Fewer flights could cost jobs at American Airlines
Tuesday, October 11, 2011
DALLAS (AP) — Fall and winter service reductions at American Airlines could cost some workers their jobs at the nation’s third-largest airline company.
American announced late Monday that it will reduce passenger-carrying capacity in the October-through-December quarter by about 3 percent compared with late 2010. It cited the weak economy, high fuel costs, and more pilots retiring.
Analysts said the move, along with similar recent announcements from United and Delta, showed that airlines were serious about controlling costs. Barclays Capital said Tuesday that it still expects American’s parent, AMR Corp., to lose money through next year — but not as much, thanks to the reductions.
AMR shares led a rally in airline stocks, rising 17 cents, or 6.5 percent, to $2.70 in afternoon trading.
While investors were encouraged, employees at American had new reasons to worry about their jobs.
“These capacity adjustments could have a significant impact on operations and, unfortunately, could result in employee reductions companywide,” said spokesman Tim Smith.
Smith said American was studying whether it could limit the number of furloughs by offering voluntary severance.
American said advance bookings are about in line with last year’s, but analysts predict that travel demand is likely to weaken in the fourth quarter.
Airlines usually cut capacity by reducing flights or using smaller aircraft. Both result in fewer seats for sale. That should help maintain current airfares, a “positive for the airline sector,” said Dahlman Rose & Co. analyst Helane Becker.
Even with the fourth-quarter moves, American’s capacity for all of 2011 will still be 0.4 percent higher than 2010. But the increase is far smaller than the airline’s original plan to grow by 3.5 percent.
American also plans to retire up to 11 Boeing 757 jets next year. It already has fewer pilots to fly its fleet of about 600 planes.
In the past two months, 240 American pilots have retired — about 10 times the normal rate. They are taking advantage of an unusual contract clause that lets them lock in the value of some pension benefits before the recent stock market slump.
American parent AMR Corp. was the only major U.S. airline to lose money last year and is expected to keep posting losses through next year. High fuel prices have hurt American, which has a relatively old and inefficient fleet, and the company says that its labor costs are higher than those of competitors.
While announcing the reduced schedule, AMR also said it would take $51 million in charges against earnings in the third quarter related to fuel-hedging contracts and changes in currency exchange rates.