American selling ads in newsletter
By Trebor Banstetter
Star-Telegram Staff Writer
FORT WORTH - As they read the grim details in the latest employee newsletter of management's request to slash $1.8 billion in labor costs, American Airlines workers may also notice something new -- ads hawking new cars, vacation packages and condos for rent.
The financially strapped airline confirmed Tuesday that it is selling advertising in Flagship News, the monthly newsletter for its 100,000 employees.
"We can raise a substantial amount of revenue," said American spokesman Marty Heires, who declined to disclose how much companies paid for ads in the current issue.
The move underscores American's desperation to raise money from nearly any source possible. While resisting the urge to raise ticket prices, American and other major airlines have implemented a host of fees and restrictions designed to increase revenue from passengers.
"I think they're looking at anything they can to save money or make a little money," said airline consultant Michael Boyd of The Boyd Group in Evergreen, Colo. "Given their financial condition, if someone will pay for an ad, why not?"
During the past two years, American has lost $5.2 billion as it grapples with a steep downturn in business travel and an intense price war waged by efficient, low-cost discount airlines like Southwest Airlines and AirTran Airways. American is expected to lose another $800 million during the first quarter of 2003.
The company is in the midst of an intense cost-cutting campaign, and executives hope to eventually slash $4 billion in annual expenses. Last year, the airline says, it cut $900 million in operating costs, and it has targeted another $1.1 billion over the next two years.
The airline has been burning roughly $5 million in cash every day.
Last week, executives asked employees for $1.8 billion in concessions, which would likely mean cuts in wages and benefits, tightened work rules and additional layoffs. The carrier's unions are considering those concessions.
For the current issue of the newsletter, which was printed this week,
the ads will offset the cost of mailing a copy to the home of every American employee, Heires said.
Some of the advertisers include Fort Worth auto dealership Texas Motors Ford, Executive Tour and Travel Services, and a ski resort in Jackson Hole, Wyo.
American halted home delivery of the newsletter soon after the Sept. 11, 2001, terror attacks, but the current issue will be mailed because it details the company's request for steep cuts in labor costs. Future editions will not be mailed on a regular basis, Heires said.
In a message to employees recorded Tuesday, Chief Executive Don Carty suggested that families sit down and review the proposed concessions together.
"This is an emotional period, and its only natural to feel both frightened, a bit frustrated, and perhaps even angry," he said.
Carty defended the airline's strategy of cutting costs, rather than raising fares or changing its business model to resemble that of discounter Southwest Airlines.
"Raising fares is next to impossible in our environment because of low-cost carriers and deep industry discounting," he said.
He said restructuring American's fleet and route system to match Southwest's would be painful and would strip the airline of its strengths.
"We'd be forced to get rid of hundreds of airplanes and lay off tens of thousands of employees," he said. "We would no longer be a strong global network carrier, but just one more airline in a pack of point-to-point low-cost carriers."
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