American Airlines (AAMRQ) Announces Plan to Revamp Company
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American Airlines, a wholly owned subsidiary of AMR Corporation, today outlined a business plan to transform the airline and restore it to industry leadership, profitability and growth. The plan targets an annual financial improvement of more than $3 billion by 2017, including $2 billion in cost savings and $1 billion in revenue enhancements. The additional cash flow will enable American to renew its fleet and to invest several hundred million dollars per year in ongoing improvements in products and services to deliver a world-class travel experience for customers. The improved cash flow will also allow American to further reduce its debt and become financially stronger in the years after its emergence from the restructuring process.
American's plans build on initiatives already in place that reduced costs significantly over the past several years, including major changes to its route structure, network, capacity and fleet. Utilizing the benefits of the restructuring process, American intends to realize additional savings over the next six years by restructuring debt and leases, grounding older planes, improving supplier contracts, and undertaking other initiatives.
A central element of American's transformation is the overhaul of its fleet, which will reduce fuel, maintenance, and financing costs, and provide improved profitability and growth over time, by enabling American to better match the right equipment to the right routes.
A fundamental element of American's plan, which is designed to allow it to exit restructuring and vigorously compete and win, includes employee cost reductions across all work groups. American informed employees earlier today that all groups, including management, must reduce their total costs by 20 percent. While the savings from each work group will be achieved somewhat differently, the plan provides that each will experience the same percentage reduction. These reductions would result in average annual employee-related savings of $1.25 billion from 2012 through 2017.
As described in its internal announcements today, American's business plan and proposals encompass a total reduction of approximately 13,000 employees. Included in the total employee impact is the expected result of a previously launched redesign of American's management and support staff structure that will reduce 15 percent of management positions. Consistent with the approach taken by other major airlines in their restructurings, American's plan also includes:
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American's plans build on initiatives already in place that reduced costs significantly over the past several years, including major changes to its route structure, network, capacity and fleet. Utilizing the benefits of the restructuring process, American intends to realize additional savings over the next six years by restructuring debt and leases, grounding older planes, improving supplier contracts, and undertaking other initiatives.
A central element of American's transformation is the overhaul of its fleet, which will reduce fuel, maintenance, and financing costs, and provide improved profitability and growth over time, by enabling American to better match the right equipment to the right routes.
A fundamental element of American's plan, which is designed to allow it to exit restructuring and vigorously compete and win, includes employee cost reductions across all work groups. American informed employees earlier today that all groups, including management, must reduce their total costs by 20 percent. While the savings from each work group will be achieved somewhat differently, the plan provides that each will experience the same percentage reduction. These reductions would result in average annual employee-related savings of $1.25 billion from 2012 through 2017.
As described in its internal announcements today, American's business plan and proposals encompass a total reduction of approximately 13,000 employees. Included in the total employee impact is the expected result of a previously launched redesign of American's management and support staff structure that will reduce 15 percent of management positions. Consistent with the approach taken by other major airlines in their restructurings, American's plan also includes:
- Outsourcing a portion of American's aircraft maintenance work, including seeking closure of the Fort Worth Alliance Airport (AFW) maintenance base, and certain airport fleet service clerk work;
- Removing major structural barriers to operational flexibility, such as restrictions on codesharing and regional flying
- Introducing work rule changes to increase productivity.
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