Airline Will Take $1.3 Billion Hit In Second Quarter

Ouch. There's no other word to describe the news this week that American Airlines may post a second-quarter charge of as much as $1.3 billion, much of it related to the carrier's plans to reduce capacity.

In an example of "spend money now, to save money later," American said Wednesday it will take the financial hit over the airline's plans to park many of its aged, gas-guzzling MD-82 and MD-83 airliners. The carrier will also pay out severance packages to the many, many workers it plans to lay off in the coming months.

And speaking of layoffs... the carrier told employees as many as 7,000 American workers can expect to be cut before the end of 2008, representing about eight percent of its worldwide workforce. That mirrors American's previously-announced plans to cut back global capacity by roughly the same amount.

The total includes American's plan to furlough as many as 900 flight attendants, as ANN reported Wednesday. Jeffrey J. Brundage, American's senior vice president for human resources, said the airline hopes many of the cuts will come through voluntary retirements and other reductions, not furloughs.

"While we are still working through the specific impact to employee work groups, both voluntary and involuntary, employee reductions commensurate with the overall system capacity reductions are expected companywide as we reduce the size of the airline," Brundage said, reports The New York Times. "It's crucial that we take the appropriate actions to operate a strong and competitive airline for both our employees and customers."

American currently employs about 85,500 workers; an eight percent cut works out to 6,840 jobs, including positions in management.

"These are difficult but necessary changes given the unprecedented challenges we face with overcapacity in the industry, skyrocketing fuel prices, and a worsening US economy," said company spokesman Tim Wagner.

FMI: www.aa.com