American parent AMR has concluded it needs to achieve $1.25 billion annually in employee cost savings to successfully emerge from Chapter 11 bankruptcy protection.
The labour costs savings account for more than 60% of the $2 billion of total savings AMR believes its need to cut annually to remain a viable competitor among its legacy peers.
AMR said the remainder of the cost savings would stem from restructuring its debt and leases, grounding older aircraft and improving supplier contracts.
The estimated $2 billion in annual cost savings is part of a plan by American laid out to employees today to improve its results by $3 billion annually. American estimates a $1 billion improvement in revenue from its network scale, fleet optimisation and products improvements, said carrier CEO Tom Horton in a letter to employees.
American stated the $1.25 billion in annual costs savings affect all employee groups, including management, and were fairly and equitably allocated across all labour groups proportional to their total salary and benefit costs.
“We are proposing that each group reduce its average costs by 20% to meet the goals we need to emerge as a thriving company,” said American.
During the third quarter of 2011 American recorded roughly $1.8 billion in salary, wage and benefit expenses, which accounted for approximately 28% of its $6.4 billion in revenues.
At the same time the company has informed employees staffing levels need to fall by 13,000 in order to ensure a successful restructuring under Chapter 11 bankruptcy protection.
US government data from November 2011 show American had approximately 66,400 full-time employees, which means the carrier is aiming to trim its employee ranks by roughly 20%.
Company management is meeting with unions today regarding its proposal to reduce staffing levels.
“A difficult outcome of the restructuring process is our need to reduce our workforce to better align with a more efficient operation,” said American.
The carrier supplied rough estimates of the number of employee cuts necessary from each workgroup with mechanics and related staff comprising the bulk at 4,600. American expects to cut 4,200 fleet service and other staff represented by the Transport Workers Union, 2,300 flight attendants, 1,400 management and support staff and 400 pilots.