American to cut 5,000 jobs, ground more planes Airline presses to slash labor costs

September 15, 1993|By New York Times News Service

American Airlines said yesterday that it would eliminate 5,000 jobs by the end of 1994 and ground more planes to reduce capacity.

The cuts punctuated American's strategy for achieving long-term profitability by shedding uncompetitive routes, a plan its employees have criticized.

AMR Corp. Chairman Robert L. Crandall told securities analysts that the eight 727s the airline planned to retire in 1995 would be retired next year, and it would ground four DC-10s next year, and seven more over 1996 and 1997.

Those retirements will come in addition to the grounding of 31 DC-10s that the airline announced in March. American said the groundings would leave 635 planes by the end of 1997, 37 fewer than it had in December.

The cuts, including dropping several unprofitable European routes this winter, will reduce the systemwide capacity of American by 4.5 percent next year.

American, which has reported net losses totaling $1.23 billion over the past three years, began its first significant job cuts in October, and before this month, had announced 1,700 cuts.

Most of the 5,000 cuts announced yesterday were new, but they included 665 management layoffs disclosed earlier this month.

"If we cannot deploy the planes profitably, we cannot justify flying them," Mr. Crandall said, defending American's transition plan, under which the carrier is also focusing increasingly on its nonairline businesses, like computer consulting.

Shares of AMR fell 37.5 cents, to $64.375, yesterday but its drop was the smallest of the three big carriers.

American's cost-cutting program stands apart from those of its largest rivals. Delta, United and Continental airlines have signaled interest in adding or replacing some flights with service modeled after Southwest Airlines, with low fares and frequent flights on short routes.

Mr. Crandall rejected that strategy yesterday in favor of the hub-and-spoke system, in which flights converge on a hub during bursts of activity to maximize the choice of connections for passengers. Also, American has more options than its competitors because of its subsidiary businesses.

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