American Plans more Layoffs, CEO Says
by Trebor Banstetter, Ft. Worth Star Telegram Staff Writer
November 4, 2004

FORT WORTH - American Airlines will eliminate more jobs in the months ahead as it struggles with high fuel prices and heavy competition, the carrier's chief executive said Wednesday.

Those cuts will be on top of 1,100 layoffs of pilots and mechanics that American executives recently announced.

"We will see more cuts across the board, involving all workers, in the months ahead," Gerard Arpey, American's chief executive, told analysts during a conference at the airline's Fort Worth headquarters.

Arpey laid out several avenues for additional cost reductions, including possibly canceling airplane orders and renegotiating contracts with some vendors.

American, which is the largest employer in North Texas, has shed more than 20,000 jobs since 2001 amid a steep industry downturn and intense competition from smaller, low-cost airlines. But it continues to lose money. Last month, the airline posted a $214 million loss for the third quarter, which is traditionally the strongest period of the year. And Arpey said that fourth-quarter results will probably be even worse.

So while American has already cut costs, including $1.6 billion in concessions won from unionized employees last year, it needs to slim down further, executives said.

"We've continued to focus on driving costs out of our company," said James Beer, American's chief financial officer. "Clearly we have many financial challenges ahead of us."

Executives would not disclose how many jobs might be cut in the next round of layoffs, although Arpey said all of American's work groups would be affected.

The airline has been working closely with union leaders to explain the situation and prepare them for the cuts, said Jeff Brundage, American's vice president of human resources.

Regular talks with union leaders have gone a long way toward reversing American's traditionally hostile relations with labor, Brundage said.

"That puts us light years ahead of where we could be," he said.

Executives said they are closely watching efforts by competitors, including United Airlines and Delta Air Lines, to terminate or restructure employee pension plans. But they said it is too early to know if American will follow a similar route.

"We're watching the situation as it evolves," Beer said. "The bottom line is we're going to have to be competitive in all areas of the industry."

Altering pension plans would require changes to American's contracts, which must be approved by the unions.

Brundage suggested that changes to labor contracts, if necessary, might be made by signing letters of agreement with union leaders rather than renegotiating new deals.

In addition to targeting labor costs, American is in talks with Boeing to delay or cancel upcoming airplane orders, Arpey said. He did not specify how many airplanes might be affected or how much money the airline could save.

American has reached an agreement with Embraer to cancel orders for 18 regional jets.

Arpey also said that he would like to work with American's vendors to find some financial relief. The airline negotiated some savings with vendors last year, but Arpey said many are comfortably profitable while the airline continues to suffer.

Executives didn't discuss the presidential election extensively, but William Ris, American's senior vice president of governmental affairs -- and a Democrat -- said he had been teased by co-workers about the results.

He urged analysts to skip his presentation and go straight to a planned cocktail party.

"After the results yesterday, I've been drinking all day," he said lightly.