American To Slash Employee Costs by $1.25 Billion

 - February 1, 2012, 3:21 PM
American plans to operate the industry's youngest fleet by 2017. (Photo: Boeing)

In a February 1 letter to American Airlines employees, company chairman and CEO Thomas Horton identified $1.25 billion in annual employee-related cost reductions—estimated to involve between 12,000 and 14,000 job cuts—among a list of some $2 billion worth of annual cost-savings initiatives that include restructuring debt and leases, grounding of older airplanes and improving supplier contracts. Now in Chapter 11 bankruptcy, American would also increase revenues by $1 billion a year through what it calls network-scale fleet optimization and product improvements, according to the letter.

Horton promised that the 20-percent cuts planned for all the company’s work groups would prove “fair and equitable” and would include management. “While the savings from each work group will be achieved somewhat differently, each will experience the same percentage reduction,” he wrote.

Meanwhile, American plans to invest an average of $2 billion a year in aircraft in an effort to build the youngest fleet in the industry by 2017. It also plans to increase departures by 20 percent over the next five years in Dallas/Fort Worth, Chicago, Miami, Los Angeles and New York. Finally, it expects to invest “several hundred million dollars per year” in the modernization of its brand, products and services to attract so-called high-value customers.