American Airlines Continues to Face Turbulence in Challenging Environment

Andrew Klips |

AMR, DAL, LCC, UAL, airlines, chapter 11, bankruptcy, labor costs, jet fuel, fuel costs, reorganization, restructuring, Thomas Horton, Gerard Arpey,As it trudges its way through bankruptcy restructuring, American Airlines said that it is sending layoff warnings to more than 11,000 employees, although it actually expects the job cuts to be more in the area of 4,400, according to airline spokesman Bruce Hicks. Ground workers and mechanics will be the primary recipients of the notices. The company also reported that it is cutting flights by one to two percent for the rest of September and October.

American Airlines, the principle subsidiary of AMR Corporation (AAMRQ) and third-largest U.S. air carrier, filed for Chapter 11 protection in November 2011, as it struggles with ongoing labor costs.

Notices of potential layoff were sent to more than 3,000 workers in Dallas and Fort Worth, Texas, where American is based; about 3,000 people in Tulsa, Oklahoma; just over 1,200 in Miami; nearly 1,000 in New York; about 900 in Chicago and smaller numbers in other cities across the U.S.

Federal law - under the Worker Adjustment and Retraining Notification (WARN) Act - mandates that companies notify any staffers 60 days before potential major layoffs or plant closures, so more people will be contacted than will be terminated. In February, American said that it would be cutting 14,000 jobs as a consequence of its bankruptcy, but it looks like the numbers are going to be significantly less. In the past few months, the iconic airline also has seen about 2,600 employees take severance packages to voluntarily quit.

"As bad as this is — and we knew this day was coming — we've been able to lessen the pain," said Jamie Horwitz, a spokesman for the Transport Workers Union which represents workers that received WARN Act notices.

Separately, the war is waging on between American and its pilots. The unionized pilots (of the Allied Pilots Association) are the only major work group at American that has not agreed on contract concessions since the bankruptcy filing. Leveraging approval by the bankruptcy court that they can ignore a collective bargaining agreement, American began implementing cuts for the pilots last week.

While other labor groups have approved negotiations with American to make concessions to reduce costs, the pilots have rejected American’s latest contract offer. Now, the pilots are "angry" with the imposing of new work terms that cut their compensation and benefits, said Union president Keith Wilson in a message on Tuesday. A strike vote will be held amongst the union on October 3, but the workers have said that they will not conduct the strike illegally. To that end, Wilson said the he will be meeting this week with Transportation Secretary Ray LaHood and other senior officials in the Obama administration and Congress seeking approval of steps that could eventually lead to a legal strike.

American says that the pilots are calling-in sick far more than usual, leading to flight cancellations. The company cites this as a contributing reason for the planned flight cancellations this fall to ensure that they have enough pilots to meet demand, but the Pilot union spokesman Gregg Overman says that sick rates for American pilots have not deviated from normal historical rates, based on the union's tracking.

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