AA - not good news

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dragon

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SOURCE: American Airlines

American Unveils Next Series of Fundamental Business Changes
- Reduces Capacity By 9 Percent, Retires 74 Fokker 100s,
- De-Peaks DFW Hub and Makes Other Fleet Changes
FORT WORTH, Texas, Aug. 13 /PRNewswire-FirstCall/ -- American Airlines today unveiled the latest in a series of short- and long-term initiatives intended to further position American for long-term competitiveness and profitability.

"We grasped the need for fundamental change in the airline industry some time ago, and have undertaken both long-term structural change and measures responsive to current industry conditions. This latest round of initiatives is yet another step toward more solidly positioning American for success in the long term," said Chairman and CEO Donald J. Carty.

"We believe our future lies in continuing to operate as the world's leading network carrier -- but 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. Our decisions going forward will be framed around those objectives and geared toward positioning American to succeed and be profitable," Carty said.

In the past 18 months, American has implemented a number of changes:

de-peaking its Chicago hub,
simplifying its fleet,
launching several automation initiatives that improve customer service and enhance productivity,
changing distribution methods,
modifying its in-flight product, and
initiating a broad range of cost savings programs.
The initiatives announced today will increase scheduling efficiencies at American's largest hub at Dallas/Fort Worth, further simplify its fleet and sharply adjust capacity for the fall and winter.

"These are a combination of fundamental structural changes and tactical moves to re-position and re-size the airline in light of a continued sluggish economy and changes in consumer flying behaviors," Carty said. "We view change as an ongoing process at American as we continue to evaluate every aspect of our business."

The initiatives being announced today include:

American will expand its successful April 2002 Chicago hub "de-peaking" to its largest hub at Dallas/Fort Worth beginning Nov. 1 to allow the airline to utilize people, gates and aircraft more productively -- and to give customers better flight options. Since aircraft will be flying into and out of the hub on a more continuous schedule, with flights spread out more evenly throughout the day, spoke cities also will see increased efficiency and productivity as a result of the DFW and Chicago hub de-peaking initiatives.
"Our Chicago experience has improved customer service, reduced costs, improved productivity and allowed us to fly the same schedule with the equivalent of five fewer aircraft and four fewer gates," Carty said. "We expect the DFW and spoke de-peak to allow us to fly an equivalent schedule with 11 fewer aircraft, with an as-yet-undetermined number of gates saved as well."

American will retire its 74-jet Fokker 100 fleet -- furthering the fleet simplification efforts that had previously cut fleet types from 14 to seven. The first F-100 will leave the fleet in the third quarter of 2003 and the last plane will retire by the third quarter of 2005.
While regular maintenance will continue unabated, consistent with AA's high standards and FAA and manufacturer procedures, each Fokker aircraft will be retired before its next scheduled major overhaul, resulting in major cost savings. Further, since the F-100 is not common with other aircraft types, crew-training savings will be very significant.

"The Fokker is a small plane with very high operating costs, complicated by the manufacturer's bankruptcy. Its economics simply no longer work for us," Carty said.

American will standardize, reconfigure and consolidate a number of its fleet types to realize greater scheduling efficiencies, increase utilization and enhance its product in international markets.
With a total of 43 Boeing 777s now in its fleet, American will concentrate this three-class premium aircraft to serve its primary business markets in Europe, deep South America and Asia. The company will standardize and reconfigure its fleet of 49 Boeing 767-300s to serve other markets in continental Europe, Latin America and Hawaii. The reconfigured aircraft will feature 30 business- class seats with 60-inch pitch, as well as 182 More Room Throughout Coach seats. A common 767-300 fleet will save the equivalent of two aircraft because of routing efficiencies.
In order to achieve greater scheduling efficiency from the 777 fleet, the company will move to one standard configuration, rather than operating separate configurations across the Atlantic and Pacific. The 777s will continue to offer three-class service on all routings -- with fully flat first class, 60-inch business class and More Room Throughout Coach seating. Carty said eliminating separate fleet types for the 777 increases its utilization by an equivalent of two aircraft.
"With these changes, we will actually be providing a superior product in our international markets, which will be served either with the three-class 777s or with an expanded business class on the 767-300s," Carty said. "As a result, we will have a more efficient mix of aircraft ideally suited for a large, international network carrier."

In addition to reducing the number of fleets and sub-fleets, American has deferred 35 aircraft deliveries in 2002 and will seek every opportunity to defer or cancel new deliveries going forward.
Given recent economic and consumer confidence reports, American will reduce capacity by 9 percent by November, versus summer 2002.
As part of the capacity reduction, American will accelerate the retirement of its nine TWA 767-300 aircraft to November 2002.
"While some of these reductions and changes are seasonal, this more broadly represents a re-sizing of the airline to draw down some of the excess capacity we see in the marketplace," Carty said. "American will remain the world's largest network carrier, even after these changes, but we believe fundamental, ongoing change is necessary for the company to return to profitability and achieve long-term success."

American will reduce, between now and March 2003, an estimated 7,000 jobs in order to realign its workforce with the planned fall capacity reductions, fleet simplification and hub restructurings.
Once the October and November schedules are in place, the company will be communicating specific job reduction impacts internally to the affected workgroups and locations.

"As the company goes through fundamental and structural change, one unpleasant reality, as we have said many times, is that we simply will need fewer people to operate the airline. We've also said many times that we will be guided during these times by a principle and commitment to do what we can to take care of our people who are impacted. Fortunately, in addition to a new age-60 retirement plan, we have been able to fashion a number of options, including selective voluntary programs, a variety of leaves, part-time, and stand-in-stead programs to minimize the impact on our people," Carty said.

Once fully implemented, the initiatives announced today -- coupled with those already implemented -- will result in structural annual operating savings of more than $1.1 billion, independent of capacity reductions.

"And, as I've said many times, we're going to see even greater savings as a host of cost-saving suggestions from employees, automation programs and additional structural and process changes currently under review get implemented," Carty said.

In addition, the aircraft utilization efficiencies that result from the de-peaking and fleet actions announced today create the equivalent of 17 "new" aircraft, which save the company more than $1.3 billion of capital spending in the future. The company already has cut or deferred an additional $5 billion in capital spending since early 2001.

Carty said these initiatives also bolster American's substantial liquidity. The company ended the second quarter with $2.6 billion in cash and significant untapped financing capacity, including approximately $6 billion in unencumbered aircraft and several billion dollars in available non-aircraft assets. In July, American completed a $500 million tax-exempt financing at JFK, further bolstering its cash balances.

"We were pleased with our JFK financing, which was larger than expected," Carty said. "We were able to place bonds with a 26-year final maturity at less than 9 percent in a very difficult market."

This transaction followed a number of other financings American has completed in the period since September 2001, including a $1.9 billion public secured financing, a $300 million tax-exempt funding and several bank facilities.

"This breadth of financing demonstrates that the public and private markets are open to us for a variety of different transactions, which is important as we continue to make the business changes that we see as crucial to our future success and industry leadership," Carty said.
 

BMD

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jobs?

Does anyone know what this will mean for pilots? More furloughs?
 

CCDiscoB

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You're quick sailor. I see you read a lot of the messages on the board. I'm thinking those wings of "gold" aren't quite so shiny.

Don't take this personally, one of your shipmates attacked our platinum wings, so I’m “responding.”
 

WyoHerkdriver

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The word is 100 pilot furloughs on October 13th and another 100 on November 1st. The number after that are "to be determined" but could be an additional 350 for a total of 550. All of these will be former TWA pilots. I was laid off in March, and am fortunate to have found a decent non-flying job. It is a good thing, because I now do not expect to get recalled for probably three years.
 

BMD

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lead

disco, thought they were made of lead.
 

tredding@swa

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AA....

Just saw a segment on CNN a few minutes ago...

AA to eliminate 7,000employees. Retiring F-100 fleet by November, 2003(74 airframes). Looks like another 500-700 pilots will have to go bye-bye. Bummer! :(

For details, goto; http://money.cnn.com/2002/08/13/news/companies/amr/index.htm

An excerpt from the text -
Still, Carty had signaled Tuesday's changes in a message to American employees last month, saying the airline was losing its key business travelers to low-cost carriers such as Southwest Airlines (LUV: up $0.43 to $13.15, Research, Estimates), and that American and other major carriers no longer could hope for an improved economy to return it to profitability. He also predicted at the time that the airline would need fewer employees in the future.

Good luck to all of you effected by the layoffs, wish it were not happening. Regards - Tredding
 

tredding@swa

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AA pilots & FAs....

Most job cuts will begin in October and will be widespread across the system, an American executive said. About 40 percent will come from the ranks of pilots and flight attendants. The job cuts will be complete by March 2003.

No cuts are expected in the maintenance and engineering side, said American spokesman Tim Doke. As of March, American had 101,706 employees.

BYE BYE BIRDIE

American will retire 74 costly Fokker 100 aircraft and defer 35 aircraft deliveries in 2002. The airline will also "seek every opportunity" to defer or cancel new deliveries going forward.

American will also accelerate the retirement of nine Boeing 767-300 planes that it inherited from its purchase of TWA.

FYI - 40% of 700 = 1800. Doe snot look good fro the pilots OR FAs..... sorry.
 

Delphi

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Where did you hear 40% will come from pilots and F/A's? AA has already said that it will upto 550 pilots.
 

Delphi

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The pilots at AA have been told that it will be up to 550 pilots.
and that they will be offering out about 450 early retirements.
 

LR45JI

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AA says they are loosing a large portion of theie passengers to SWA, JetBlue, AirTran,...etc....

Just curious how much the fracionals have hurt them? We have aound 2,700 owners @ NJA; Flight Options has about 900 or so and then there is Flexjet, Citation Shares, etc....

When I was working at Eagle years ago AMR said that about 80-85% of their revenue came from the guys riding up front. Well, the folks we are carrying, instead of taking the First Class seat has to be hurting!!!

As AA restructures their fleet, hubs, schedules etc.... they have already warned that connection time will increase...etc, etc... I'm willing to bet more First Class folks will jump ship to a fractional operator....
 

banned username 2

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LR45JI said:
AA says they are loosing a large portion of theie passengers to SWA, JetBlue, AirTran,...etc....

Just curious how much the fracionals have hurt them?
Probably a lot more than they want to believe... and you are right, as connection times increase and such, it will drive away even more business travelers....

Fractionals and Corporates are going to thrive (relatively) in this environment...

IMHO...
 

HA25

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Fractionals?

A. Having flown fractional before, I will tell you that they are hurting the majors, that is for sure. The fact is if there were now fractionals. that revenue would be going to AMR/DAL/UAL etc...

HOWEVER... EJA is on the verge of a significant pay raise to bring them "Closer" to the pay scale of the jets they actually fly. They are also seeking important workrule improvements that they very much deserve. This will dramatically cut into the profits (that have yet to be realized on an operating basis) at EJA.
EJA makes all of their money selling planes right now, and this is not going to help them.

B. AMR has one thing on their side, assets and cash (and unlike UAL, no $900 million debt payment due in a couple of months). This is why they are taking a long term fix approach that will result in a downsize of the company (bad news for me). They can afford to bleed cash longer than their rivals, BUT that will all be null and void if all of their rivals are in Ch11. This will give them all signifcant cost advantage over AMR and they will take advantage of it and grow.....when times get good, AMR will be left holding smaller market share and therefore less revenue, so I hope Don knows what he's doing. He is taking a new approach, he wants to focus less on revenue and more on cost......i.e. downsize....

I predict 2005 before they hire again.
 

publisher

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business

As someone more in tune with the management side of this problem than some of you, I want to say up front that management gets paid to make these kind of tough decisions.

Don Carty has been tough and fair since the beginning. He has shown the leadership qualities that David Siegel is also starting to show.

In addition, I would suggest that Godon Behtune showed these same qualities some years back with the bankruptcy of Continental.

They have played by the rules and hand dealt and are doing an admireable job.

This is why American was in the best shape before 9/11 and will be coming out of the recession.
 

pilotsgirl320

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Reuters quote

"Most job cuts will begin in October and will be widespread across the system, an American executive said. About 40 percent will come from the ranks of pilots and flight attendants. The job cuts will be complete by March 2003" Reuters

They already have hundreds of pilots furloughed from 9/11.
 

AAflyer

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Publisher,

You are right, they do get paid. To the toon of around 4 million dollars (forbes; carty is the 204th highest paid CEO and currently the #1 paid airline CEO) Glad to know that while more of my over paid brothers are hittting the street he and upper managment get a raise.

They have been fair. Would that explain why Carty appointed G. Arpey to oversee daily operations while he went to DC to lobby congress on abolishing the Railway labor Act, and making Scope clauses illegal.

Leadership qualities. Would that explain why between AA,AE,TWLLC there are close to 367 oustanding grievances for contract violations. Would those be the same qualities that have tried to pit labor groups against each other. Would these leadership qualities explain why AMR has one of the worst labor relations in the industry.

Last but not least, Oh wise one. Can you gurantee me AMR will come out on top. That must be some crystal-ball you have. What color shirt do I have on?

I have read many of your posts, this was not one of your better ones, maybe I would just stick to flying airplanes.

Regards,
AAflyer
(aka: overpaid mainline guy who has no clue):eek:
 

eaglefly

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A lot of AA's domestic future will involve more 70-seat RJ's (and probably 90-seaters too). The APA has been successful in limiting Eagle, but has failed to address the new threat. American Connection. They have the ability to fly ANY SIZE aircraft to ANY DESTINATION in ANY FREQUENCY with an UNLIMITED FLEET SIZE.

Eagle will remain at its current size (but may go all jet and adjust route structure), but there's nothing APA can do about Connection with "reverse code-sharing".

AMR management has already hinted of "things to come" in the near future involving this issue. The thing to come WILL be the 70 (and 90-seat) RJ NOT flown by mainline. The 550 announced is just the start over the next several years. AMR wants the EMB-170. It hits the market early next year and will be flying everything the F-100's used too.

You can deny it, but if you do you're living in denial.
 

JetPilot500

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That is correct, CEO's make a lot of money, it is a fact of life. They have a lot of responsibility, more than any pilot, so they make more. You want the best of the best at the helm of your company, therefore you have to pay for it. They are responsible for not just your job, but for all of the investors too. It is the way the world works. Their job is to make money for investors. If it means shrinking the company so they can offer some earnings per share, than that is what they have to do. It sure beats the alternative, BANKRUPTCY!

I too got furloughed after Sept 11, and I was very sad to see my job go away. But, I picked myself up and moved forward. The industry is doing what it has to do to survive right now.

Airlines will NOT make money paying the salaries that the unions demand. The industry has changed. Unions must change. Management must change. The way they do business has to change.

Everything is gonna have to adjust here. Things cannot, and will not be as they were. They can't, and it just might take the loss of a few big airlines like US Airways and United to prove that point.

Good Luck to all,
Jetpilot500

By the way: I highly recommend the book, "Who Moved My Cheese." Its a short book that talks about dealing with Change.
 

publisher

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reponsibility

I can understand the perspective offered by AAFlyer.

The fact is though that the CEO of an airline is reponsible to a good many more people than flight crews.

The first and foremost responsibility is to see that the corporation survives and that the assets are protected. Second is to generate a return for the shareholders.

From a business perspective, it is ludicrous that the labor rules of todays modern airlines are covered by the Railway Labor Act. Even the name is absurd. Secondly, scope from a business standpoint does not work as evidenced by many posts on this board. It is an artifical barrier that fails the test when inserted into a supply and demand market place/

Frankly, I think AA has gone overboard to comply with the rules and in their approach to doing so has showed how stupid this thing is.

I stick by what I said. AA is well run and go compare them with United. During these times, they had to give labor raises so that they could ask for concessions. That is certainly a novel approach.
 

LR45JI

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This is a nasty, rotten business.

--Robert Crandall
American Airlines, 1994
 
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