American Airlines (AA) chairman, president and CEO Tom Horton outlined the bankrupt carrier's plan for emerging from Chapter 11 protection in a Wednesday letter to company employees, calling for $1.25 billion in annual labor cost cuts.
The labor expense reductions, which would likely cut about 13,000-15,000 employees from AA's roster of around 80,000 workers, will cover more than half of the over $2 billion in yearly savings the airline plans to achieve via bankruptcy restructuring. Additional cost slashing will be realized through "restructuring debt and leases, grounding older planes, improving supplier contracts and other initiatives," Horton explained. AA is also seeking to generate "revenue improvements of $1 billion per year through network scale, fleet optimization and product improvements," he said.
The company will spend "an average of about $2 billion per year in aircraft, so that by 2017 American's mainline jet fleet will be the youngest in North America, with the versatility to match aircraft size to the markets we serve," Horton wrote. "This step is central to our transformation and means more profitable flying due to markedly improved fuel and maintenance costs and higher revenue generation."
AA has committed to a narrowbody fleet renewal that includes 260 Airbus aircraft (including 130 A320neos) and 200 Boeing aircraft (including 100 737 MAX aircraft).
Horton said the Chapter 11 restructuring process "allows us to spread the effects of cost savings as broadly and evenly as possible, but there is no avoiding the fact that the cost reductions will be deep. And there is no sugarcoating the effect on our people."
He noted that all AA workgroups "will have total costs reduced by 20%, including management. While the savings from each work group will be achieved somewhat differently, each will experience the same percentage reduction." He called this approach "fair and equitable."
Article Source : ATW Daily News
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