October 22, 2004 Friday

American Airlines to Lay Off Up to 1,100

BYLINE: BOBBY ROSS JR.; Associated Press Writer

SECTION: FINANCIAL NEWS

LENGTH: 629 words

DATELINE: DALLAS

American Airlines, struggling with rising fuel costs and competition from low-fare carriers, will furlough up to 650 maintenance workers in Kansas City and St. Louis and up to 450 pilots, the company said in a memo given to employees Friday.

The news came two days after Fort Worth-based AMR Corp., parent of American, reported that it lost $214 million from July through September and expected an even bigger loss in the fourth quarter.

Jeff Brundage, the company’s senior vice president of human resources, wrote in the memo obtained by The Associated Press that American has worked for months to “operate more efficiently and return to profitability.”

“Despite our success in lowering costs, some circumstances that greatly impact us, most notably fuel, are out of our control,” Brundage said in the memo. “Unless things change significantly, we know we are in for a difficult winter.”

Tim Wagner, a spokesman for American, confirmed a memo went out to employees, but said Friday night he could not comment because the company has promised to tell employees about cost-cutting measures before discussing them publicly.

Before Friday’s memo, American had furloughed nearly 2,600 of its 11,000 pilots and more than 4,500 flight attendants, although it was recalling 610 attendants for international routes. The latest cuts would push the number of furloughed pilots above 3,000.

“We’re not happy to lose pilots off the payroll or to put their careers in jeopardy,” Capt. Denis Breslin, a spokesman for the Allied Pilots Association, said Friday night. “At the same time, we’re also having a hard time overcoming the effects of high fees, historically low fares and historically high fuel prices that are out of control.”

A message left at the office of Jim Little, director of the air transport division of the Transport Workers Union of America, was not immediately returned Friday night.

Along with employee cuts, American will shrink its domestic flight schedule by 5 percent in the first quarter of 2005, the memo said. Also, the company will implement a “simplification that ran this summer in Chicago” and “showed the potential to save millions.”

The airline plans to cut 300 to 400 maintenance positions in Kansas City, Mo., and 200 to 250 in St. Louis, along with an undetermined number of maintenance positions throughout the system, the memo said. Flight attendant levels will be adjusted through voluntary leaves starting in January.

The company has cut 400 management and support staff positions this year and is evaluating further staffing reductions, the memo said.

AMR on Wednesday reported a net loss of $214 million, or $1.33 a share, on $3.84 billion in revenues for the three-month period ending Sept. 30.

American said it spent $342 million more on fuel last quarter than in the same three months of 2003 – turning a potential profit into a loss. The price of jet fuel on spot markets along the Gulf Coast has jumped from 88.9 cents per gallon at the beginning of the year to $1.56 per gallon last week, according to the Department of Energy.

The airline expects high fuel prices to continue in the fourth quarter, which is typically a slow travel period, leading to a “significantly larger” loss than that of the third quarter.

Some carriers have partly insulated themselves from high fuel prices by taking options to buy fuel in advance at fixed prices. American could not do that because of its weak financial position, so it hedged only 9 percent of its fuel in the third quarter, compared to 80 percent by profitable Dallas-based Southwest Airlines.

In trading Friday, AMR shares closed down 12 cents, or 1.81 percent, at $6.52 on the New York Stock Exchange.


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