AMR Corp. is shedding 13,000 jobs under a restructuring plan that is seeking some $2 billion in annual cost savings and a further $1 billion in improved sales.
The cost cutting includes more than $1.25 billion from labor, while the remaining $750 million or so will come from debt restructuring, grounding of older aircraft and revised supplier contracts, AMR CEO Tom Horton tells staff in a memorandum issued this afternoon.
All employee groups will be affected by the job losses as the company seeks 20% savings from labor, although initial data suggest the company’s mechanics and fleet service workers will be most affected, with 4,600 and 4,200 positions eliminated, respectively. AMR’s flight attendant roster will decline by 2,300 positions, while pilot numbers will fall by about 400. Management and support staff will account for a further 1,400 positions.
With these cuts, AMR will eliminate about 18% of its current full- and part-time payroll and will close its maintenance facility in Fort Worth. To accommodate this reduce staffing, AMR intends to outsource a “portion of our aircraft maintenance work” as well as “some airport fleet service clerk,” Senior VP of Human Resources Jeff Brundage told employees in a separate memorandum issued mid afternoon.
As expected, the labor costs include the termination of AMR’s four defined benefit pension plans, a move that will enable the company to transfer all obligations for its underfunded pensions to the U.S. Government’s Pension Benefit Guaranty Corp. (PBGC). If the carrier had decided to simply freeze its pensions, as the PBGC has proposed, labor would have to contribute an additional $800 million in cost savings to meet the airline’s annual obligations, Horton notes in his letter.
PBGC’s Director Josh Gotbaum, who in the past few weeks has been waging a war-of-words with AMR’s leadership, is not convinced that AMR is addressing the pension issue correctly. “Before American takes such a drastic action as killing the pension plans of 130,000 employees and retirees, it needs to show there is no better alternative. Thus far, they have failed to provide even the most basic information to decide that,” says Gotbaum in a statement.
Horton’s staff notice comes as his leadership team met in Washington with federal lawmakers and the company’s unions to discuss AMR’s Chapter 11 reorganization. Further talks are scheduled later today on the details of each employee group’s contribution to the plan, after which AMR is expected to provide more information about the restructuring.
Of particular interest is AMR’s intent to increase departures at its five “cornerstone” markets by 20% in the next five years, which Horton’s letter noted will include increased international operations. He also mentioned a fleet renewal and optimization effort, but offered no details about the extent of this program, although it is clearly a reference to the carrier’s record narrowbody order from July that will add current modeland single-aisle aircraft from 2013 and re-engined models from 2017.
“While we are now firmly on a path to a successful growing future, we must acknowledge the near-term pain these changes will require. That’s especially true because we will end this journey with many fewer people,” Horton says in his letter.
“But,” he adds, “we will also preserve tens of thousands of jobs that would have been lost if we had not embarked on this path–and that’s a goal worth fighting for. As I’ve said before, our objective is to create the best outcome for the greatest possible number of people.”