AMR Corporation Announces Significant Capacity Reductions

[L1011Ret]

From AMR's 8K filing with the S.E.C.


SEC FILING

40-45 S80s by the end of the year = about 900 less F/As needed. But attrition runing at 50/month = 400 less F/As due to retirements. So overage is 500 F/As at the end of the year. 737s coming on line starting in 2009, 34 of them at staffing of 25 F/As per aircraft minimum = 850 F/As needed provided no more S80s retired in 2009.

 

[kirkpatrick]

And don't forget Overage Leaves must be offered.

MK

 

[s80dude]

I am optimistic that we will see little impact on the FA side. I think overage leaves help, and the attrition will absorb some. The 737's will also need 4 flight attendants as the new arrivals will be configured with a denser main cabin pushing total number over 150, so even if they replace Super 80's on a 1 for 1 basis, you are still going to need more staffing.

I'm trying to be optimistic. We also won't see the rushed panic mode downsizing after 9/11 and the RPA since this is for 4th quarter, so hopefully cooler heads will prevail. I hope Ms. Glading and other union leaders will insist on meeting with the company to find creative ways to mitigate layoffs or lessen their severity.

 

[Skymess]

40-45 S80s by the end of the year = about 900 less F/As needed. But attrition runing at 50/month = 400 less F/As due to retirements. So overage is 500 F/As at the end of the year. 737s coming on line starting in 2009, 34 of them at staffing of 25 F/As per aircraft minimum = 850 F/As needed provided no more S80s retired in 2009.

Let's say 3-5 A-300s. That's 7-8 FAs per plane.

 

[Veritas]

And don't forget Overage Leaves must be offered.

Unfortunately those are not as attractive as they used to be before the contract change which requires those on leave to pay for their health insurance and other benefits.

Let's say 3-5 A-300s. That's 7-8 FAs per plane.

How many bid positions does this translate to? 72-120?

 

[WingNaPrayer]

Most airlines reported losses in the first quarter, and following two years of profits, the industry is expected to be back in the red this year. JPMorgan analyst Jamie Baker expects the industry to lose about $7 billion in 2008.

Airlines appear to have enough cash on hand to make it through 2008. But, barring major changes, including capacity reductions similar to those announced by AMR, a number of major carriers could be forced into bankruptcy in 2009, some analysts say.

Many U.S. airlines went bankrupt early in the decade during a long industry downturn, but AMR was able to cut costs without resorting to a Chapter 11 filing. That meant employees kept their pension plans and didn't take huge pay cuts, as happened in court-led financial reorganization.

Still, employees at AMR's annual shareholders' meeting Wednesday expressed anger at AMR management. A representative of the pilots' union said little progress has been made at negotiating a new union contract.

AMR shares were down 21% at $6.50 in recent trading. Shares of UAL Corp. ( UAUA), US Airways (LCC) and Continental Airlines Inc. (CAL) were down 21%, 13%, and 12%, respectively, all at new 52-week lows.

Arpey said the capacity reductions aim to "significantly" cut costs "as well as create a more sustainable supply-and-demand balance." He said he couldn't put a dollar amount on cost-cutting, but that thousands of jobs likely will be cut, and some cities may lose air service.

 

[jimntx]

Unfortunately those are not as attractive as they used to be before the contract change which requires those on leave to pay for their health insurance and other benefits.


How many bid positions does this translate to? 72-120?

That's the hard part because you have to look at what is the daily/weekly utilization of that a/c. If it does nothing but one turn/day to the Caribbean then you need 7-8 f/as/dayx7, and if they are on a 2on-2off line (unlikely in International, I think) then you need 3 "sets" of f/as.

I agree however that I don't think anyone should count too highly on Overage Leaves or attrition eliminating the overage. Let's assume for a minute that Rock Solomon has good solid information--that the estimated overage is, in fact, 3000 f/as. With an average attrition rate of 60/month--and that's everything...quits, dies, retires, get fired--by the end of the year less than 1/4 of the overage would be mitigated by attrition. Does anyone really believe that they are going to get 2200-2300 overage leave takers? We didn't in 2003 when we had a much larger "active" f/a corps than we have today (approx. 25,000 then vs. 18,000 now). That's why over 3000 of us were furloughed then.

I've already cancelled plans for a new kitchen floor this summer until I know the company's numbers which will be late June-mid July.

 

[BigBangTheory]

That's the hard part because you have to look at what is the daily/weekly utilization of that a/c. If it does nothing but one turn/day to the Caribbean then you need 7-8 f/as/dayx7, and if they are on a 2on-2off line (unlikely in International, I think) then you need 3 "sets" of f/as.

I agree however that I don't think anyone should count too highly on Overage Leaves or attrition eliminating the overage. Let's assume for a minute that Rock Solomon has good solid information--that the estimated overage is, in fact, 3000 f/as. With an average attrition rate of 60/month--and that's everything...quits, dies, retires, get fired--by the end of the year less than 1/4 of the overage would be mitigated by attrition. Does anyone really believe that they are going to get 2200-2300 overage leave takers? We didn't in 2003 when we had a much larger "active" f/a corps than we have today (approx. 25,000 then vs. 18,000 now). That's why over 3000 of us were furloughed then.

I've already cancelled plans for a new kitchen floor this summer until I know the company's numbers which will be late June-mid July.

I think you may be surprised on how many this time do take the OVL. Those who don't need the medical, will take the OVL's. But, people are really fed-up with this company and need a break for a while. With the 737's coming on early next year with the increased seating capacity of over 150, we will need a 4th fa.

 

[FrequentFlierCA]

What a day.

Posters on this board (of all opinion perspectives) have been saying for some time that the airline needs to shrink. We were all right about that and it's finally happening. Don't know if it's enough, but it's certainly a start. Retiring MD-80s should be especially helpful on the fuel bill, since they represent a disproportionate amount of fuel burn relative to the 738s.

 

[s80dude]

I don't think Rock's info is that solid. I think 3000 flight attendants is a bit much. In order to need 3000 less flight attendants, we would need more than 40-45 airplanes taken out of the fleet. Also keeping in mind that 39 737's are coming next year with higher staffing, we may be able to skate by with overage leaves, month long bid leaves, partnership flying, etc.

 

[BigBangTheory]

I don't think Rock's info is that solid. I think 3000 flight attendants is a bit much. In order to need 3000 less flight attendants, we would need more than 40-45 airplanes taken out of the fleet. Also keeping in mind that 39 737's are coming next year with higher staffing, we may be able to skate by with overage leaves, month long bid leaves, partnership flying, etc.

I agree with you about Rock. The real question is...how many will take the OVL with having to pay 100% of the medical?

 

[FA Mikey]

40-45 S80s by the end of the year = about 900 less F/As needed. But attrition runing at 50/month = 400 less F/As due to retirements. So overage is 500 F/As at the end of the year. 737s coming on line starting in 2009, 34 of them at staffing of 25 F/As per aircraft minimum = 850 F/As needed provided no more S80s retired in 2009.

Wasnt the plan an even exchange a S80 for a new 737? With the mass cut that may have changed, or may still be the plan for 09 and 10.

 

[kirkpatrick]

I don't think Rock's info is that solid. I think 3000 flight attendants is a bit much. In order to need 3000 less flight attendants, we would need more than 40-45 airplanes taken out of the fleet. Also keeping in mind that 39 737's are coming next year with higher staffing, we may be able to skate by with overage leaves, month long bid leaves, partnership flying, etc.

The word from a base manager is that it takes about 20 FA's to staff an MD80; so 40 - 45 aircraft looks like about 900 people, even if three or four are A300's. Arpey said the aircraft would be grounded "by the end of the year," and I presume the setdowns will begin at the end of Sept or beginning of Oct (I haven't seen an official time frame). So it looks like attrition could take care of nearly half that number. I think 500 or so OVL's would be snapped up very quickly. It's scary, but it looks like we might make it.

 

[s80dude]

The good news in all this is that it isn't a rush rush rush job, but we will have the 3rd quarter to prepare. I personally am optimistic we can mitigate furloughs. I hope for all our sakes we can.

 

[FWAAA]

The good news in all this is that it isn't a rush rush rush job, but we will have the 3rd quarter to prepare. I personally am optimistic we can mitigate furloughs. I hope for all our sakes we can.

Agreed. And if the unlikely happens (US dollar strengthens and/or oil prices collapse or massive capacity reductions happen at other airlines) between now and then, the cuts might not have to be as deep as forecast today.