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AA Workers Face Job Cuts

July 17, 2008

By John Stancavage, Tulsa World, Okla.

Jul. 17–The parent of American Airlines lost more than a billion dollars in the second quarter, it said Wednesday, also disclosing that its job-cutting efforts will focus next on the company’s maintenance staff.

American employs 7,000 people in Tulsa, most at its Maintenance and Engineering Center. According to a company spokeswoman, those employees were given letters Wednesday outlining American’s plan to eliminate jobs, starting with some voluntary severance options.

The total number of jobs to be cut throughout American’s maintenance facilities, which together employ 13,000 people, has not been determined. American previously had targeted flight attendants and pilots for cutbacks.

Executives at American’s parent company, Fort Worth-based AMR Corp., told analysts in a conference call Wednesday that the company must adjust to skyrocketing fuel prices and other economic factors. As a result, American plans to continue to reduce its number of flights and ground or eliminate some of its aircraft.

“Today, American announced further fleet reductions to take place by the end of 2009,” spokeswoman Tami McLallen said in an e-mail to the Tulsa World. “The maintenance organization will be impacted by these fleet changes and the previously stated capacity reductions, which will cause a reduction in the M&E (maintenance and engineering) workload.

“A staffing level reduction proportionate to these changes is required and a reduction in force across American’s maintenance organization, including TWU (Transport Workers Union)-represented employees, management and support staff, will occur.”

The Tulsa facility is one of American’s three large maintenance bases; the others are in Fort Worth and Kansas City, Mo. In addition, the company has eight line-maintenance stations and other smaller facilities.

“Our maintenance capacity obviously is sized for a much larger airline,” American’s chief financial officer, Tom Horton, said in the conference call.

McLallen said details of the severance options still are being worked out. The choices likely will be presented to employees within the next week or two, she said.

Officials want to see how many employees voluntarily leave the company — and from which maintenance bases — before making decisions on whether further job cuts will be needed, McLallen said. In addition, executives will analyze the type of work being done at each location, she said.

“We have not made any decisions as to the specific impact to our maintenance bases or line maintenance facilities,” the spokeswoman said.

After the terrorist attacks of Sept. 11, 2001, and a subsequent downturn in the industry, American for a time had considered closing a major maintenance base. It later made some work shifts but kept all three facilities open. The Tulsa facility, in particular, has been adding work in recent years.

On Wednesday, AMR reported a second-quarter loss of $1.45 billion, or $5.77 per share. Much of that amount, however, came from the company’s reducing the value of its jet fleet to reflect its program to reduce capacity.

Excluding that and other charges, AMR said it would have lost $284 million, or $1.13 per share. A year ago, AMR earned $317 million, or $1.08 per share.

AMR said revenues in the latest quarter were up 5.1 percent to $6.18 billion.

Fuel costs increased 47.4 percent from a year ago, to $2.42 billion.

The undetermined number of maintenance job cuts are part of an estimated 6,800 positions the company is eliminating.

Chairman and CEO Gerard Arpey said in a conference call that American also has increased fees and raised fares.

If fares go too high, however, the tight economy could cause some consumers to quit flying, he said.

“We don’t believe we’re at that point yet, so we continue to believe the industry can sustain — we can sustain — higher prices, so we’re raising our prices,” Arpey said.

The CEO also said American has put its plan to sell its American Eagle unit on hold, citing poor industry conditions.

American plans to remove 103 airplanes from its fleet this year. In particular, it now will retire its 34 Airbus A300 aircraft by the end of 2009, three years ahead of schedule.

Heavy maintenance for the A300 is done in Tulsa, but that fact does not necessarily point to a negative outlook for the local base, McLallen said in a telephone interview.

When asked about ground being broken last week for a $10 million hangar at the Tulsa M&E center, McLallen said that project will go forward.

“We don’t plan to close any of the hangars in Tulsa,” she added.

Ray Neidl, an analyst with Calyon Securities, said in a telephone interview that the entire airline industry needs to shrink.

“It is not structured for $130 oil,” said Neidl, who has a “neutral” rating on AMR’s stock.

Despite the large net loss, the company’s second-quarter performance still beat many analysts’ expectations. AMR’s shares gained $1.41, or 32 percent, to close at $5.82 on the New York Stock Exchange.

The stock hit a 52-week low of $4 Tuesday. It is down 58 percent this year, and is more than $23 off its 52-week high of $29.32, reached on July 24, 2007.

The Associated Press contributed to this story.

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