American Airlines Confirms It Will Cut 13,000 Employees

american airlines

Photo: Flickr Matt Hintsa

American Airlines parent company, AMR, has confirmed that it will cut some 13,000 positions as it wades its way through bankruptcy proceedings.Mechanics and ground workers will be impacted greatest by the move, as the company sheds 4,600 and 4,200 positions across the two workgroups, respectively. Some 2,300 flight attendant and 400 pilots positions will also be targeted.

In a memo sent to employees today, AMR CEO Tom Horton said the company was looking to save more than $1.25 billion a year through new labour agreements, part of $2 billion in annual savings it is targeting. It is unclear what percentage of job cuts will come through lay offs. 

“All workgroups will have total costs reduced by 20 per cent, including management,” Horton said. “While the savings from each work group will be achieved somewhat differently, each will experience the same percentage reduction.”

At the end of the third quarter in 2011, AMR employed 78,250 workers. The trim will also impact AMR’s American Eagle division, although a decision on those cuts have not been finalised.

The news follows the confirmation by US Airways’ CEO Douglas Parker that it has retained Barclays Capital and Millstein & Co., among others, to explore a possible takeover of AMR  during its fourth quarter conference call.

The move would fill a revenue gap for US Airways, while also helping fuel American’s weakened hub system, which has been drained as it cut money-losing flights over the past several months. 

“While it’s no longer imperative that our industry consolidate, we are of course always interested in exploring value enhancing deals,” Parker said on the call.

US Airways said it would wait to see what costs AMR is first able to shed while navigating bankruptcy, and that a deal could be a year or more away.

AMR is also seeking to reduce costs by terminating its pension program, and move employees to a 401K program. 

“The 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,” Horton said. “And there is no sugarcoating the effect on our people.”

Shares trading over the counter are down more than 12 per cent this afternoon.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.