- CHICAGO (Reuters) - American
Airlines, the world's largest air carrier, unveiled plans on Tuesday to
cut another 7 percent of its work force, reduce flights and retire aircraft
as it tries to restore profits in the wake of the post-Sept. 11 downturn.
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- The actions, which include 7,000 job cuts, are the latest
in a series of moves by American to right itself as air travel remains
depressed, particularly among high-paying business fliers.
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- The Dallas/Fort Worth-based airline will change the seating
plans on nearly 100 jets -- Boeing BA.N 777s and 767-300s -- to better
match demand for various classes of tickets.
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- It also plans to smooth out the flight schedule at its
key Dallas/Fort Worth hub to distribute flight times more evenly throughout
the day. A similar move at its Chicago hub earlier this year reduced the
need for five aircraft there by using others more efficiently.
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- In all, the changes will save about $1.1 billion annually,
American said, roughly equivalent to the amount of money the giant airline
lost in just the first six months of this year. In 2001, American parent
AMR Corp. AMR.N lost $1.8 billion.
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- Several Wall Street analysts praised the moves, and AMR
shares rose 38 cents, or 4.6 percent, to $8.74 on the New York Stock Exchange
on Tuesday. But the previous day they had dropped to $8.15, their lowest
level since the attacks devastated the industry.
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- SCOURING THE SYSTEM
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- Most job cuts will begin in October and will be widespread
across the system, an American executive said. About 40 percent will come
from the ranks of pilots and flight attendants. The job cuts will be complete
by March 2003.
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- No cuts are expected on the maintenance and engineering
side, said American spokesman Tim Doke. As of March, American had 101,706
employees.
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- Jarring news in the airline industry has yet to abate
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- Demand for air travel is still off about 10 percent since
the Sept. 11 attacks. US Airways Group U.N , the No. 6 U.S. airline, filed
for Chapter 11 bankruptcy protection on Sunday. Industry experts say UAL
Corp. UAL.N , parent of No. 2 United Airlines, may be next to head for
the courts.
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- Shares of UAL dropped another 28 percent on Tuesday,
falling below $3 to their lowest level in decades. The stock ended at $2.74,
down $1.06, after UBS Warburg analyst Samuel Buttrick cut his rating to
sell from hold.
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- BYE BYE BIRDIE
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- American, smarting from competition from low-cost rivals
like doggedly profitable Southwest Airlines LUV.N , will retire 74 costly
Fokker 100 aircraft and defer 35 aircraft deliveries in 2002. The airline
will also "seek every opportunity" to defer or cancel new deliveries
going forward.
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- Tom Ryan, a spokesman for Boeing Commercial Airplanes,
said the delivery deferrals from American were already factored into the
manufacturer's outlook for 2002 and 2003.
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- Boeing will still deliver 380 planes in 2002 and between
275 and 300 in 2003, Ryan said. Boeing shares slid nonetheless, falling
8 percent to $37.23.
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- American will also accelerate the retirement of nine
Boeing 767-300 planes that it inherited from its purchase of TWA.
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- For the various fleet changes, Chief Financial Officer
Jeffrey Campbell on a conference call outlined charges to earnings in the
third quarter of up to $500 million.
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- Of that, Campbell said up to $100 million relates to
the 767s and $200 million to $400 million for the Fokkers, whose manufacturer
is now out of business.
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- NO STONE UNTURNED
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- AMR Chief Executive Don Carty warned at the airline's
annual meeting in May that he would leave no stone unturned in his quest
to restore profitability.
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- "They're doing the kinds of things that I thought
some months ago would need to be done," Robert Crandall, former chief
executive of AMR, said in a telephone interview. "The kind of structural
changes they announced this morning has to happen."
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- The industry has lost more than $10 billion since the
attacks, and the bleeding shows no signs of stopping.
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- Citing recent economic and consumer confidence reports,
American said it aims to reduce capacity by 9 percent by November, compared
with levels this summer.
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- After the attacks on New York and Washington, which involved
two American Airlines planes, AMR laid off about 20 percent of its staff
and cut back capacity by 20 percent, moving in step with most other major
U.S. airlines.
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- Industry capacity has recovered some ground since then.
After the new round of cutbacks, American's capacity will be about 13 percent
lower than it would be had the Sept. 11 attacks not happened, Doke said.
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- Merrill Lynch analyst Michael Linenberg called the announcement
good news that is "well aimed" at returning the company to profitability.
He rates the stock a buy.
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- The hub initiatives announced on Tuesday will increase
efficiencies at Dallas/Fort Worth by using people, gates and aircraft more
productively, simplifying its fleet and adjusting capacity for the fall
and winter, the company said.
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- Campbell on the conference call hinted that other hubs
could be next for the same sort of action.
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