American Airlines plans to lay off 7,000 workers

DALLAS -- American Airlines announced a massive restructuring Tuesday that will cut its work force by 7,000 jobs by March 2003 in an effort to make the world's biggest carrier competitive with lower-cost rivals.

American, which has lost $2.8 billion over the past 18 months, said restructuring is critical to long-term survival. In addition to cutting its work force, it will reduce capacity by 9 percent and retire its fleet of 100-seat Fokker planes.

The announcement comes as the U.S. airline industry continues to be rocked by the slump in travel after the Sept. 11 terror attacks, a tepid economic recovery and fierce price competition.

The new initiatives by American, and earlier cost-saving measures, will save $1.1 billion in annual operating costs, the company said.

"We must get our costs down in order to compete, and must focus on the products our customers want and are willing to pay for," chairman and chief executive Donald J. Carty said.

After the announcement, shares in AMR were up 18 cents at $8.54 in trading on the NYSE.

AMR Corp., American's parent company, said last month it lost $495 million in the second quarter, blaming low fares driven by discount carriers.

Sept. 11 effects

After the Sept. 11 attacks, when two American Airlines jets were among the four that were hijacked, the company cut its fleet, delayed capital spending and laid off workers to deal with a drop-off in air travel.

American said the 7,000 job cuts will occur by March 2003. The airline said it plans to reduce capacity by 9 percent by November from summer levels.

Carty said options including leaves of absence and part-time work are being developed "to minimize the impact on our people."

The carrier's 74 Fokker 100s will be phased out by the third quarter of 2005, American said.

American did not ask employees to make concessions on salaries. Ray Neidl, an analyst with Blaylock & Partners, said the airline would wait to see what happens at US Airways and United Airlines.

With US Airways in bankruptcy, many wonder if United Airlines might be next. United has implemented a financial recovery plan to stem losses, but the carrier faces high labor costs and losses of more than $1 million a day.