Employees of American Airlines are expected to learn today about what some predict will be "drastic" cuts in jobs and benefits as part of its parent's proposed restructuring in bankruptcy.
Executives of the Fort Worth-based carrier will meet with its three major unions to lay out the company's new business plan and changes it wants to make in labor contracts. American's parent company, AMR Corp., filed for bankruptcy in late November in New York.Though details of American's restructuring plan are not yet public, workers are expecting layoffs, more costly health insurance, increased work hours and the elimination of their pension plans. Also possible: outsourcing of jobs and closure of American's maintenance base at Fort Worth's Alliance Airport. American employs about 25,000 people in North Texas."We are standing on the precipice of a very stressful and tumultuous time in this bankruptcy," Laura Glading, president of the Association of Professional Flight Attendants, said in a message to union members Tuesday. "Our experts and I expect this initial proposal to include drastic cuts across the board. Further, I expect dismay and outrage from our membership as details of the proposal are made public. I urge you to remain calm."American said it will not discuss its restructuring plan until it meets with union leaders."We have reviewed every aspect of our business and it's clear we have to be a more nimble, flexible and efficient airline in order to compete successfully and be consistently profitable," American spokesman Bruce Hicks said.In Chapter 11, labor contracts can be altered under Section 1113 of the U.S. Bankruptcy Code. American has not filed any motions with the bankruptcy court seeking to modify agreements with its pilots, flight attendants, mechanics or ground workers.But industry analysts say today's meetings are the first step in the Section 1113 process.Gimme Credit analyst Vicki Bryan expects American to try to trim up to $2 billion in labor expenses with job cuts affecting 10 to 15 percent of the workforce."We also expect AMR to close and/or outsource most of its in-house maintenance facilities and potentially pilot bases such as St. Louis," Bryan wrote, referring to the heavy maintenance work done in Tulsa and at Alliance. "Such harsh measures are necessary if AMR is to survive in any form -- either as an independent or as a plum that some other carrier might actually want to buy."In a court filing Tuesday, American said it posted a net loss of $904 million in December, its first full month operating under bankruptcy protection. American also ended the year with $4 billion in cash and short-term investments. In bankruptcy, AMR must file monthly financial reports with the court.AMR also said its mainline carrier had passenger revenue of $1.4 billion with its regional affiliates; total revenue was $1.9 billion.In a message to pilots Friday, Allied Pilots Association President David Bates pointed to concession proposals the company made in contract talks last fall as an indication of what the company may disclose today.American offered raises to pilots but wanted them to work more hours and allow the carrier to expand its code sharing with other domestic carriers like JetBlue and Alaska Airlines. It also proposed cutting pensions for new hires and altering retiree health benefits."Bankruptcy restructuring was clearly not our desired destination, but that's where we've landed," Bates said. "We're going to do our absolute best to ensure that the pilots of American Airlines are treated fairly and appropriately."The Transport Workers Union, which represents 26,000 AMR workers including mechanics and ground crew workers, plans a news conference this afternoon to discuss the company's plans.Analysts say the transport union could be affected most if the company chooses to outsource its maintenance work and tries to hire third-party contractors for jobs like cabin cleaning and bus driving currently performed by union members.Also Tuesday, the Pension Benefit Guaranty Corp. said it had placed liens on American's assets in Texas and overseas since the carrier contributed only $6.5 million on a $100 million pension payment due in January.The agency said it filed more than 70 liens, totaling $91.7 million, on behalf of American's four pension plans."That's what we can do in order to protect the integrity of the ongoing contributions that companies are required to make," agency director Josh Gotbaum said. "It does nothing to change the fact that American is also getting ready to propose that its pension plans be terminated."The agency, which insures pensions based on employer contributions, has been urging American not to dump its pensions.The agency estimates that American has $8 billion in assets in its pension plans to fund $18 billion in obligations, meaning a shortfall of $10 billion. Since the agency has a cap on pension payouts, about $1 billion of the shortfall will not be covered.Gotbaum pointed out that Congress allowed American to reduce its pension funding requirements three years ago, cutting the airline's obligations by about $1 billion. When AMR filed for bankruptcy, it said it had $4 billion in cash."The case, if you will, that 130,000 people have to have their pensions killed in order for American to survive is not a strong case," Gotbaum said.Andrea Ahles, 817-390-7631Twitter: @Sky_Talk
American plans to cut 13,000 workers nationwide:
400 pilots
4,600 mechanics and related workers
4,200 fleet services workers
2,300 flight attendants
1,400 management and support staff
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Court puts hold on AMR's hiring advisers
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