Urgency Cannot be Overstated

Citing its unsustainable current losses and the long-term need to restructure its business, American Airlines has asked its labor leaders and employees for $1.8 billion in permanent, annual savings through a combination of changes in wages, benefits and work rules.

"We have together made significant changes in our operation, our product and our service to build a more efficient and innovative airline," the company said in letters to union leaders and non-represented employee workgroups.

"But we need to do more. And we need to do it now. Our financial results make it abundantly clear that American's future cannot be assured until ways are found to significantly lower our labor and other costs."

In the letters, AMR Chairman and CEO Don Carty and President Gerard Arpey noted that, unlike other financially troubled airlines, the company turned to employees as a last resort, and only after pursuing an aggressive restructuring plan that identified $2 billion in annual, structural cost savings.

Company executives have said the airline needs an estimated $4 billion in permanent annual savings to compete effectively and return to profitability.

The company cited pricing actions by low-cost and bankrupt carriers among the factors putting "unrelenting pressure" on the company's financial situation.

"Today, as a last resort, we are taking the difficult step of asking all of our employees to participate in American's recovery by working with us to deliver $1.8 billion in permanent, steady-state savings. We hope to work collaboratively with you to restructure labor agreements to realize these permanent, annual savings and those needed to address our long-term financial health." The company also said it would seek to obtain accommodations from a number of its other stakeholders, including aircraft lessors, lenders and suppliers.

FMI: www.amrcorp.com