding a pension trust and paying out lucrative bonuses to the company’s top executives, including Carty.
Now they go to the negotiating table yet again.
“The company makes their proposal and we begin negotiating with them,” Mayer maintained. “That's what will happen with all three unions."
For other major airlines that went through bankruptcy, he continued, “the final agreement looked nothing like the original proposal by management.”