NEW YORK—AMR Corp., the bankruptcy holdings company for American Airlines, said on Wednesday that it plans to slash 13,000 jobs as part of its restructuring and reorganization to emerge from bankruptcy as a more competitive company.
The Dallas-based AMR announced the decision this week after executives including Chief Executive Officer Tom Horton met with different labor groups and determined that the cuts were necessary to preserve the company. He hopes to improve the company’s financial situation by $3 billion, with $1 billion in additional revenues and $2 billion in expense savings.
“Our major competitors have used the restructuring process to overhaul their companies and become more competitive in every aspect of their business,” Horton said in a letter to employees on Feb 1. The company plans “cost savings of over $2 billion, from restructuring debt and leases, grounding older planes, improving supplier contracts, and other initiatives, and necessary employee-related changes.”
Additional revenues will come from changing route networks and better utilizing its current fleet, Horton said. He plans to increase “departures across American’s five key markets—Dallas/Fort Worth, Chicago, Miami, Los Angeles, and New York—by 20 percent over the next five years,” he said in the letter.
The $3 billion cost cuts, which equate to roughly 20 percent of its total costs, will mainly come in the form of terminating 13,000 employees, or around 15 percent of its current workforce of 88,000.
The company expects the job cuts to affect 4,600 maintenance and mechanical workers, 4,200 baggage handlers, 2,300 flight attendants, and 1,800 pilots, and other corporate staff. Other cuts it plans to make include changing medical benefits for retirees and scrapping its defined benefit pension plan.
AMR, which is the parent company for American Airlines and American Eagle filed for Chapter 11 bankruptcy protection in November 2011, and stated that its costs were drastically higher than its major competitors, especially in labor costs.
While AMR plans to emerge from bankruptcy as an independent company, Reuters reported that various rivals—including Delta Airlines and US Airways Group are assessing bids to acquire it.