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American Airlines to Lay Off Workers, Reduce Flights

Aired August 13, 2002 - 14:01   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CAROL LIN, CNN ANCHOR: Fewer planes, fewer flights, and thousands fewer workers at American Airlines, the largest airline on the planet. It is all because of economic turbulence that sent one airline into bankruptcy on Sunday and threatens to bankrupt another before the end of the summer. CNN's Allan Chernoff is live in New York with the latest on this -- Allan.
ALLAN CHERNOFF, CNN CORRESPONDENT: Carol, also a consequence of the post-9/11 environment, and recall right after the terror attacks, the aircraft and airline industry cut capacity by 20 percent. It simply wasn't enough. The red ink continues to flow, and American Airlines itself has been losing $5 million a day.

Therefore, the company today announcing plans to make itself even more efficient. It is going to cut capacity by another 9 percent. It is going to lay off 7,000 workers. Much of that will be in St. Louis, which had been the headquarters for TWA last year. AMR, the parent of American, bought TWA. It will retire 74 Fokker 100 aircraft. The manufacturer, a Dutch company, went bankrupt and it has become very expensive to buy replacement parts.

Also, American will defer aircraft deliveries, 35 this year, more to come in the following years. And there will be a new standard configuration for American's 767s and 777s. This is also a cost- cutting move. It will make planes interchangeable and allow the airline to be more efficient.

Also, in Dallas-Fort Worth, they are going to change scheduling so that there is more of an even flow of aircraft arriving and departing. They don't want to have a peak and valley because that, while it is more efficient for many fliers, it has been costing the airline plenty of money, and they need to do whatever they can to become more efficient.

Right now, of course, a very difficult environment for the entire airline industry. Not only the anxiety that many people still have about flying, but also the weak economy, and keep in mind the added expense of security, insurance, on and on -- Carol.

LIN: So Allan, what does it mean to American Airline passengers? Does it mean it is going to cost them more to fly? Does it mean it is going to be less safe for them to fly?

CHERNOFF: Certainly, it should not affect safety whatsoever. In fact, American says it is not going to be laying off any maintenance workers. But, in terms of scheduling, the biggest impact would be in Dallas-Fort Worth, probably going to be longer waiting periods between people -- for people connecting flights. You will have to wait a little longer at the airport, but perhaps the idea is this would make it more efficient in terms of operations, and therefore, perhaps, fewer delays. So there might be an offset there.

One other impact, there will be fewer fast-class seats. They are going to get rid of first class on some routes between the U.S. and Europe and Latin America.

LIN: Wow. All right. And what about that sell recommendation by analysts for United Airlines? When was the last time you heard a sell recommendation from an analyst?

CHERNOFF: Well, these days, it is happening in the airline industry because it is certainly a very tough business, as we said. And United Airlines, the parent, UAL, the stock is getting hammered today, down 25 percent. That is about a dollar a share with the price it is trading at. The analyst there saying he expects UAL to lose five and a half billion dollars this year. That's up from his previous estimate of $5 billion dollars.

The betting on Wall Street is that UAL, the parent of United, will be the next airline to declare Chapter 11 bankruptcy, expected to happen by the end of the year -- Carol.

LIN: What a way to mark the one-year anniversary of September 11. All right. Thank you very much. Allan Chernoff live from New York.

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