For American Airlines’ employees filing for bankruptcy was just step one. Now the company has to abide by a cost reduction program that involves measures that directly affect the well being of workers. Bloomberg writes that American Airlines has plans for 13,000 job cuts.
Part of the company’s bankruptcy plan, American Airlines will shed about 13,000 jobs, in other words 18 percent of the carrier 73,800 employees. The overall cost reduction program aims to boost revenue by $1 billion and cut annual operating costs by $2 billion.
Chief Executive Officer Tom Horton announced today that all the work groups within the company will undergo a 20 percent reduction in costs, that only top the decision to terminate the four pension plans.
“We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalize fully on the solid foundation we’ve put in place”, read Horton’s letter to his employees.
Laura Glading, president of the Association of Professional Flight Attendants, called the job cuts “absolute outrage”, adding “there’s nothing in here that’s remotely acceptable”. Transport Workers Association President James Little warned that the union will fight it .
As Horton himself pointed out, the restructuring American Airlines will go through is of “a different kind”. “It’s not about shrinking. It’s about renewal and growth” he said. But Ray Neidl, a Maxim Group LLC analyst, is concerned about exactly how is Horton going to pull out such a plan.
“That’s the big question mark. All airlines have set these new revenue targets during restructurings or mergers, and it’s very hard to achieve because you can’t always control all the variables” said Neidl. The analyst tried to make some back of the envelope calculations based on the measures Horton announced.
Jeff Straebler, independent airline analyst in Stamford, has similar concerns. “New revenue is the hardest part, no question. And if there’s $1 billion they can find, then so should everyone else, so there is no competitive advantage”.
In Straebler’s opinion, there are some opportunities, such as raising rates on the company’s flight operations, “but all of the low – hanging fruit has already been picked”.