Tags: American | Air | Flight | Bankruptcy

American Air May Trim Flight Schedule Amid Bankruptcy Cost Cuts

Tuesday, 29 Nov 2011 10:13 AM

American Airlines, planning to continue normal operations during parent AMR Corp.’s bankruptcy, will probably cut some flights in the future, the chief executive officer said.

The reductions, along with job cuts, are likely as the airline seeks to reduce expenses, Chief Executive Officer Thomas Horton said on a conference call.

“The most important message of the day is that it will be business as usual while we focus on doing a great job for our customers,” Horton said. “All of the people of American Airlines are going to stand tall and deliver for our customers."

American Airlines passengers made up about 15 percent of total traffic for U.S. carriers in October, according to Bloomberg data. The carrier’s strategy of continuing to fly tracks that of Delta Air Lines Inc., United Airlines and Northwest Airlines, which did the same while reorganizing in the past decade.

The carrier may lose ‘‘at least a few’’ customers as passengers choose other carriers because of the Fort Worth, Texas-based airline’s bankruptcy, said Rick Seaney, Chief Executive Officer of Dallas-based FareCompare.com.

‘‘It’s always worrisome when you wake up in the morning and you hold a holiday ticket and the news headlines say the airline that you’re going to be flying is in bankruptcy,” Seaney said by telephone . “It’s bound to have a psychological effect on fliers.”

Industry Mergers

AMR filed for bankruptcy after failing to secure cost- cutting labor agreements and sitting out a round of mergers that dropped it from the world’s largest airline to No. 3 in the U.S. With the filing, American became the final large U.S. full-fare airline to seek court protection from creditors. Horton, the company’s president, succeeded Chairman and Chief Executive Officer Gerard Arpey, who is retiring.

AMR was determined to avoid Chapter 11 in the years after the 2001 terrorist attacks, as peers used bankruptcy to shed costly pension and retiree benefit plans and restructure debt. American later watched as rival carriers combined, giving them larger route networks that were more attractive to lucrative corporate travel customers.

American was embroiled in negotiations with unions for all of its major work groups as far back as 2006, seeking to boost employee productivity and erase part of what it said was an $800 million labor-cost disadvantage to other carriers.

The airline’s pilots, flight attendants, mechanics and baggage handlers wanted to use the contract talks to regain some of the $1.6 billion in annual concessions they gave in 2003 to help the company avoid bankruptcy.

‘Good Thing’

Delta Air Lines Inc. and Northwest Airlines Corp., then the third- and fourth-largest U.S. airlines, sought bankruptcy protection in September 2005. The two agreed to merge in 2008 after completing restructurings a year earlier. US Airways Group Inc. won court approval in 2005 to combine with America West Holdings Inc. and emerge from its second bankruptcy that decade.

United Airlines parent UAL Corp., a predecessor to United Continental Holdings Inc., emerged from bankruptcy protection in 2006 after more than three years and the carrier later merged with Continental Airlines.

“Airlines like Delta and United who have gone through recent mergers have come out stronger in the long run in an extremely tough economic situation,” Seaney said. “This is probably a good thing for American in the long term.”

The move actually benefits consumers since it will preserve a major competitor, said Jay Sorensen, a consultant with IdeaWorks in Shorewood, Wisconsin.

“There’s no stigma attached to bankruptcy anymore, and so I think that the smart customers, i.e., the business travelers, will probably look at this and say, ‘Thank heaven, this cloud has been lifted,” Sorensen said in a telephone interview. “This is not about a company that’s going to suddenly fold up its tent and go away.”

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American Airlines, planning to continue normal operations during parent AMR Corp. s bankruptcy, will probably cut some flights in the future, the chief executive officer said. The reductions, along with job cuts, are likely as the airline seeks to reduce expenses, Chief...
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Tuesday, 29 Nov 2011 10:13 AM
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