WAR cuts!


Dec 21, 2002
American Airlines to Cut Capacity over War
Thursday March 20, 10:28 pm ET
By Jon Herskovitz

FORT WORTH, Texas (Reuters) - AMR Corp. (NYSE:AMR - News) Chief Executive Don Carty said on Thursday the war in Iraq would hurt struggling American Airlines financially and cause it to cut down on its flying.

American, the world''s largest airline, said it would cut international flights by 6 percent in April as an initial response to falling ticket sales because of the war.

The airline, which previously announced plans to cut its April domestic schedule by 7 percent , said it did not plan any immediate additional capacity cuts in the United States.

In an address to several hundred employees that was open to the press near the company''s headquarters in Fort Worth, Texas, Carty said he was confident American could weather its current financial crisis through cost-cutting and emerge as a strong airline. American is a division of AMR.

Even as we keep working, day in and day out, to keep this company afloat, we will have to trim some capacity as prices and supplies are impacted by the war, Carty told employees.

There can be no denying it: whenever the conflict ends, even if it''s very soon, our airline will be affected, he said.

Carty has said the carrier must cut $4 billion a year in structural costs if it is to stay in business, with current losses being unsustainable. Last month he asked employees to accept $1.8 billion in annual wage concessions as a part of a cost-cutting plan designed to keep it from going bankrupt.

The company lost an airline industry record $3.5 billion last year and said it was losing about $5 million a day at its current level of operations. If fully implemented, the $1.8 billion in employee-wage cuts sought by management would bring the $5 million cash-burn number down to about zero, he said.

Unlike some of our competitors, the question is not whether this company is going to survive. There is no doubt in my mind that one way or another, we''re going to make it, Carty told the employees.

The three main unions at American have entered into concession talks with the carrier. Their counterparts at bankrupt carriers United Airlines (NYSE:UAL - News) and US Airways (OTC BB:UAWGQ.OB - News) have been forced to accept draconian wage cuts or have their contracts suspended under court-supervised restructuring.

When we started down this road of reorganization, we took a different path than our competitors like United and US Airways. We first did everything we could to cut costs throughout the system -- including management -- and only came to you as a last resort, he said.

He said a lobbying campaign launched by the airline industry and its employees for aid from Congress in the form of items such as reduced taxes has started to make an impression.

He said that because the struggling industry will likely, because of the war, see reduced demand for air travel, higher security costs and higher fuel prices, Washington is paying greater attention to the industry''s plight and there is a better chance carriers may be seeing some relief.