- The Washington Times - Wednesday, August 14, 2002

American Airlines Inc. announced yesterday that it would lay off 7,000 employees and ground 74 aircraft in a massive reorganization prompted by fierce competition and losses after the September 11 attacks.
The restructuring of the world's largest airline is part of an industry trend to stem losses that reached $4 billion in the first six months of this year. Of the nation's seven largest carriers, only Southwest Airlines remains profitable.
On Sunday, US Airways Inc. filed for Chapter 11 bankruptcy protection, while industry analysts speculated Monday that United Airlines Inc. would be next to seek a safeguard against creditors.
"We believe our future lies in continuing to operate as the world's leading network carrier but we must get our costs down in order to compete and must focus on the products our customers want and are willing to pay for," Donald Carty, chairman and chief executive of American Airlines, said in a statement.
American Airlines had eliminated 20,000 jobs since September 11. Of those, 9,622 workers have been called back. About 2,100 of its 110,000 employees work in this area.
In Waco, Texas, where he was attending President Bush's economic summit, Commerce Secretary Donald L. Evans said the entire industry is going through a "difficult period right now."
"It was going through a somewhat tough period before September 11," he said. "My heart goes out to those 7,000 employees that were laid off at American Airlines."
Mr. Carty said he expects $1.1 billion in annual savings from the job cuts and the retirement of its fleet of 100-seat, medium-range Fokker airplanes. Spending cuts since 2001 have reduced annual expenses by $5 billion, the company said.
AMR Corp., the Dallas parent company of American Airlines, posted a second-quarter loss of $495 million, compared with a $507 million loss a year earlier.
Even if the latest moves restore American Airlines to profitability, they will not eliminate the industry's lingering ills.
"We could see more bankruptcies," said David Swierenga, chief economist for the Air Transport Association, the trade group for major airlines. "There also could be some consolidation in the industry."
Competition from low-cost carriers, such as Southwest Airlines, contributed to the woes of the major carriers. Passenger loads remain about 10 percent below pre-attack levels.
The restructuring at American Airlines includes revisions to its traditional hub-and-spoke operation to make it more like low-cost carriers. Airlines that use hubs concentrate flights around peak hours at a few major airports.
American plans to spread out its flights through the day to generate more trips and to ensure use ground crews and gates more efficiently.
The company said the revisions will allow it to offer the same number of flights with 17 fewer airplanes. The airline's largest hub is at Dallas-Fort Worth International Airport. It tested the new "rolling hub" concept at Chicago's O'Hare International Airport in the spring.
However, passengers might have longer waits because of greater intervals between flights.
Other changes include reducing capacity by 9 percent, expediting retirement of nine wide-body Boeing 767-300 airplanes and eliminating first-class seats from the remaining 767-300s.
"We just weren't selling first-class seats," said Marty Heires, a company spokesman. "There are a lot of things that we knew we needed to do to get our product to be a better fit for the marketplace."
First class will be retained on Boeing 777s.
Labor contracts are the largest expense for airlines. With revenue down 15 percent to 20 percent from last year, a smaller work force might be the only option for some carriers, Mr. Swierenga said.
"Layoffs will happen if carriers reduce their flying," he said. In addition, the summer travel season is ending.
"We're going into a period of time when demand slacks off," he said.
The Allied Pilots Association, the union representing American Airlines pilots, said labor contracts were not a primary source of the airline's financial concerns.
"There are a lot of things that can be done within the confines of existing labor agreements to create greater efficiencies," said union spokesman Gregg Overman. "I think that's where they're starting to look, and we applaud that."
American operates 68 daily flights out of Ronald Reagan Washington National Airport, 42 out of Washington Dulles International Airport and 68 out of Baltimore-Washington International Airport.
"It's a great market for them here," said Melanie Miller, BWI spokeswoman. "They've increased their service here after September 11."

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